Private sector funds care economy

Where does Jim Chalmers think the money will come from to pay for the ever-expanding public payroll? It is a question the federal Treasurer ignored on ABC Radio National on Friday, saying instead: “Care economy jobs are real jobs … we want to see care economy workers respected.” As a way of appealing to unionised public sector workers this is hard to beat.

But where Dr Chalmers lets them down is by ignoring the obvious – that more jobs and higher wages for workers in aged care, childcare and disability care depend on the productive economy generating the tax revenue to pay them.

He also dismissed as “snobbishness” comments such as those from opposition employment spokeswoman Michaelia Cash, who warns that public sector growth is unsustainable, especially when government policy and union-dominated workplace relations reduce the private sector’s opportunity to expand.

His glib response was an opportunistic attempt to avoid the grim fact that 80 per cent of the additional hours worked in the September quarter were in the non-market economy, which will always consume all available resources and then some.

Reducing annual expenditure growth in the $44bn-a-year National Disability Insurance Scheme to 8 per cent is hailed as a major achievement by the government. It demonstrates the depth of the underlying problem. Neither is there much chance that welfare services will ever do more with less. As the Department of the Prime Minister and Cabinet has acknowledged, productivity growth in the care and support sectors across the past 20 years was close to zero.

All of which adds up to the fact Dr Chalmers’s sole continuing option to fund the care economy is by providing the private enterprise economy with the opportunity to create more wealth. The pathway to achieving that objective is clear.

It involves reducing the power of unions to hinder labour productivity through restrictive work practices, stopping the state soaking up ever more resources and, above all, reducing the tax rate that middle- and a very few high-income earners pay. Cancelling the Coalition’s stage three tax cuts was a pointless wealth transfer from citizens to government.

But don’t bank on Dr Chalmers getting out of the way – he attributed the 0.2 per cent increase in GDP in the September quarter to state and national government spending, as if that were a good thing when it crowded out private sector employment and made it harder for the Reserve Bank to reduce inflation.

There is no credible way to ignore the fact productivity growth is the only way to expand the tax base without increasing the share of national income government expropriates from individual and business taxpayers. To fund jobs in the care economy, indeed in all of government, including the bureaucracy, the private sector must be freed up to grow and grow.