Cost Of Labor: Huge Income Tax Hikes Shorten’s Only Option

AS IRRESPONSIBLY POPULIST as Labor’s approach to the federal budget has been under Bill Shorten, one thing stands out above all others: confronted by a deeply structurally flawed budget and shrinking revenues relative to spending, Labor has gone to desperate lengths to ensure meaningful expenditure reductions are squashed by the Senate whilst ruling out any increases. The price of a Labor government would be a colossal hike in income taxes.

A debate over a debate, in the current context of Australian politics, is a ridiculous and tangential indulgence.

Yet there are early signs that a “debate over a debate” may be precisely what is set to be unleashed in political circles, with the so-called “fairness debate” ignited by opposition “leader” Bill Shorten perhaps set to become the focus of the national press, sections of the commentariat and, most disturbingly, the Liberal Party, as it seeks to somehow wrest control of the political agenda away from an irresponsibly dishonest Labor Party that talks about little else.

Last night I read an article in the Fairfax press — centred on the economic view of Australia by a former senior Treasury official now based in Edinburgh — that was premised on the possibility that a deep recession may be required in this country to force government into the painful corrective action needed to fix the structural flaws now embedded in Australia’s budget and its economy, and noting that reductions in interest rates (which are already at record lows) have all but reached their use-by date as a tool for stimulating economic growth, meaning the “easy option” is about to become redundant.

And it makes the telling point that one big effect of plunging interest rates is their impact on the domestic housing market which, in short, is to cause the price of housing stock to rocket.

It warrants mention of the so-called stimulus package implemented by the ALP and its contemptible then-Treasurer during the Global Financial Crisis, by virtue of which close to $100 billion of (mostly borrowed) government money was sluiced into the economy.

And its objective: to avoid a recession at literally any cost, for the Labor government of the day feared above all else that were it to preside over the first recession in Australia for almost 20 years, electoral annihilation would soon follow.

One obvious impact of that stimulus package is that whilst home values did fall by somewhere between 10 and 15 percent, the bottom did not fall out of the residential housing market; it had the effect of protecting people from their own stupidity, as those who either bought at the top of an overheating property market were insulated from a market correction that the stimulus money probably only deferred (until some point soon, I would wager) or who failed to divest their assets in time to realise the gains from their risk that were effectively underwritten.

But the stimulus package delivered by the Rudd government is also a very big reason for the “entitlement mentality” that is now entrenched on this country, and the dishonest and brazenly populist antics of Shorten and his ranting about “fairness” serve merely to reinforce it.

I raise that article because — in the absence of intelligent and meaningful reform — it is probably right: a deep recession that imposes the very corrections politicians are (understandably) loath to see occur on their watch in office might very well be the only way some common sense and sanity is able to be restored in Canberra.

I hope it doesn’t come to that, of course. But with the “fairness debate” itself now apparently becoming the subject for a national conversation in its own right, Shorten probably can’t believe his luck; anything that inoculates Labor from the obligation to account for its rhetoric, or excuses it from laying out the hard details of what it would itself do if restored to government, can only encourage more of the same dumb-arsed and idiot-simple bleating about “fairness” and the unreasoning parliamentary obstruction that accompanies it.

(This doesn’t mean I have gone soft on Treasurer Joe Hockey and the abominable federal budget he delivered last year, mind; the imperative is on the government to make a far better fist of this critical task in 2015, and preferably under a new Treasurer equipped with better resources in communications and marketing than is currently the case, but I digress).

The “fairness debate” can be distilled to two points.

One, anything that can be used by Shorten and his cronies for political gain, through a refusal to allow the recipients of bloated government spending to be adversely affected by so much as a cent in expenditure reductions, is “fair.”

And, two, anything that seeks to realise expenditure savings that can be used to whip voters into a vicious anti-Liberal frenzy is “unfair.”

So much for the “debate” over the “fairness debate.”

The fact remains that whether people like Shorten want to accept it or not, Australia is living beyond its means; simply stating, ad infinitum, that we have sustainable and targeted welfare and other spending programmes that are reasonable and “fair” ignores the hard truth that they cannot continue forever, or perhaps continue at all without some hard changes being made.

Claiming that Australian government debt is “low by international standards” and that therefore no budget “crisis” exists is disingenuous: yes, debt levels in Australia are currently low by world standards, at some 25% of GDP. But left to their own devices and on their current trajectory, these will hit 50% within a decade and 100% by 2050.

So much for Shorten’s, and Labor’s, low debt view of Australia: a reality their own handiwork in office, with booby-traps built into the federal budget through colossal new recurrent spending commitments in welfare and education legislated ahead of an election loss, set to accelerate the country’s descent into unsustainable red ink.

And far from being a target in a “hit the rich” onslaught against a non-existent class Labor claims is ripe to tax into oblivion, the top 16% of taxpayers already pays 66% of all income tax, as has been noted elsewhere in the press today.

Australia should be having sensible discussions — and devising policy responses — on many fronts: about doubling GST; using the proceeds to fund offsetting increases in age pensions and other essential payments; cutting income taxes for middle wage and salary earners; dropping the 30% company tax rate to at least the 20% level that applies in the UK as an incentive for businesses to relocate here or to expand, and to hire more people, providing jobs growth; sensible welfare reforms that encourage a transition to work by those who have no excuse not to so, such as ending single parent pensions when a youngest child goes to school; abolishing the first home buyers grant; and finding ways to circumvent Labor (and the unions) in lowering cost barriers to businesses hiring staff by getting rid of Labor’s noxious “Fair” Work regime and instituting greater labour market flexibilities around conditions, entitlements and wages (yes, wages).

These are just the first handful of changes that spring to mind as I write; there are plenty of others. But none will ever see the light of day if Shorten and his acolytes have their way.

