Coalition needs a big sales job to highlight Labor’s wrongs

Too many journos let Bill Shorten get away with a porky in his Budget reply almost as big as his citizenship lie.

The Opposition Leader Bill Shorten giving his Budget in Reply speech to the Parliament in the House of Representatives in Canberra. Picture: Gary Ramage

Fairness is all the go at the ABC, especially in the wake of the federal budget on May 8 and the ­opposition’s reply two nights later.

Sabra Lane pushed the fairness line on ABC Radio’s AM on Thursday, May 10, citing research from KPMG and the National Centre for Social and Economic Modelling showing that despite the government’s proposed tax cuts for low to middle-income workers of $530 a year. Its plan to flatten the tax system seven years from now eventually would confer more benefits on higher-income earners.

Picking up the theme on ABC TV’s Insiders the Sunday after the budget, new 7.30 political editor Laura Tingle specifically said “the big underlying issue is supposed to be about fairness and inequality” after host Barrie Cassidy had interviewed Scott Morrison.

Malcolm Turnbull explained a few facts of tax life to Lane, who was exercised by the analysis showing that under the proposed flat tax rate of 32.5 per cent from $41,000 to $200,000, the savings would be greatest for the highest earners. “Someone earning $200,000 will pay 12½ times more income tax than someone on $41,000,” the Prime Minister said.

Even though notionally on the same marginal rate, under the proposed changes the average tax paid by someone on $200,000 would be $60,007, a 30 per cent rate overall. Someone on $41,000 would pay $4767, an average rate of 11.6 per cent. So still very progressive, and remember the intersection of benefits with the tax system allows half of all Australian households to pay no net tax at all.

As the Treasurer has been saying, the top 10 per cent of earners pay the vast bulk of income tax, even after their capital gains and negative gearing concessions.

Treasurer Scott Morrison delivering his Budget speech in the House of Representatives Chamber, at Parliament House in Canberra. Picture: Kym Smith

Fairfax Media, Guardian Australia and the ABC concentrated on the unfairness angle for days. The Sydney Morning Herald’s political editor, Peter Hartcher, was the exception, arguing in his paper and on the ABC’s The Drum that the government should have used its revenue windfall to pay down the deficit, an unusual line at Fairfax, whose commentators normally see little wrong in deficits.

Neither Fairfax nor the ABC has been comfortable with market-based economic reforms going right back to Paul Keating’s days as treasurer in the 1980s. They loved him as PM for his big picture on Asia, the republic and reconciliation but have long argued voters are more interested in government services than tax cuts.

Traditionally, the News Corp papers, especially the tabloids, have championed Keating’s idea of using growth to float all boats, cutting taxes — personal and business — and trying to foster aspiration. Their position is based not only on the successes of the Keating, Hawke and Howard reform era but on a calculation such reform best serves the interests of their outer suburban readers.

The truth, as Deloitte Access Economics managing partner Chris Richardson said on 7.30 on May 10, is that neither budget offered much new spending. The Coalition gave away only about half its revenue windfall in tax cuts and did none of the heavy lifting on spending cuts, trimming only $404 million over five years.

Labor bettered the government’s proposed tax cuts but kept most of its powder dry, remembering it has a $200 billion war chest to play with because it is winding back concessions to self-funded retirees, company tax cuts, capital gains tax concessions and limiting access to negative gearing for property investors.

As usual, this government stumbled in its sales job. The seven-year “hitch” on its wind-back of bracket creep and an arcane 23.9 per cent ceiling on tax as a proportion of the economy are too blunt to cut through. But it had the right idea: the next election will be between Labor hellbent on the biggest tax grab in our history and a government focused on business and personal income tax reform to lift jobs and growth.

No doubt Tingle on Insiders, Guardian Australia’s Katharine Murphy and political commentator ­George Megalogenis were right to be sceptical about plans for tax reform three terms hence. They are also right to doubt the government’s words when it insists it will not split its reform package, saying tax refunds in July next year cannot be separated from rate changes in 2024. History suggests pragmatism in dealing with a recalcitrant Senate will put paid to that idea.

But too many let Bill Shorten get away with a porky almost as big as his citizenship lie: remember him saying we in the Labor Party have better processes to detect dual citizens? Every few minutes in his speech he repeated the big lie that Labor could outdo the government’s tax cuts because it was not giving $80bn to its top-end-of-town mates and rewarding rorting bankers. The Australian’s editor-at-large, Paul Kelly, nailed it last Saturday week in this paper, pointing out the tax cut for companies with turnover of more than $1bn was not scheduled to start phasing in until 2023-24 before hitting 25 per cent in 2026-27. By then, the banks the Opposition Leader kept attacking would have paid an extra $16bn in tax under the government’s bank levy introduced last year.

Shorten was getting away with claiming his savings on big corporate tax cuts that would not start for another five years were paying for personal tax cuts across the next four years. On the ABC’s 7.30 after Shorten’s reply, Tingle repeated the Labor line that it was able to deliver $5.8bn of tax cuts because it was hitting the big end of town. Well, no, actually.

Shorten does, however, plan to repeal tax cuts to companies with turnover from $2m to $50m. How will the 1.4 million workers at those companies feel about that?

The government should be shouting this from the rooftops every day but you would be lucky to find a voter who has grasped these points.

The “progressive” media is ­allowing Shorten and opposition Treasury spokesman Chris Bowen to walk away from 34 years of Labor-initiated bipartisan consensus for micro-economic reform to boost productivity, tax reform and growth without any real scrutiny because they believe he has the next election won.

This is far from certain. Australians are a sceptical bunch, especially the aspirational tradies and incorporated small businesses of the outer suburbs of our capital cities. As former Labor senator and now electoral demographer John Black said in this paper last Saturday week, it feels a lot like 2001, when many thought John Howard was certain to lose to Kim Beazley.

Howard’s battlers and Kevin Rudd’s working families are more honest than those who claim they would prefer better government services to tax cuts. Many will buy Morrison’s line that they know better than governments what’s best for their money.

They will hate the waste and rorting they are hearing about in the National Disability Insurance Scheme. They know about the failure of $18bn a year in extra Gonski funds to lift education outcomes. They won’t like penalising self-funded retirees because they hope never to need the Age Pension themselves. Most of all, they hate soaring power prices and won’t want a bar of Shorten’s 45 per cent renewable energy ­target.

Yet whether the Coalition can put together a negative campaign against a giant increase in the size of government is an open ­question.