Category Archives: Economics

Budget 2014: setting up for more tax cuts for the rich, funded by grinding the poor into the dust

How to give a certain class of Australians what they want.

Tony Abbott at Daily Tele post-budget party

Tony Abbott at tonight’s Daily Telegraph post-budget party

  • Step 1: Win government, promising that, even though the country’s finances are well-known, you can magically create a “budget surplus” whilst simultaneously cutting taxes, and not cutting spending.
  • Step 2: Exaggerate budgetary difficulties. Double the deficit. Lock in revenue cuts (eg abolishing the mining tax) that help your rich mates. Lock in company tax cuts.
  • Step 3: Claim “budget emergency” (even though anyone paying attention can see that the only things that have changed since the election were done by you)
  • Step 4: Slash basic services for the poor – drive those on NewStart further into poverty, deny young people even that support, bully the poor out of going to the doctor or even the emergency room, cut services for the disabled.
  • Step 5: Cover your permanent assault on the poor with a comparatively small “deficit levy” on certain wealthy people that is, unlike the service cuts, only temporary.
  • Step 6: As soon as the unnecessary cuts produce a surplus, give the proceeds to the rich in more tax cuts.

In short –
Times are good: lock in tax cuts.
Tax cuts wreck the budget: lock in service cuts.
Service cuts create a surplus: more tax cuts.

End result: America.

Still, after all, it’s just what Australians want – which is why before the election we had to tell them none of it would happen. Because of how much they support it.

Oh, alright, yes, they’re angry – now, two and a half years out from the next election, when they can’t do anything about it. Sure, we’ve got a lot of votes to buy back in the next two budgets – but with the money we just gouged out of the poor and vulnerable, history indicates we can do it.

Trust us.

Funding decent public services easier than you think

Imagine if we actually did have a government prepared to collect enough revenue to fund necessary services like dental care and disability services, let alone decent public health and education system. A Dr Richard Denniss, writing in Crikey this week as part of their “what would you do” budget discussion, has some ideas:

My fantasy budget would massively simplify the tax system and in the process collect a lot more tax revenue. It would be transformative because in one fell swoop tens of thousands of our best and brightest would be “freed up” from the stultifying, but very well paid, task of helping wealthy people engineer their finances to avoid tax.

So how to do it?

Step one is to abolish John Howard’s arbitrary decision to tax capital gains at half the rate of other income. Before that decision we had spent 20 years moving towards a simplified, harmonised system that reduced incentives to “financially engineer” ordinary income into more tax effective forms of income. The argument that such an incentive would stimulate investment is spurious, was mounted after the decision was made and is not borne out by the empirical evidence. That said, it’s very popular among the wealthy.

Step two is to abolish the bizarre notion that income from superannuation should be tax free. This was another of John Howard’s crimes against tax efficiency and equity. Those lucky enough to have accumulated millions, and in some cases tens of millions of dollars, in their superannuation accounts before the annual contribution limits kicked in can literally withdraw millions of dollars in income from their super, completely tax-free.

All up, tax concessions for superannuation cost the budget about $30 billion per year and anyone who says that these contributions are saving the budget more than $30 billion in reduced aged pension payments is either kidding themselves or kidding you. It’s demonstrably untrue, and Treasury’s own figures show that about $10 billion of that $30 billion goes to the highest 5% of income earners, the vast majority of whom were never going to be eligible for the pension.

There’s more on the link, but imagine if governments had the sense to even do that much. (Those calling the ALP’s recent budget “socialist” have no idea.)

Talking of avoiding responsibility

Another ripper story in Friday’s Crikey daily email, with Bernard Keane calling bullsh*t on business people pathetic present ruse of blaming every bit of their own incompetence on THAT DIABOLICAL GUBMINT!

We need a name for this — we’re calling it Whinger Whack-A-Mole. Business leader after business leader sticks their head up to blame Julia Gillard for all their own failings and says that investors were turning away from Australia. We at Crikey whack them with facts. Rinse, repeat. Well, someone has to do it, because the rest of the media don’t appear interested in doing it.

Today it’s Myer’s Bernie Brookes lamenting that Everything Is The Gummint’s Fault, dutifully reported verbatim by Fairfax’s Eli Greenblat, that dedicated diarist of the woes of the traditional retail sector. Brookes also got plenty of air time at Business Spectator, where he was more circumspect about the Prime Minister’s personal culpability for everything wrong with Myer, but still managed to fit in a few complaints about taxes, uncertainty and that old favourite, the lack of GST on the evil internet.

To rehearse the tiresome facts all over again: the Fair Work industrial relations framework sees industrial disputes and wage pressures at or near historic lows. The government presides over a low inflation, low unemployment, low-interest economy of the kind only dreamed of for most of the past 30 years. The tax take from business has fallen as a proportion of gross operating surplus to the lowest level since the mid-1990s; overall tax receipts as a proportion of GDP are at their lowest level since the mid-1990s. It’s hard to work out, bar removing all protections for workers, how much more this government could have delivered for business.