Properly considered, the list of items that ought to comprise the next wave of economic reform is substantial.

Labor’s blanket refusal to allow the Abbott government to do anything about them is telling, and Hockey — with his politically lethal budget and a total inability to sell it — hasn’t helped.

But what is most telling, especially where “fairness” is concerned, is what Labor under Shorten has ruled out — and what is left, as a result, for it to work with if ever returned to office.

The GST is off-limits.

So, too, is any concerted attempt to overhaul welfare payments: premised squarely on a ridiculous unspoken assertion that all handout recipients are legitimate just because they are, not a penny can be saved in this area.

Foreign aid cuts are an absolute no-no.

Saving money by removing the electoral bribe that was Gonski is akin to a policy of wilful advocacy of national illiteracy and poverty, if you listen to the ALP.

The National Disability Insurance Scheme — totally unaffordable if well-intentioned, bloated before it starts at an eventual $22 billion annual cost, and a political trap the Liberals in opposition fell blindly into — can’t even be mentioned.

The GST is just a no-no: lifting it by a fraction of a percentage point (even if the monies raised are redirected to put spending on a more sustainable footing) is tantamount to a slug-the-poor policy that Labor, with the flatulent wind of empty rhetoric filling its bellows, will resist to the very fibre of its rotten core.

Shorten’s only specific policy to date (which he hasn’t allowed to be ventilated in public, understandably, for months now) is the wholesale abolition of the Private Health Insurance Rebate — an “initiative” that would see the private healthcare sector collapse and the public system flooded with increased demand at a cost of some $12 billion per year: money currently injected into the system out of the pockets of private insurance policy holders.

Shorten’s health policy might play well with his beloved poor and the “unfairly” targeted, but if it is ever implemented it will cause their “free” health system to collapse altogether under the weight of its own unaffordability.

Where all of this leads is to the question of how Shorten would, as Prime Minister, fund an increasingly unsustainable programme of profligate government spending in light of everything he has decreed to be untouchable, and in view of all the things he refuses to allow to be explored as possible reforms to put the national budget onto a more solid long-term footing.

The only thing Shorten has not ruled out is a colossal tax grab, aimed at middle income earners, that will force millions of ordinary families into the real poverty against which Shorten claims to be the national guardian, and which would completely destroy quaint notions such as incentive, reward for effort, social mobility or empowering ordinary people to take personal responsibility for their own lives as opposed to the slavish and entrenched culture of dependence on government it would simply encourage and reinforce.

If there is to be a real debate about “fairness,” this is where it should start.

As unpalatable as some may find the present government, the alternative would be far, far worse: both in the immediate sense and with an eye to the long-term health of the country’s finances and the preservation of the national lifestyle that is so uniquely our own.

Then again, perhaps the alternative storyline of a thumping and involuntary recession — taking the arbitrary response away from today’s politicians and forcing the structural corrections Labor at least is hellbent on preventing — might be exactly what is called for after all.

And if that uncontrollable correction causes property investors to shed paper gains government should never have taken action that underpinned an assumption that they were entitled to them — rather than capitalising them through divesting assets at a time determined by shrewd judgement rather than limiting losses in a panic-induced fire sale — then so be it.

They wouldn’t be the only ones to feel the pain. And Shorten — when the fallout spread to reducing opportunities for the very people he spuriously claims to be the champion of — would become the national pariah his deception and irresponsible populism so richly demand he should be.

 

Advertisements

3 thoughts on “Cost Of Labor: Huge Income Tax Hikes Shorten’s Only Option

  1. Yale, you are one angry puppy today – of course there shouldn’t be any notion of fairness in policy, that’s not the hard right way, perhaps you should start the Tea Party here?

    • BobD, I thought you were a little more intelligent than this kind of cheap jab.

      I’m not “angry” and to be sure, anger has nothing to do with it, although anyone is entitled to be angry about the tactics Shorten is using.

      He is not “mirroring the Abbott strategy” — Abbott as opposition leader was happy to wave some legislation through the Senate on a case by case basis. This is, by contrast, blanket stifling of key legislation simply for the sake of causing trouble. It’s irresponsible in the extreme.

      I would have thought you’d pick up on the fact that “fairness,” in the context of my remarks, has become an emblematic term for everything that works for the ALP: whether truly fair or not, Shorten is only concerned about it if it wins him votes. He couldn’t really give a rat’s arse, of course, about anyone. Except himself, that is.

      None of the policies I have alluded to would disadvantage anyone except those able-bodied individuals who simply refuse to work. Rather than criticising in these idiot-simple terms perhaps you could provide the counter-argument.

      And in relation to the Tea Party, this strongly suggests you have something to do with the ALP in a closer capacity than just voting for them: the Australian electorate is by no means stupid, but by and large it doesn’t understand the finer nuances of what the Tea Party is (and nor should it reasonably be expected to). EVERY Labor operative I interact with, however, bangs on relentlessly about it. Clearly, this is another little kite the ALP is trying to fly, although this one will simply sail over the heads of its intended audience.

      No matter — Shorten still has his “fairness” diatribe to work with. The thing that is really unfair is just how recklessly dishonest he is being with the people he expects to vote for him, and the difficulty his party’s stewardship of this country will encumber future generations with.

      Perhaps, if you want me to respond in future, you can reply with arguments based in fact or reason. I don’t generally reply to comments like this one.

      • That was a long reply for someone who doesn’t generally reply to comments he dislikes.Go and live in a caravan park for a couple of months and then come back and waffle about fairness.My wife worked in one for 9 years and told me many stories about the human condition.The drugies,the drinkers,the nutters.the bludgers,the disabled and the destitute were all there and some of them even drove cars.

Comments are closed.