Many Australians remain in holiday mode. But post-Christmas credit card bills, the return to work and tumbling property values in Sydney and Melbourne are prompting many people to take stock. In doing so, four months from the federal election, it makes eminent sense to compare the key economic policies of the Coalition and Labor and how they would pinch the hip pockets of households and businesses for years or even decades to come. As the nation faces the likelihood of a change of government, Bill Shorten and his Treasury spokesman, Chris Bowen, to their credit, have not shied away from setting out a detailed economic narrative. Under the guise of “fairness” they have stuck with it, regardless of criticisms from those who would lose heavily as Labor shifted the nation towards higher taxes, bigger government and a more omnipotent welfare state. For the past week, this newspaper has cut through the argy-bargy, putting the blowtorch to key issues in play and how they will affect voters’ hip-pocket nerves, such as capital gains and personal taxes, negative gearing, welfare changes, superannuation and workplace relations. After crunching the numbers and considering the arguments of Josh Frydenberg and Mr Bowen, it is clear that voters who aspire to greater prosperity owe it to themselves and to their families to assess the cost benefits of the parties’ contrasting policies.
A week ago, The Weekend Australian examined Labor’s plan to hike capital gains tax. It would see Australians taxed up to 36.75 per cent on capital gains, compared with 23.5 per cent now. While 885,530 taxpayers declared capital gains in 2015-16, mainly from shares and investment property sales, the cost of the opposition’s pledge largely has slipped under the radar, unlike its promised crackdown on negative gearing. In supporting Labor, voters would be supporting the highest CGT rate in the Anglosphere. US investors pay 23.8 per cent tax on capital gains, the British 28 per cent on residential property and 20 per cent on other assets, and Canadians 16.5 per cent. According to home builder Tamawood, which has slashed its profit expectations by 26.9 per cent, Labor’s changes would help create a “perfect storm” in depressed real estate markets. Mr Bowen was notably unapologetic, noting that 70 per cent of the current CGT discount advantages the top 10 per cent of income earners.
Quasi class warfare also pervades Labor’s income tax policy, under which more than a million Australians, double the current number, would find themselves paying a top marginal rate of 49 per cent within six years, Treasury figures show. Labor’s top rate, one of the highest in the world, would cut in at 2.2 times average full-time earnings, compared with eight times average full-time earnings in the US.
Not everyone would lose under a Shorten government, however. After 20 years of welfare reform guided by the sound principles of Bob Hawke’s “reciprocal obligation” and John Howard’s “mutual obligation” policies, Labor has announced a softer approach to jobseekers, including redesigning work for the dole and ditching the need for the unemployed to apply for 20 jobs a month. The Business Council of Australia wants the system overhauled, arguing employers are bearing the costs of sorting through unsuitable job applications. Further reform is needed, mainly because welfare continues to account for more than a third of federal spending. It would be disastrous, as Noel Pearson warns, if Labor caused a backslide towards the passive welfare dependence that hard-won reforms of the past 25 years helped overcome.
As the population ages, the retirement policies of both major parties demand close scrutiny if workers’ superannuation returns are to be maximised and reliance on the Age Pension reduced. Both major parties have mixed records on super. But as reported today, Treasury estimates show Labor’s proposed changes could leave up to a million workers worse off through tax changes and abolition of the government’s measure to allow concessional catch-up contributions. The opposition, dominated by the union movement, which controls lucrative industry-based funds, has blatantly rejected the Productivity Commission’s main recommendation for improving retirement savings.
Superannuation is just one area in which the unions would dominate a Shorten government. Labor has pledged rigid regulation of workplaces and agreed to allow unions to make wage claims on multiple employers. That move, Australian Industry Group chief executive Innes Willox warns, has “left the door open to rampant industrial disputation across the entire Australian economy”. Next week’s strike at a Wollongong colliery over labour-hire workers is a foretaste of what could be expected.
While exasperated by much of the drivel that passes for political debate and by the Coalition’s internecine warfare, voters, in their own interests, should scrutinise the costs of the parties’ policies. If Coalition MPs are to lift their dismal act they should recall how the mantra “It’s the economy, stupid” propelled Bill Clinton to power in 1992. As the government achieves the first surplus since Mr Howard lost office, it has the ammunition to take Labor apart, point by point, tax by tax, dead-handed policy by policy, and highlight the dangers of stumbling blindly down a socialist dead end. Unless more ministers plunge in and fight on their ground — growth and jobs — they and Australians aspiring to be justly rewarded for hard work are on a hiding to nothing.
This was an editorial published by The Australian on 12 January 2019