Fairness v aspiration: the coming bitter row

The Turnbull government seems to be winning the policy-based debate on funding for the National Disability Insurance Scheme, the Medicare levy and the Gonski schools issue — but Bill Shorten’s populist campaign points to his success in the political battle, the contest that matters.

This is the battle that Australia does not need. It is not in the interests of the Australian public. It shows how much the poor, the schools and the disabled have become political pawns, to be traded on the floor of parliament for party political advantage.

If you want to grasp the cynicism people feel about our politics, look no further than this debate. It reveals the depth to which politics is being debased. And remember, because this conflict is just starting, it is sure to poison our politics even further. This week brought the post-budget struggle to an early zenith and the divide on display may yet define the next election.

The Opposition Leader and Labor are running on fairness, redistribution, higher taxes on business and the better-off, and class warfare, depicting Malcolm Turnbull as the Prime Minister for millionaires. Shorten presents as the protector of the working and ordinary middle class whose wages are under pressure and insists — despite the budget deficit and the need to fund a huge spending agenda — that their benefits and tax burden can be protected.

Turnbull presents as the champion of aspirational values, job creation and rewarding opportunity. He asks the public to fund the NDIS in an inclusive and fair manner. He champions the purer method of Gonski needs-based funding — with David Gonski on his side.

He propounds an enabling state to help people prosper in their own right.

Turnbull’s embrace of classic Labor policies — on Gonski and NDIS funding and then outbidding Labor with the bank levy — has seen Shorten double down on a more aggressive and populist stance. It is working in the polls. It may work in opposition, but Labor is storing up a stack of problems for a governing party.

The Labor attack is clever and based on the “growth trap” — if economic growth falls short of optimistic budget predictions of 3 per cent real gross domestic product growth in 2018-19, then voters will become even more receptive to Shorten’s “millionaires” rhetoric. For Turnbull, a dual onslaught based on a weak economy and “unfair” distribution would be lethal.

Put crudely, Turnbull has embraced Labor policies to neutralise last year’s successes for the opposition, and Shorten has reframed the same tactic to become defender of what he calls “the working and middle class” — the victims, he says, of Turnbull’s “tax cut to millionaires”.

Shorten had an alternative: it was the Keating position. It was to declare the budget a Labor triumph, to claim ownership of this period, to depict Turnbull as a Labor man in disguise and to draw the line and settle a series of epic issues for this country: the Gonski funding method, the NDIS reform and its consolidated funding.

They would have become part of the established polity of the ­nation. It would have been uplifting and statesmanlike. But there was a catch. That meant advancing the nation, which in turn meant Shorten would need another line of attack against the Prime Minister. That would create a tactical problem for him.

So, advancing the nation was ditched for an easier option for Labor — abandoning its previous principles and launching an assault on Turnbull’s Gonski agenda and his NDIS funding model.

Understand what is happening here — the national interest is being buried before narrow party interest. Don’t think using the Tony Abbott exemption (he punished us so we will punish him) cuts the ice any more. That’s ancient history. Labor is responsible for what Labor does.

Labor may win the election on this tricky, populist pitch, but winning an election being tricky and populist will lead to tears in office. Who cares? This tells us a lot about the nation’s culture. What counts now is winning — not the nation. That is a harsh judgment but it is justified by these events.

Shorten says: “We don’t believe it is the right time to make battlers pay more when the government is getting rid of the budget repair levy, which will see millionaires get a tax cut of $16,400 annually. No government worth its salt should decrease the burden on the top 2 per cent of wealthy Australians and then ask millions of other Australians to pay more.”

Put this way, Shorten has a powerful sell — and Newspoll proves it. For the record, based on 2014-15 data, those top 2 per cent of taxpayers that Shorten wants to pay more now contribute 23 per cent of the income tax revenue. The top 10 per cent of taxpayers pay 45 per cent of income tax revenue. And, depending on your measure, about half of workers pay no net tax. Is this unfair or proof of a progressive tax scale?

Shorten has a powerful answer: the system is unfair. The better-off must pay more. He says he is standing up for teachers, nurses, retail and childcare workers. In this game of numbers Shorten has the numbers on his side.

He builds his edifice on three pillars: he insists the 2 per cent deficit levy on high-income earners above $180,000 be kept and not be automatically exhausted, as provided for in the Abbott government law that Labor voted for; he rejects Turnbull’s 0.5 per cent increase in the Medicare levy to help fund the NDIS — the policy of the Gillard government that Shorten once championed — saying Labor accepts this increase only for incomes of $87,001 and higher; and Labor is voting down the huge $18.6 billion Gonski scheme on the grounds that it wants an even bigger scheme worth an extra $22bn.

“Living standards are stagnating and Australians know it,” Shorten told parliament on Thursday. “Under these rotten twisters sitting opposite, wages growth has flatlined at 1.9 per cent. I bet when you tot up the wages of senior executives, wages growth for low-paid workers is even lower. The unfairness is showing through more and more every day.”