That’s presumably one of the reasons we’re almost choking on investment. Brookes’ comments were particularly poorly timed given yesterday’s release of new resources investment data by the Bureau of Resources and Energy Economics, which shows there’s a mining investment pipeline of half a trillion dollars, with “advanced projects” accounting for over a quarter of a trillion dollars. If there’s a capital strike on by foreign investors, god help us if they ever get enthusiastic.

Fortunately for Tony Abbott, that kind of actual analysis and balloon-pricking doesn’t appear much in the news media consumed by most Australians.

It’s either amusing or galling (depending on whether you can forget for long enough to avoid an ulcer that the consequences of this shameless whinging will ultimately negatively affect the vast majority of us) watching business blame every one of their problems on everyone else whilst claiming to be advocates for “personal responsibility”.

Because they’re used to it

Cathy Wilcox nails the problem with policies like the Liberals’ PPL scheme, in which the government gives more to those who already have more:

I suppose in the digital age, this’ll have to be the equivalent of cutting out a cartoon in the paper and sticking it to the fridge.

It’s the deleted tweets that are the most revealing

According to Boing Boing, Rupert Murdoch’s first deleted tweet:

Spoken like a man who sees employees as economic units to be exploited, and not human beings with families and lives.

Hey, Rupe? Maybe they have too long working hours and not enough holidays for a country with so many unemployed people and not enough jobs to go around?

UPDATE: Rupert’s followed up with the surprised “I’m getting killed for fooling around here and friends frightened what I may really say!”

Well, duh. Ordinary people aren’t supposed to hear what the powerful really think of them. The mockery is supposed to be limited to quiet conversations at the Club, or the lobbying to make the average person’s life more difficult to private chit-chats with malleable politicians. Tweeting these thoughts to the world? Nothing good can come of that.

UPDATE #2: Oh, and here’s hoping more CEOs take the advice of, and follow Rupert’s footsteps:

But you don’t have to be on Twitter every five minutes to make a big impression. One tweet a day – as simple as a link to an article you read or a thought from a conversation or meeting you had – can get the ball rolling.

So why not take a leaf out of Rupert Murdoch’s book and get the ball rolling on Twitter this year? But before you do, take a few tips from one of our tech gurus, Paul Wallbank. He’s written a great blog today which has three tips for Rupert Murdoch, which can be summarised as:

Shut up and listen.
It’s about community.
What’s your objective?

Somehow, I suspect the writer of that article had not yet come across Rupert’s deleted tweet.

Digital distribution the future of software? Only if you don’t mind having stuff you’ve paid for deleted

Game publisher Electronic Arts has a special new power it’s given itself over products consumers buy from it – the power to block them from playing their own software.

It’s like if you bought a car from Holden, and then said something publicly that Holden didn’t like, and so Holden came around and disabled your car and it was now worthless.

Meanwhile, EA and other dinosaur publishers think they can charge more for a digital download than a physical product, as part of their cunning strategy to delay digital distribution (from which they profit handsomely, having no physical costs and no retailers to cut in on the profits).

Which, given what they want to do with it, is possibly a blessing in disguise.

Threatening to cut off Centrelink payments from teenage mothers in disadvantaged areas

Thank God we’re finally going to cut poor teenage mothers off welfare if they won’t find the magical time they don’t have to do Year 12, so their children can grow up in cardboard boxes while their mums go to school. And until they get the message, they and their children can starve. It’s an important message – YOU’RE BLOODY FAILURES IN LIFE YOU LOSERS GO BACK TO SCHOOL YOUR BABIES DON’T NEED YOU BECAUSE YOU’RE PROBABLY CRAP MUMS ANYWAY – and if we have to sacrifice the health or lives of some poor kids (infants and teen mums) to make it clear, then that’s what we’ll do.

Young mums in NSW suburbs Bankstown, Wyong and Shellharbour will be among the first in Australia forced to take part in a federal government trial of 10 disadvantaged areas that will strip them of their benefits if they don’t finish Year 12.

About 11,000 teenage parents receive a parenting payment worth up to $641 a fortnight and 90 per cent of them have not completed Year 12.

Under the government’s welfare crackdown, teenage parents will be required to attend six-monthly interviews with Centrelink once their baby is six months old and, on the child’s first birthday, will have to have a plan for completion of school.

Serves them right for living in a disadvantaged area. They should be grateful it’s not as disadvantaged as the aboriginal communities in Central Australia. At least we’re not telling them how to spend their meagre Centrelink payment.

You know what I heard on the deranged right-wing radio I spend a lot of time listening to because I enjoy hating the people it claims are destroying this country (particularly the evil lying Prime lying Minister LIAR LIAR LIAR) because, obviously, they despise us and don’t share our values? Well, I heard that young girls – sluts, the lot of them – deliberately get pregnant for the luxurious welfare that’s made single mothers on Centrelink famous as the most privileged people in our community! It’s true! Someone said it and provided no evidence for this frankly absurd claim, and I believe them!

Those darn people poorer than me. Man, it’s just so satisfying making their lives more difficult, isn’t it?