A federal budget for business, as usual

Don’t believe the hype about a volte-face. It’s business as usual for the federal Liberal government – under the latest three-word slogan, “security, opportunity, fairness”. The government remains politically constrained after the 2014 overreach, as evidenced by its new-found love of “good debt” to fund a few big ticket infrastructure projects. But the baseline calculation is, as ever, how to make the rich richer.

Look at what the Liberals are doing to the unemployed. There are 10 times more people currently looking for work (or more work, if they are in part time or casual positions) than there are jobs advertised – 1.85 million unemployed or underemployed compared with about 180,000 jobs advertised each month, according to the Bureau of Statistics. Such is the extent of the gap between need and reality.

Yet the budget message is that the jobless, living in poverty on the pathetic and Orwellian-named Newstart allowance, are bludgers who need to be policed ruthlessly via welfare quarantining and drug tests (how about coke tests for the boardrooms, arseholes?). Every cent that can be pilfered from their pockets will be pilfered, with a new demerit system to push and shame as many people as possible off their rightful entitlement– as though an unemployed manufacturing worker with depression is the enemy of the people.

Again, higher education is in the crosshairs. University students and staff have taken a $3.9 billion hit since 2011 in the name of “budget repair”. But the government won’t let up, with a proposed $2.8 billion funding cut and fee hikes of 7.5 percent. On top of that, the HECS loan repayment income threshold is to be lowered from around $55,000 to $42,000. “The decision will see people who are earning less than the median wage … being hit with a tax rise of up to 2.5 percent”, wrote economist Greg Jericho in the Guardian.

Don’t believe for a moment the spin about increased school funding. The Abbott-Hockey 2014 budget tried to cut $30 billion. Now, as the Liberals themselves admit, we have an $18 billion funding increase that is actually a $22 billion decrease compared to what would have been the case had they not been elected in 2013. How’s that for fairness etc.?

All the while, there is plenty of cash for law and order and harassment of Muslims, with more than $300 million to the federal police. There’s a bottomless pit for military spending, with a commitment to increase funding by $25 billion over the next decade. And the Liberal accountants can always find $50 billion to help out their mates in the boardrooms, with the push to lower corporate taxes continuing.

It’s never enough for the conservatives’ big-end-of-town backers. Don’t be fooled by the so-called hit to the banks, the profits of which have gone into cloud-land in the last 15 years or so. It’s a 0.06 percent levy on the liabilities of institutions that hold at least $100 billion and will mean $3-400 million each year for the Big Four, according to the Guardian’s Bridie Jabour.

In 2010, deputy tax commissioner Jim Killaly revealed that more than 40 percent of big businesses paid no tax at all. Yet they sook about the 30 percent corporate tax rate, which was 49 percent in the mid-1980s; the effective rate, what companies actually pay after all the “gimmies” and loopholes, is less than 20 percent for those companies actually paying it. Further, a 2014 Tax Justice Network report estimated that 57 percent of the biggest publicly listed companies own subsidiaries in tax havens and that avoidance is costing the federal government more than $8 billion annually – enough to build four state of the art hospitals every year.

What have the Liberals done in response to such revelations? A few pathetic measures to deal with multi-national tax evasion – while they cut staff at the Australian Taxation Office, making it less capable of enforcing compliance. They also scrapped a requirement that the commissioner make public the tax payments of companies with revenues of $100 million or more. And yes, they’re fighting to lower that corporate tax rate.

It’s not just the “take from the poor, give to the rich” accounting typical of a federal Liberal budget. The government refuses to address the most important economic issues facing the majority of people. In fact, it deliberately makes matters worse by refusing to act.

The housing and debt crisis

There is a debt crisis, but it’s not the government one that the politicians and right wing press routinely talk about.

Speculation has become rife in the property market as investors take advantage of negative gearing and the capital gains tax discount, which cost the government billions of dollars per year in forgone revenues and directly contribute to dramatic price hikes. Between 2012 and 2015, the total value of residential dwellings rose by more than $1 trillion – about $1 billion per day. Over the last five years, house prices nationally are up by more than 40 percent.

