The Politics    Tuesday, November 21, 2023

Exit stage three

By Rachel Withers

Anthony Albanese and Jim Chalmers in the House of Representatives, October 2023.

Prime Minister Anthony Albanese and Treasurer Jim Chalmers in the House of Representatives, October 2023. © AAP Image/Mick Tsikas

A report on generational spending power could not make it any more obvious that the Stage Three tax cuts need to be rethought

This morning, a set of data – confirming what many implicitly understood – got people fuming online. It was a report by CommBank iQ, showing that while younger and poorer Australians are making drastic cuts to their personal budgets during this inflation crisis, older homeowners with savings are spending at a higher rate, having benefited from higher interest rates, and are therefore fuelling inflation further. We already knew rate rises were hitting generations unequally, but the stats are damning: over-65s increased their overall spending by 6 per cent across the year, above the rate of inflation, “splashing out” on cruises and package deals, while 25- to 29-year-olds, many of whom face escalating rental costs, cut back on spending, both essential and discretionary, to the tune of 5.1 per cent. It’s been obvious for some time now that the Stage 3 tax cuts need to be scrapped or amended. The Australia Institute’s Greg Jericho has done a phenomenal job of laying out how and why, offering the government an easy political sell. So how can Labor possibly go ahead with something that will put more money in the pockets of the “haves”, pumping inflation even higher, when it is the “have nots” who are already bearing the brunt of the rises in this shamefully unfair system?

If you are in any doubt that the Stage 3 tax cuts for high-income earners are inflationary, it’s worth listening to economist Chris Richardson on Q+A last night making the case for shrinking or delaying cuts. I recommend you listen to him now. But the gist is, the cuts are going to add money to the economy at a time the Reserve Bank is desperately trying to take money out, with the result being inflation and interest rates staying higher for longer than necessary. As independent MP Monique Ryan noted, things have changed since Labor pledged to keep the Coalition tax cuts – there are modest ways to make them fairer and less inflationary, leaving the government with extra money to spend on more important things. But Labor is going to have to find the courage to do what is right here, on this and other issues, at a time when Labor courage seems to be in short supply.

It is about more than just doing what is right here – saving money and preventing inflation from getting worse. It is about doing what is best for Labor, if it wants to stay in power. Prime Minister Anthony Albanese clearly fears that breaking the tax cut “promise” will do damage to his credibility. But it is his decision to allow this crushing inequality to rage unchecked that is doing far worse damage to his government, with the shameless Coalition and the mainstream media blaming the government for people’s suffering (even as they insist the government keeps the tax cuts). The Opposition does not miss a chance to attack the Albanese government over the cost-of-living crisis, even knowing full well that the inflation crisis is a global one, and having acknowledged that keeping wages down was an explicit strategy of its recent time in power. Figures such as Today host Karl Stefanovic, meanwhile, rip into the government for not doing enough to help struggling Australians during the cost-of-living crisis, even though he would be first in line to complain should Labor scrap his precious tax cuts or tax concessions. Labor can’t win here – it may as well stop trying to please Stefanovic and break its pathetic Stage 3 promise, explaining to the public why it is doing so. Assuming it still cares about inequality, that is.

I and others have written at length about the unfair deal that younger generations are getting in this cooked economy, cooked housing market and cooked planet. The Stage 3 tax cuts are already disproportionately skewed towards older people, with those under 25 receiving only 2.8 per cent of the benefits. And now we know they are getting disproportionately fucked by interest rate rises, with Stage 3 to likely keep rates higher for longer. Inequality is pulling at our social fabric, with the unfair burden of the economic crisis fraying civic relations; as Waleed Aly wrote last week, there is a “simmering sense that there is no strong correlation between hard work and prosperity”. For young people there seems to be no way to catch up, as the burden of intergenerational inequality gets heavier and heavier, and only those with rich parents able to benefit, putting an end to Australia as the land of the “fair go”. What a shame we didn’t elect a Labor government willing to do something about it.

Rachel Withers

Rachel Withers is the contributing editor of The Politics.


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