The latest Household, Income and Labour Dynamics in Australia study, released this month, shows inequality across Australia is now worse than at any time in the survey’s 19-year history. The young yet to enter the housing market are feeling the pinch more than most.
Former Coalition prime minister John Howard, derided as anti-worker by the left, presided over a period of relatively strong performance by lower-income demographics in the HILDA survey.
HILDA did not exist in the Hawke and Keating Labor years but their productivity-enhancing reforms certainly helped lift living standards.
Think here the deregulation of labour and capital markets, micro-economic reform in water and electricity, and cuts in 1985 to the top personal income tax rate from 61 to 49 per cent and the intermediate rate from 46 to 40 per cent.
Treasurer Paul Keating cut company tax from 49 to 39 per cent in 1988 and as PM cut it again to 33 per cent in 1993.
Imagine PM Anthony Albanese and Treasurer Jim Chalmers, who claimed in 2022 that they would emulate the reforms of Hawke and Keating, ever cutting company tax or the top personal income tax rate.
Hawke and Keating lived in a different media era. Skilled political and economics writers often led debates about tough reforms to open Australia to international competition. Today most journalists outside this paper and The Australian Financial Review run a race-call version of reporting in which the political winner is the side offering the most free giveaways.
Yet today’s giveaways are future budget imposts for young taxpayers.
Not all senior journalists were on board the reform era train. Nine’s Ross Gittins — still running the antireform lines of his past 50 years in newspapers — was always a sceptic.
Gittins last Monday told readers of The Sydney Morning Herald and The Age that voters don’t care about balanced budgets advocated by the “Trumpist business media”.
A brilliant analysis of Australia’s miserable economic performance over the past decade ran in the AFR the same day as Gittins’ piece. Penned by leading federal budget observer Chris Richardson, this decidedly “non-Trumpist” piece was headed “We wasted a $400bn windfall, and now we all have to pay”.
Also compelling was a piece in December on the end of “Australian exceptionalism”, by this masthead’s Paul Kelly. Headed “2024: the year Australia lost its way”, Kelly’s analysis was not “Trumpist” either.
Keating and Howard’s treasurer, Peter Costello, did not just benefit from a powerful media. They also benefited from majority government.
Teals spruikers at the ABC, Guardian and Nine newspapers should ask themselves if any of the reforms of the 1980s and ’90s could have succeeded without strong majority government.
Remember here Hawke, a former trade union leader, led an attack on the centralised wage-fixing system that had been the policy centrepiece of Labor’s political and union wings. Howard, as opposition leader, backed Hawke’s reforms.
Such a scenario is hard to imagine today – as is a government going to an election with a new tax, as Howard did when he pitched the GST ahead of the 1998 poll.
Not only will we see no budget reform this week, we are unlikely to see majority government in May. Most left-wing journalists will cheer that on, forgetting how much the reform era benefited Australian living standards.
These have been stagnant for a decade yet many young journalists dream of minority government, with teal and Greens support.
Kelly’s piece in December quoted Costello on budget reform: “Australian exceptionalism became a phrase used in the IMF. We were considered a model for other Western nations. This process began with Hawke and Keating but the fiscal high point — 10 budget surpluses and the retirement of all commonwealth debt — was considered to be Australian exceptionalism.”
This allowed Australia to weather the global financial crisis in 2008-09.
Given Tuesday’s budget will confirm a decade of future deficits, how will we fare if, for example, President Donald Trump’s trade wars trigger a deep global slowdown?
Coming off two decades of mining boom, Australia’s financial bottom line should be much better. Richardson nails the problem: “The bad news is we’ve done well thanks to luck rather than good management. And the worse news is that, despite the luck that’s come our way, our social compact isn’t delivering prosperity: Australian living standards stood still over the last decade.”
Richardson says last financial year’s revenue windfall more than paid the cost of “unemployment benefits, plus childcare subsidies, the capabilities of each of the army, navy and air force, federal subsidies to state schools, as well as our support for carers, fuel tax credits plus spending on public sector superannuation”.
“Spending was 24.4 per cent of national income in 2022-23 but will be 27.2 per cent next year,” he wrote. It’s the fastest rise in government spending since Gough Whitlam’s Labor government 50 years ago.
High spending might be OK if Chalmers and Albo put it into productive investments. But they wasted most of it on handouts to help cost of living, effectively trying to offset the Reserve Bank’s anti-inflation monetary policy.
The latest pre-election spendathon includes some clangers.
How about the $8.5bn Albanese announced last month to increase bulk-billing rates? This will effectively give doctors $3 for each $1 of extra bulk billing.
The policy will save patients $859m a year by 2030 but at a cost to the government of $2.5bn a year.
How about the $2.4bn to rescue the Whyalla steelworks in South Australia at a cost of $2.2m for every direct job saved?
And look at Albanese’s expected childcare bribe to entice families at the poll. It could add $8bn to the existing $14bn cost of government childcare subsidies that already go to families earning up to $530,000 a year.
Why are we spending borrowed money to subsidise such high-income families?
And these are just the initiatives of the past few months. What about the National Disability Insurance Scheme that threatens to blow out to $100bn a year mid-century? Or Gonski school funding that can’t improve school results despite $32bn a year in federal funding on top of what the states – which run the schools – already pay?
What about all the billions in off-budget measures adding to the nation’s borrowings?
Does anyone think wiping $20bn of student debt for people – who will one day be high-income earners – is a good idea?
Consider, too, the economic wisdom of the $20bn “Rewiring the Nation” project to build new poles and wires across the continent for the green energy transition the rest of the world is abandoning.
Or the money set aside to make solar panels in NSW that can be made for a fraction of the price in China?
How about the funding for the green hydrogen that Climate Change and Energy Minister Chris Bowen still believes in, even after Twiggy Forrest has stepped back from the idea?
When our country’s luck changes, young journalists will begin to understand how these issues made their generation poorer.
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Unfortunately for younger Australians, Tuesday’s federal budget and the May election will be much ado about nothing.