The trouble with Shorten’s position is the fiscal fantasy it promotes — that Australia can painlessly fund the $22bn annual cost of the NDIS; that with schools funding steadily rising in recent years and Turnbull pledging another $18.6bn over the decade, Labor has a magic pudding to boost this by yet another $22bn; that despite the budget deficit, spending benefits are not to be cut and legislated tax rises must be kept to the “big end of town” and higher-income earners. This is an unsustainable framework.

However Shorten and Labor’s Treasury spokesman Chris Bowen can question in turn the sustainability of Scott Morrison’s budget framework, its weakness being the ambitious revenue projections. The budget rests on the assumption of rising growth; if that disappears, so do Turnbull and the Treasurer.

Newspoll last week showed that voters backed Shorten’s limit of the Medicare levy increase to people earning $87,001 or more, as distinct from Turnbull’s policy that it should apply to everyone above the $21,000 Medicare threshold, by 56 to 33 per cent. The message is clear: redistribute to the majority and you win; the problem is, this is not a sound way to run an economy.

The idea of shared burden is collapsing in Australia as people turn inwards and politicians exploit the politics of envy, grievance and unfairness. In an ominous sign for Turnbull, 65 per cent of voters say they worry about NDIS costs. If the NDIS acquires a “pink batts” smell then people will be hostile to the government and even less prepared to fund it.

Turnbull’s frustration with Shorten is manifest. His arguments are superior but Shorten appears to be winning the contest so far. Turnbull says it is fair for the entire community to bear the cost of the NDIS.

This recalls former treasurer Wayne Swan’s 2013 argument that “we are all in this together” on funding for such a “greater public good”, when Labor legislated a 0.5 per cent increase in the Medicare levy in this cause. Labor was right then and it is wrong now. The public would accept the 0.5 per cent increase in Morrison’s budget but Labor will not accept it.

In a sign of his rising stature in parliament, Social Services Minister Christian Porter said in the house: “How is it possible to both support and oppose the same policy? Some have called it hypocrisy, but it has actually gone to the next level. It is now what Orwell called doublethink. Doublethink is how you think that war is peace and that ignorance is strength. Doublethink is the only way you can believe that $18.6bn more spending on schools is actually less spending on schools. Doublethink is the only way you can believe that the Medicare levy is at once a completely fair way to fund the NDIS and also a completely unfair way to fund the NDIS.”

Porter’s final message: “Do the right thing by people with a disability.”

The next day Porter, in a performance that recalled Peter Costello, said he had found a new voice in the NDIS debate: “After diligent search, there it was, nestled gently among the Phil Collins CDs in the bargain bin at the second-hand book shop. A copy of the literary classic The Good Fight.

He quoted from chapter 20, where it says: “More savings were required to fund the NDIS. By May we had effectively ruled out every option except an addition to the Medicare levy. There was simply no other workable option. There was broad community acceptance that the NDIS was a worthwhile investment — less than a dollar a day for some on average wages.”

This was Swan proud to be “hanging tough” on funding the NDIS in 2013 through the Medicare levy — because there was no other viable option and because it was only “a dollar a day”. That was Labor in office. Porter mocked the Labor benches: “Toughen up! Support the good fight! Support the NDIS!”

Turnbull’s contempt for Shorten is undisguised. His mantra on Shorten this week became the old refrain: he is unfit to be prime minister. He said Labor was “all tactics and no principle”.

But that doesn’t do the job. Turnbull was searching for the best reply. He asked: “How fair is it to leave the NDIS unfunded?” He asked whether it was fair to leave disabled people unfunded.

Then Turnbull confronted Labor with the argument he must use: a flight attendant on $60,000 can help fund the NDIS through the Medicare levy increase knowing that she and her family will have the protection of the scheme if they need it. Under Turnbull the top 6.7 per cent of taxpayers on incomes of more than $180,000 contribute 26.9 per cent of the extra dollars for the NDIS. Is that unfair? The bottom 10 per cent of taxpayers pay only 1.6 per cent of the extra Medicare levy dollars. Is that unfair?

Morrison asked: “Since when in this country is someone who is earning $87,001 a rich man or woman? Since when has that been true? This Leader of the Opposition thinks that a hardworking Australian out there every day earning $87,001 is some sort of Google CEO.”

But Bowen plunged the political knife into the government: “They are the party of low tax for high-income people … and they are the party of high tax for low-income people. The fact of the matter is that there are 10 million people in Australia for whom the government wants to increase tax while we do not. That is the key choice for the Australian people. Somebody earning $60,000 will pay $300 more under this government but high-income earners will get a tax cut.”

Why do they get a tax cut? Merely because the three-year temporary levy legislated by the Abbott government has automatically expired. Turnbull is not legislating any tax cut for higher-income earners. Indeed, he is doing nothing. And Labor’s policy, which it took to the last election, is for the levy to remain.