The massive price increases have underpinned onerous levels of household debt. From having one of the lowest debt-to-income ratios in the 1980s, Australian households now are among the most indebted in the world, with the debt to income ratio rising from less than 50 percent to more than 180 percent. The much-vaunted low interest rates cannot compensate for the sheer weight of the liabilities. So while the mortgage rate has fallen by one-third since 2011, the number of households facing mortgage stress has climbed by 50 percent to more than one in five.

The bottom 40 percent of households own only 10 percent of mortgage debt. But debt as a proportion of income among poorer households has doubled since 2004. This is a ticking time bomb. As the National Centre for Social and Economic Modelling noted in a recent paper: “The most financially stressed households in Australia are not necessarily those with the highest debt but are more likely to be low income families, in particular single parent households.”

It’s not just mortgage debt, although that is the bulk of it. According a Digital Finance Analytics report, the proportion of households that are not able to meet their financial commitments as they fall due jumped from 24 percent to 32 percent between 2005 and 2015.

The government’s proposed solutions? A bit of negative gearing “tightening”, posturing about foreign investors – adding to the general racist hysteria – retirement savings of $30,000 being opened to home investment, and the National Housing Infrastructure Agreement. It’s a big ticket $1 billion, much of which is not new anyway. Did I mention property values collectively rising at $1 billion per day? Yeah, welcome to the clown factory distress-reduction circus. Let the market rip, boys and girls …

Inequality and stagnant wages

Australia is one of the richest countries in the world, yet is plagued by inequality and poverty. For most of the “long boom”, wealth polarisation has gotten worse. For example, the top 1 percent of Australian income earners doubled their share of national income in the past three decades. Social demographer Mark McCrindle estimates that the richest 2 million households on average have wealth of $2.5 million and own 62 percent of the country’s private wealth, making them more than 70 times richer than the poorest 20 percent.

Real wages have grown over time for most people – something that, until recently, was true in most of the developed world. “As recently as between 1993 and 2005”, noted researchers from McKinsey Global Institute last year, “all but 2 percent of households in 25 advanced economies saw real incomes rise”. For the rest of the advanced economies, the situation changed more than a decade ago. “Between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people”, the researchers wrote.

Australia has now joined that club – which is making the situation of indebted households worse. Wage growth and household disposable income have been declining for the last five years; real wages have been stagnant for four years. The single fastest way to ease cost of living pressures – which the government claims to be concerned about – would be for workers to get significant pay rises. But the Liberals are allowing penalty rates to be cut for hundreds of thousands of retail and hospitality workers. And they relentlessly attack the unions that have managed to win decent pay rises for their members.

Underemployment – people with part time hours who need more work to make ends meet – has surged to more than one million people, masking the true extent of a growing section of the population’s hardship. During the 1980s, the underemployment rate rarely rose to 4 percent of the labour force. Today it’s at a record high of more than 8.5 percent. As Greg Jericho noted in the Guardian in March: “The reason is the lack of full time work compared with part time. Since May 2014, 329,000 new part time jobs have been created compared with just 152,000 full time ones”.

Here the government and its business backers say that lower wages, greater job “flexibility” and lower corporate taxes will help improve economic conditions – a bogus argument for which there is almost no real-world evidence, unless you include the increasing creation of low wage casual jobs.

Business as usual

Read the commentators obsessed with debt and deficit and you will hear all about a Keynesian Liberal government, about a Labor Liberal budget, about a great about-turn in the cabinet, about a politically-savvy document, about a government that might well have learnt its lessons.

In reality, the government doesn’t want a strong economy that will benefit workers. It wants a two-tiered education system. It wants unemployed people on the brink and vilified. It wants the problems of everyday life blamed on foreigners. And it wants workers desperate for a job, saddled with debt and pushed to the margins to fuel an economy run by the rich and for the rich.