On a bipartisan path to ruin: our leaders have lost the plot on reform
The Albanese government deserves every criticism for abandoning stage three tax cuts. In trashing a solemn, repeated promise, it debauches our political culture. Who can now say it won’t abandon promises on AUKUS or national security?
And it’s abandoned good tax reform.
But there’s a different lesson here. This also represents failure by the Liberal and National parties and signals the decay of our political culture. We’re drifting towards Australian Peronis m. I’ll explain that term in a minute. The broader point is our politics is now all but incapable of meaningful policy reform, apart from endlessly bigger transfer payments to ourselves.
Consider tax, Australia Day and Defence.
We have an extremely inefficient tax system, too reliant on income tax, full of disincentives and perverse penalties, the enemy of productivity. Neither side of politics can reform it. The most striking statistic is economist Chris Richardson’s calculation that the top 1 per cent of income earners pay tax equivalent to the entire tax contribution of the bottom (in income terms) 77 per cent of adults.
With free healthcare, extravagant transfer payments and the NDIS running out of control, Australia has one of the most progressive (meaning the rich pay more) tax and welfare systems in the world.
The three stage tax cuts were announced in 2018, then legislated in 2019. Stages one and two gave great benefits to low-income earners. Stage three, which tried to reduce disincentives and complexities higher up the tax scale, didn’t come into operation for six years after they were announced.
That meant the pro-low income down payment of the early tax cuts was completely disassociated in the public mind from the upper-income scale reforms. That the Liberal-National government did its reform this way shows that in fact it was far too cowardly ever to do the reform at all. This is a political first cousin of AUKUS submarines. A government does absolutely nothing right now but promises something grand long in the future, almost certainly when it has ceased to be in office.
On this occasion, this has worked tactically well enough for the Coalition. It forced Anthony Albanese to support the tax cuts in opposition and then can blame him for breaking a promise in government. The result, however, is a total failure in tax reform for the nation.
The Coalition wouldn’t do the whole reform at once both because it couldn’t meet the spending discipline needed to fund it, and because it couldn’t bear the political pain of being seen to do something that helped higher-income earners, even if this was much less than even returning bracket creep. It could of course have done a smaller version of all three stages at once. But the Liberals really couldn’t and wouldn’t do tax reform, they couldn’t manage the politics.
In the entire decade of Coalition government, the Liberals never cut the highly uncompetitive top marginal tax rate of 47 per cent (including the Medicare levy). More important, they never adjusted the low threshold at which it comes into effect of $180,000.
Really rich people don’t pay regular income tax. Form yourself into a legal company and you pay 30 per cent tax instead of 47 per cent. There is an infinity of more complex tax arrangements. The more complex the tax system, the more incentive for inherently worthless, artificial schemes.
The bottom line is that in office the Coalition never had the courage of its convictions in tax reform. It’s not surprising that the Albanese government doesn’t have the courage of the Liberals’ convictions either.
We’ve just passed an Australia Day in which, grotesquely, our major cities didn’t have traditional national day parades, making us one of very few countries in the world too confused, conflicted, fraudulently ashamed of ourselves to even properly celebrate national achievements such as continuing democracy, the rule of law, universal citizenship, etc.
Australia Day has been effectively destroyed by the onslaught of identity politics over the past 15 years. Mostly, this identity politics campaign has not been an expression of popular discontent coming up from the grassroots of society, but rather an academic- and activist-led top-down campaign. The vast cohort of the activist and academic leadership are paid, ultimately, with government money, or sometimes with the money of giant corporations.
We’ve just had Cricket Australia announce, then apparently reverse, a decision not even to acknowledge Australia’s national day. The national cricket captain, Pat Cummins, is opposed to the national day on January 26. What an interesting contrast to the treatment of elite footballer Israel Folau. In a personal social media post Folau slightly mangles a verse of the New Testament and is driven out of professional sport and prevented from ever earning his chosen living again. Cummins as national cricket captain opposes an elementary national symbol and is a candidate for sainthood.
The Albanese Labor Party promised in opposition to keep and support Australia Day, but in office has effectively done nothing to defend it. Australians voted against identity politics in the voice referendum 61 per cent to 39 per cent. But no one apparently takes any notice of them.
Yet in the decade of Coalition government, Canberra fully funded the Aboriginal grievance industry. Nor would the Coalition ever clearly state its purpose in constitutional terms, which led numerous Aboriginal leaders to conclude, mistakenly, that the Coalition offered much greater scope for constitutional change than it really did. In the end the Coalition was forced to take a clear position opposing the voice because of Jacinta Nampijinpa Price’s personal leadership. The crisis in our national purpose, identity and symbols brought on by identity politics was underwritten by the Liberal-National parties long before Labor came to government.
The Albanese government’s decision not to send a ship to the Red Sea to help guarantee freedom of commerce in that vital shipping route is perhaps a turning point in modern Australian history, a devastating sign of our ramshackle military decrepitude and our ultimate lack of strategic seriousness. Yet the dismal, antique navy surface fleet we have today is also the product of a decade of Coalition government.
So, Peronism? Argentina, like Australia, has a small, well-educated population and a big territory with agricultural and mineral riches. Under Juan Peron it developed stylised and ideological politics, featuring ever-growing transfer payments, crippling budget deficits, pro-trade union industrial relations, second-rate nationalism and creeping authoritarianism. Its government and people assumed there would always be money to spend. The political system became toxic, and abusive. The only thing people believed from government was cash in hand.
It’s the path to ruin. It’s the path we’re seemingly on.