Shorten’s tax and spend policies rehash the 1970s

Bill Shorten has caught the populist bug with a campaign that demonises the rich, writes Nick Cater. Picture: Zak Simmonds

It is a reflection of Labor’s populist turn that Mark Latham is sounding like the voice of reason. Back on Sky News after his lengthy term in exile, Latham is making the arguments for moderate, stable government that we seldom hear from Bill Shorten.

“You can only say to the Australian voters, ‘for goodness sake don’t send us back to the torture of the Windsor-Oakeshott era’,” Latham told Alan Jones last week.

“People have got to make a decision to do the major party choice … and a lot of those ragtag gypsies who bob up as independents are most likely to produce a hung parliament that is definitely against the national interest.”

Presumably Latham now regrets the advice he gave 60 Minutes viewers two elections ago. “Put it straight into the ballot box totally blank,” he said. “That’s what I’ll be doing on Saturday, and I urge you to do the same.”

The ambiguous election result of 2010 was the start of six excruciating years of populism that have stifled serious attempts at reform. First an abject Labor government was made even worse by its compromises with the ragtag gypsies in the lower house.

Then, when Tony Abbott’s government tried to repair the fiscal damage, it was chopped down at the knees by the ragtag forces in the senate.

Now Shorten has caught the populist bug with a campaign that demonises the rich. Using rhetoric that seems to channel Bernie Sanders, the populist who aspires to be the US’s first socialist president, Shorten demands that the wealthy and big corporations pay their fair share of tax.

On 3AW last week, Neil Mitchell asked Shorten who he meant by the rich.

“I don’t think that you could put a set number on it,” replied Shorten, “but I’ll tell you what isn’t rich. It’s people who are paying their mortgage, who don’t have 10 negatively geared houses. What isn’t rich, is people who don’t have millions of dollars in superannuation.”

Mitchell continued to press the point. What income threshold does one have to cross to move from comfortable to loaded? Is it $180,000 perhaps?

“No, it’s not,” the Opposition leader replied. “I think common sense is a good guide.”

Shorten’s credibility deficit masks a bigger problem for Labor, a party that has yet to address the reasons for its 2013 defeat and consequently fails to recognise the magnitude of the deficit challenge.

Shorten’s assertion that big spending-led economic growth will get us out of this mess assumes Australia will buck the low-growth trend apparent across the developed world. It also assumes that Labor’s decision to go to war with the wealth-creators will not damage the economy. Cutting personal and corporate tax would be one of the best ways to stimulate growth yet Labor pledges to do the opposite.

The paradox of the current Labor leadership is that it presents itself as a forward-facing party in touch with the modern world while its policy settings reflect the delusions of the early 1970s. A Whitlamesque fixation on social spending ignores the challenge of where the money to pay for it might come from.

The cost of the demand-driven higher education system Labor had a big hand in creating is running out of control, yet the party seems oblivious to the problem and is devoid of plans to fix it. In schools we spend 60 per cent more per child than we did 20 years ago, yet education standards have fallen. Labor’s solution is to spend more money still.

The incentive to rationalise the health sector — a reform long overdue — would be deadened by Labor’s plans to pour in yet more money. Ditto the welfare system, where it is not just money that gets wasted but lives.

Tax and spend may be the Labor way, but the current leadership if elected would do both exceptionally badly. The threats to make multinationals pay more tax ignore the reasons the revenue is leaking in the first place; the rise of the digital economy, the evolution of global supply chains and the increasing ­mobility of capital.

Other countries have responded to these developments by reducing company tax rates, a proven stimulus for growth and the creation of jobs. As recently as last September, opposition treasury spokesman Chris Bowen told a Sydney tax conference the nation should be aiming to reduce the current 30 per cent headline rate to 25 per cent.

Yet this month Shorten said reducing the company tax rate would produce “economic mayhem” and deliver a $9 billion windfall for banks. Cuts to personal taxation are out of the question. Labor plans to keep the deficit reduction levy, cementing the top marginal tax rate at 49 per cent.

Shorten once presented as an economic rationalist from Labor’s Right who, as AWU national secretary, recognised that flourishing businesses produced jobs and prosperity.

Now, mimicking Sanders, Shorten has embraced old-fashioned socialism. He wants us to believe that wealth and income inequality is the burning moral, economic and political issue of our time.

He no longer seems to regard lower taxes as a respectable way to stimulate the economy. Instead, like Sanders, he sees them as theft from the poor.

Sanders has maintained this position throughout his political career. He presumably believes it. But does Shorten? Or is it, in the spirit of populism, a message designed purely to get himself elected? An incident in 2004 recounted by Latham in his diaries suggests Shorten has form.

As a union leader, Shorten urged Latham to support the free trade agreement with the US. Latham said he thought the AWU was opposed to the agreement.

“That’s just for the members,” Latham quotes Shorten as replying. “We need to say that sort of thing when they reckon their jobs are under threat.”

Latham wrote: “The two faces of Little Billy Shorten. Public Shorten against the FTA, Private Billy in favour of it. Is this why he’s being groomed for one of the top slots in the corporation?”

Nick Cater is executive director of the Menzies Research Centre.