Bill Shorten has launched a political war against private enterprise in what will become a test of his leadership, the values of Labor in a globalised world and his gamble that the Australian public will keep voting for even more populist anti-enterprise, higher-tax policies.
The Opposition Leader made a mistake yesterday with his bizarre doorstop announcement. He looked like a leader stumbling under pressure. This call is a defining moment. His future depends on the Australian workforce being populist and irrational — denying a nexus between tax-competitive companies and the interests of employees who work for those companies via investment, jobs and higher wages.
First, the policy: Shorten’s Labor now goes to the election pledged to repeal tax cuts for almost 20,000 medium-sized businesses employing 1.5 million people and with an annual turnover in the $10 million to $50m zone. These are not banks, multinationals or the big end of town. Scott Morrison told parliament they were family and hardworking Australian companies with an average 75 employees. This is a bad policy — a punishment of local firms underwritten by wilful determination to repeal the law and destroy any benefit from the tax cuts by announcing their future removal.
Second, it is more dangerous in political terms than Labor expects. Shorten, by this decision, has told the world his policy is not just about banks and multinationals but about the local company down the road employing local workers.
Shorten looks shifty. He boasts about hurting big banks but swings his axe along the local parade. Beyond this, he risks being depicted as an obsessive for yet more taxation increases and repealing tax cuts laws to get them — last week pledging to repeal income tax cuts and this week pledging to repeal medium-size business cuts. This is redistributive dogmatism.
The hostility between Shorten and the business community will now spill into an antagonism not seen for decades. Labor assumes business is a paper tiger in politics. But even business might decide it has nothing to lose by getting tough if it can also get smart.
There is, however, a far bigger moral lesson from the Shorten experiment: once you embark on a strategy of class antagonism and grievance exploitation then the more pressure you face the only option is doubling down into even more grievance and populism. Shorten is on a train he cannot get off.
This was a captain’s call by Shorten. While it went to neither the shadow cabinet nor the caucus, it was long expected. It comes just days after his rival, Anthony Albanese, called for a new approach — an end to sowing discord and seeking instead collaboration with business along Hawke-Keating lines. Unfortunately for Shorten, the optics look as though he was rebutting Albanese.
There is no gainsaying Labor’s calculation. It believes public hostility to tax cuts for even medium-sized companies is so entrenched that even their repeal is a vote winner. Shorten will enjoy support from the Labor movement, the unions and progressive lobbies.
But this event will also trigger a more searching debate about today’s Labor Party as it aligns as a pro-union, anti-business, anti-bank, high-tax, big-spending party pledged to redistribution to fight inequality while punishing business investment and personal aspiration, and campaigning against a prime minister because he made a lot of money.
This is an old-fashioned Labor Party. Dressed up to look modern in its progressive social obsessions, it is taking a giant policy leap into the past. This is an alarming event for Australia because, as history shows, much of the nation’s economic progress depends on the Labor Party: witness the 1940s, the 80s and 90s.
Shorten is playing at high-risk politics. Has Labor got its market research right? Labor is pledged to the politics of division but success in this project depends on where you draw the dividing line. Labor draws the dividing line on income tax for anybody earning above $95,000 in 2022, who is being told by Shorten they are not entitled to tax relief, and any business with a turnover in 2018 of more than $10m that is also being told by Shorten it is not entitled to tax relief.
Will the country accept this dividing line and redistribution or will it reassess to decide Australia is not that sort of country?
How will Malcolm Turnbull react? The government will now identify businesses in the seats of Braddon and Longman due for tax increases under Labor — along with the workers they employ, whether mechanics, electricians or hospitality workers. At the general election expect the government to identify the seat-by-seat breakdown of the 20,000 businesses. From today, every Coalition MP is gifted with a campaign as they prepare their lists of businesses in their seats being targeted for tax increases by Labor.
The litany of Shorten’s tax decisions is bold yet vests any competent government with a powerful negative campaign. Shorten opposes tax cuts for companies with a turnover of more than $50m annually — the bill on which the Senate votes this week — and pledges to repeal this policy if it becomes law. He now pledges to repeal the 2017 legislated tax cuts for companies in the $10m to $50m turnover zone. Yesterday he left open Labor’s position on repeal for companies with a turnover in the $2m to $10m zone — that’s small business. It would be unfathomable if Labor’s hostility went that far.
Business Council of Australia chief Jennifer Westacott called Shorten’s decision “another blow to business, another blow to Australia’s competitiveness, another blow to the workers of Australia”. Westacott warned that the nation was “living on borrowed time” and asked: Have we decided to be a country that cannot compete with the rest of the world?
Australian Industry Group chief Innes Willox said the decision was “an absolutely horrible message to the business community”. He said it increased “political risk” in Australia since we are going to have “significantly higher taxes” than our competitors.
The head of the Australian Chamber of Commerce and Industry, James Pearson, said: “This is a massive kick in the guts by the Labor Party. This is precisely the wrong signal to send. I call on Labor to reconsider.”
The reality is that 85 per cent of the workforce is employed by the private sector. Treasury research has long shown company tax is the most damaging federal tax for economic growth and that the big winners from company tax cuts are employees. How will corporate leaders react? Their political ineptitude, bizarre priorities and policy delusions have become legendary in recent years but Shorten’s stance might yet constitute a threshold moment for them.
The irony is the sheer modesty of the tax cut — from 30 per cent to 27.5 per cent. Both sides have invested it with a political momentum greater than the numbers. Australia, sadly, is being sucked into a self-inflicted, debilitating, reactionary class conflict that will ultimately endanger our prosperity and compromise the needed policy direction for success in a competitive world.
Our political culture is poisonous. Labor has more political muscle than the Liberals, given its institutional alliance of trade unions, industry super funds, GetUp!, welfare, environmental and cultural interest groups. But as the stakes intensify, the battle lines will be drawn deeper in a contest that will determine our future cultural and economic path.