Economics – fiscal policies and taxation
An analysis of the Coalition’s policy platform and its record
In a 12-minute video – The Liberal Myth – Michael West analyses the Coalition’s election policies and looks at their economic record.
He goes through each of the 5 policy planks on the Coalition’s website, starting with “more jobs, with unemployment below 4 percent”. Of course unemployment rises when you shut off immigration, and the headline figures on employment tell only part of the story.
The other four planks are even easier to dismiss.
His main criticism of the Coalition concerns their fiscal policy. They have had contractionary fiscal settings when they should have had expansionary settings, and now with an election looming they have expansionary settings when they should be tightening them.
Their fiscal approach to the pandemic was particularly poor. The economy needed a fast stimulus, but “Jobkeeper” was the wrong way to go about it. Of the $80 billion outlaid, half was wasted on companies that didn’t need it, and its economic effect was to worsen income and wealth inequality and to further overheat the housing market.
Jim Chalmers and Josh Frydenberg on economic policy: note the difference
If you have an hour to spare, you might have a look at Jim Chalmers and Josh Frydenberg taking questions from journalists on economic policy at the National Press Club. The whole session is actually 75 minutes, but you can skip the 15 minutes of entirely predictable opening statements.
The session was remarkably civilized. Only towards the end did a journalist from some outfit called “Sky” try a gotcha on Chalmers, which he answered with precision in spite of the chair, Laura Tingle, having ruled the question out of order.
Much of the time both engaged in fiscal trivia with assertions that “our deficit/debt/taxation/unemployment/interest rates/inflation was/is/would be bigger/smaller than yours”. Out-of-context statistics are always a distraction from serious discussions on economics.
Although they both agreed that raising productivity is the prerequisite for any rise in real wages, ideological differences revealed themselves. Frydenberg kept emphasizing a commitment to a Commonwealth taxation ceiling of 23.9 percent, while Chalmers was more circumspect about revenue, promising to find savings from the Coalition’s wasteful expenditure and higher taxes on multinationals to fund Labor’s commitments on aged care and other promises. (If Labor is elected Chalmers could do well by following Tony Abbott’s lead and appoint a commission of audit, but with competent economists rather than party cronies as was the case with Abbott’s commission.)
Any economist considering the long-term trajectory of Australia’s economy would recognise that our low level of taxation is unsustainable. Both speakers, in fact, admitted that there is a “structural deficit”. Our options are to go on accumulating deficits, to raise taxes, or to embark on a savage policy of austerity. Neither Chalmers nor Frydenberg was clear about his preference, but Chalmers’ responses hinted at raising taxes, while Frydenberg’s hinted at austerity.
Unfortunately none of the journalists present, including some from media that may consider themselves as “left”, asked the question “What’s the economic virtue in low taxes?”. It’s a pity Callum Foote from Michael West Media wasn’t in the room, for he has an article criticizing Labor for its tame approach to taxing multinationals: The verdict: Labor tax solution better than Coalition, worse than Donald Trump.
The Liberals, for their part, may go on about their taxation cap, but what’s the point of restricting Commonwealth taxes if the forgone taxation revenue has to be replaced by higher and more regressive state taxes, by costly, inequitable and inefficient privatized taxes such as road tolls and private health insurance, and by impoverished public services?
Another missed opportunity came with the first question, which asked both to justify Commonwealth grants for dog parks: “in what way do dog parks contribute to productivity?” Neither the question nor the unconvincing answers got to the serious question of why a federal government should be involved in dog parks, or for that matter car parks, sporting club change rooms, local roads … All such projects, including dog parks, are probably economically justifiable, but why the federal government? Federation reform seems to be off the agenda.
Another hint of ideological difference was Chalmers’ statement that we might need to “change the way we think about the care economy”. It’s a hint that he may be breaking from the established way of thinking that there is a productive economy, mainly in the private sector, making stuff and doing things for the unproductive care economy. Frydenberg’s responses were in line with that model, and many on the “left” implicitly hold that model when they classify health, education and housing as “social expenditure”. It’s been the way of thinking during the pandemic, with the notion that there is some trade-off between “health” and “the economy” – a way of thinking, when applied, that led to the worst of all outcomes.
It’s common but flawed thinking. There is no “productive” sector supporting an “unproductive” sector. It’s all one economy. Economic activity that does not serve social ends is pointless. If Labor can bring us to understand that the purpose of economic activity is to serve society, it will indeed be forging a meaningful change in our understanding of public policy.
Hewson on Albanese – better able than Morrison to handle labour relations
Writing in The Saturday Paper – Morrison focuses on the economy at the expense of workers – John Hewson covers a range of policy issues, exposing Morrison’s inadequacies and false claims about his so-called budget plan – “In reality, it’s just a huge pork barrel.”
He focuses on the idiocy of the criticism that because Albanese has never held an economic portfolio, he is unfit to be prime minister. But Albanese is much better equipped than Morrison to handle difficult but neglected labour-relations issues, such as skewwhiff wage relativities, wage theft, and problems with labour-hire companies. Morrison has no policy on these issues.
Morrison would have to concede that his opponent is better able to manage industrial relations, with a Bob Hawke-like capacity to pull employers and unions together for accord-style discussions and pathways forward. Moreover, Morrison carries the legacy of John Howard’s WorkChoices, which has been seen as an attack on workers’ rights.