17 hours ago.
Updated 16 hours ago
Its May 12 budget tried to feign concern for the property aspirations of the young, but that was spin to distract from tax increases and deficits that Treasurer Jim Chalmers forecast will total $1.2 trillion by 2030.
The budget forecasts 35,000 fewer new homes over 10 years and only 75,000 extra homes for first-home buyers over a decade in which 110,000 people every year will want a first home. It also forecasts rent rises.
Treasury secretary Jenny Wilkinson told the truth on Thursday when she admitted that the budget’s tax changes were about redistribution rather than housing.
Chalmers shows no sign of emulating his reforming PhD subject, Paul Keating, but is outspending his former boss and one-time fellow Queensland AWU faction leader, former treasurer Wayne Swan.
Swan left five budget deficits when the Rudd-Gillard era finally collapsed in 2013, but bequeathed future treasurers a National Disability Insurance Scheme so badly set up it was heading to $100bn a year mid-century until cuts in this latest budget.
Swan also built in years of future federal school education spending increases with the Gonski funding reforms that cost tens of billions of dollars a year all for zero improvement in education standards.
Chalmers was Swan’s chief of staff.
Yet Swan at least tried to limit welfare to families that earned less than $150,000 a year. Chalmers wants welfare for all.
Chalmers, Anthony Albanese and then first-term Minister for Industry Tony Burke have ditched Australia’s traditional bipartisan commitment to targeted welfare and a highly progressive tax system.
Burke, in Albanese’s first term, presided over re-regulation of the labour market that Keating and reforming former trade union boss Bill Kelty had decentralised in the 1980s.
Albo and Chalmers fed in to that with a part nationalisation of wages in the care sector, using taxpayers’ money to top up pay in private sector aged care and childcare facilities.
Before the last election, Albanese forgave $16bn in student debt owed to taxpayers – in effect a subsidy to future high-income earners.
He spent $8.4bn to shore up Medicare bulk billing, and in the process gave doctors $3 of taxpayer money for every dollar saved by a patient.
The PM also flagged subsidised childcare for families earning up to $535,000 a year, and signalled he wanted a free national childcare system for all.
And under COP climate president Chris Bowen, who doubles as Minister for Energy, the government is presiding over hundreds of billions of dollars in spending on renewables and the network rollout for them.
On Friday, The Australian reported that Bowen had increased spending on his Cheaper Home Batteries program, which is now expected to divert $8.5bn to people who could well afford their own batteries.
It was originally forecast to cost $2.3bn over four years, so it’s nothing like the blowout on Snowy 2.0 from $2bn to $42bn.
But this is big government on steroids. It will make Australia look more like Scandinavia than the rapidly growing economies of Asia that Keating wanted us to compete against.
So what has all this to do with a media column? The Monday after Chalmers’ latest budget, this column called out politics and economics journalists who had missed the truth: Chalmers’ budget of intergenerational equity does very little – even over a decade – to help get the young into houses.
But it will prevent the young from using negative gearing and the capital gains tax discount Chalmers is abolishing to build the prosperity that some of their parents – and Albo himself – enjoyed.
Worse than that, in a foolish attempt to equalise the taxation rates applied to labour and capital, Chalmers has risked aspiration and incentive. Treasury must surely know that around the world capital is taxed less than labour because investments begin with savings by workers who have already paid tax.
Many countries do not even tax capital gains. Think New Zealand and Singapore.
In the US, assets held for more than a year are taxed at zero per cent, 15 per cent or 20 per cent based on income.
The top US income tax rate of 37 per cent cuts in at $US626,351 ($875,000).
Here, the top rate of 47 per cent applies on all income over $190,000. The US rate at the dollar equivalent income is 24 per cent.
This is why serious economists want real tax reform and cuts in government spending. We have had low national productivity growth since Swan’s days, and Chalmers is making it worse.
After reducing the promised stage three tax cuts for higher-income earners last term, the only tax relief Chalmers is now offering is his $250 WATO (Working Australians Tax Offset) payment to all taxpayers. That’s not reform.
John Kehoe, economics editor at The Australian Financial Review, quoted former Queensland Labor senator John Black on April 23 arguing “Australia is becoming a European welfare state” under Albanese.
Black said Labor was now targeting a different demographic from its old working-class roots. “Labor no longer represents the poor and doesn’t disproportionately target benefits to lower-income voters,” he said.
“Labor now has a stronghold on middle and higher income voters, so the universality (of government benefits) makes political sense.”
Centre for Independent Studies researcher Robert Carling last July revealed more than half of all Australians now rely on government payments for the majority of their income. Think public servants, welfare recipients, NDIS beneficiaries or wage subsidies.
Remember too that the former Liberal Party seats now held by the teals represent exactly the sort of wealth profile Chalmers and Albanese are targeting.
This leaves One Nation leading the fight for poorer seats, mainly in regional Australia, as the Liberals and Nationals try to rebuild.
Yet if Opposition Leader Angus Taylor can’t sell a mainstream case for economic aspiration as an alternative to the government’s Euro-socialism, he is in the wrong business.
Chalmers has not been caught out by hard times, as he constantly whinges.
He missed the pandemic that destroyed the Coalition and he inherited a booming mining sector that has poured an unexpected $400bn extra revenue into the national economy since 2022.
Despite that windfall, Chalmers can’t balance a budget, grow the economy at a decent clip or cut taxes.
Journalists, even the ABC’s David Speers and Sally Sara, who regularly give Chalmers soft interviews, need to start asking him some tough questions.
How about this one: “Treasurer, what happens if we have a steep recession, company and PAYE tax collections plummet and you are confronted by the bill for hundreds of thousands of extra unemployed with a deficit already heading for $1.2 trillion?”
