The PM is now talking about changes to industrial relations – among some other rehashed ideas - but the timing’s odd
This week, the prime minister, Scott Morrison, decided that with the election out of the way, he should now tell the country what he proposes doing for the next three years.
It really is a lot easier to do this way, without having to go through the bother of persuading voters about your policies’ worth. Only chumps who believe in a democratic contest of ideas go in for such foolishness.
For example, Morrison told the Western Australia Chamber of Commerce and Industry that he wanted “to take a fresh look at how the [industrial relations] system is operating and where there may be impediments to shared gains for employers and employees”.
This issue was not mentioned once in his election campaign launch speech in May. The fact that Morrison wants to talk up changes to industrial relations only after the votes have been cast and counted is a rather obvious way of showing contempt for voters.
Admittedly most of his speech contained little new – it was just a rehash of mindless nothingness that he had uttered during his time as treasurer – serving the soggy, barely reheated meal of red tape and bracket creep to the chamber of commerce diners, who lapped it up like the docile audience they were required to be.
Red tape and bracket creep are terms that allow you to ignore whoever
mentions them with minimal fear of missing out on any intelligent
points. Like other phrases such as “baseload power” and “freedom of
religion”, the speaker generally is either ignorant or purposefully
misleading you.It really is a lot easier to do this way, without having to go through the bother of persuading voters about your policies’ worth. Only chumps who believe in a democratic contest of ideas go in for such foolishness.
For example, Morrison told the Western Australia Chamber of Commerce and Industry that he wanted “to take a fresh look at how the [industrial relations] system is operating and where there may be impediments to shared gains for employers and employees”.
This issue was not mentioned once in his election campaign launch speech in May. The fact that Morrison wants to talk up changes to industrial relations only after the votes have been cast and counted is a rather obvious way of showing contempt for voters.
Admittedly most of his speech contained little new – it was just a rehash of mindless nothingness that he had uttered during his time as treasurer – serving the soggy, barely reheated meal of red tape and bracket creep to the chamber of commerce diners, who lapped it up like the docile audience they were required to be.
Morrison argued that the ALP needed to pass all the government’s tax cut plans, including the one to flatten income tax rates so that the marginal tax rate for those earning between $45,000 and $200,000 would be 32.5%.
This, he suggested, “is an important change for the future, to banish the bandit of bracket creep”.
What crap.
Bracket creep is where despite doing the same job, a pay rise takes your income into a higher marginal tax bracket.
Some economists like to argue that this is a great disincentive to work; but mostly they overstate it, and all agree that the biggest disincentive is for lower income earners – because small increases in tax matter more for someone on $30,000 than someone on $130,000.
In reality, the big disincentive to extra work is not bracket creep but the interaction of income with other costs and government payments – such as childcare and the family tax benefit – where earning more can result in your actual disposable income dropping because you lose out on benefits and have to pay for childcare.
That is not so much of an issue for people earning $88,000, who because of a pay rise will earn $91,000, and thus see $1,000 of their income now taxed at 37% because it has crossed the $90,000 threshold.
And someone on $45,000 sure as hell is not worried about getting such a big pay rise that they would now earn more than $90,000.
Paying a higher marginal tax rate because you get a higher paying job is also not bracket creep – it is progressive taxation. It is a system so designed because of the reality that someone on $180,000 can afford to give up a greater percentage of their income to tax than someone on $45,000.
If you really want to take care of bracket creep, you would index all income tax thresholds to average earnings, and have them changed automatically every three to five years.
The purpose of Morrison’s flat tax policy is not to rid us of bracket creep, but to reduce income tax – and to reduce it most for high income earners.
Research by the parliamentary budget office shows that the top 10% of income earners get 31% of the total benefits from the stage 3 tax cuts. As I noted after the budget, stage 3 of the tax cuts delivers those earning $200,000 a 4.54% tax reduction, while those on $60,000 get a cut of just 0.6%. So don’t be fooled into thinking it is a policy designed in any way to help those on median incomes.
It is a policy which, the Grattan Institute has found, will make our tax system much less progressive.
In his speech, Morrison also talked about the evils of red tape, suggesting an example of a better time as when “in 1966, the late Sir Arvi Parbo took the Kambalda nickel mine near Kalgoorlie from discovery to operation in 18 months”. He contrasted this with “the Roy Hill iron ore mine [which] took around 10 years to complete around 4,000 approvals”.
The year 1966 is an interesting one to pick – it coincidentally was the year the Wittenoom blue asbestos mine stopped production – not because of red tape but falling profitability.
It says something that our prime minister wishes for a time when mining regulations were so lax that not only could you basically destroy the environment, you could also mine asbestos with impunity.
The thing about red tape is that it sounds like a bother, but when for example an apartment building starts developing cracks, the first thing people want to know is whether or not the building standards (ie red tape) were adhered to, or if they need to be raised.
Banking regulations for example prevented Australia’s financial system from collapsing as did those in the US and UK during the global financial crisis.
The history of capitalism shows that when businesses are allowed to reduce red tape, consumers and the economy eventually lose out, because businesses profit from not having to do things that consumers don’t know need to be done.
Our prime minister appears to cheer for such an outcome.
And so now after the election, we see Morrison’s economic vision – changes to industrial relations, businesses coming up with ideas on which regulations they no longer want to adhere to, and, as ever, the desire to cut taxes for the wealthiest.
Pity. That would have made for an interesting election campaign.
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