Monday, September 21, 2020

Today by Paddy Manning

Tax cuts loom
In Josh Frydenberg’s budget, the Coalition looks like reverting to type

Image of Treasurer Josh Frydenberg

Treasurer Josh Frydenberg. Image © Lukas Coch / AAP

Near the end of her moving Quarterly Essay on Scott Morrison and the politics of the pandemic, Katharine Murphy writes: “If Morrison’s roadmap after the crisis involves reverting to the economic thinking that preceded the global financial crisis, and locking in fossil fuels for another two decades, then Australia is in trouble.” The essay was dated August 19, and in the weeks since then it has become much clearer that the prime minister is serious about his so-called gas-fired recovery. There are also reports that the October budget will bring forward tax cuts favouring the rich, while the government winds back the JobKeeper and JobSeeker payments at a pace that research indicates will push 740,000 Australians back into poverty. So, for this writer at least, we have the answer to Murphy’s hypothetical concern: Australia really is in trouble, nothwithstanding that we have been relatively successful at combatting coronavirus. Today, 40 prominent Australians (including former Reserve Bank governor Bernie Fraser) lent their support to a national advertising campaign opposing the early introduction of legislated tax cuts. Building on research from progressive think tank the Australia Institute, the campaign argues that these cuts will not boost the economy and will widen inequality. “Tax is an investment in our society,” says the ad. “Those demanding tax cuts today will be demanding service cuts tomorrow.”

Designed to combat income tax bracket creep, the stage-two tax cuts are currently legislated to come into effect in 2022–23, and will lift the income threshold in the 32.5 per cent bracket from $37,000 to $45,000, and will increase the threshold of the 37 per cent bracket from $90,000 to $120,000.

Cassandra Goldie, chief executive of the Australian Council of Social Service, said today that the stage-two cuts would cost $12 billion a year and reduce tax for people on $130,000 or more by $47 per week, while most low- and middle-income earners get nothing. “Yet it’s only low income-earners that will spend most of any government stimulus,” she said. “Instead, it’s time to #RaisetheRateforGood by permanently increasing Jobseeker payments.”

The stage-three tax cuts, currently legislated for 2024–25, will reduce the rate of the 32.5 per cent rate to 30 cents, increase the new 30 per cent threshold from $45,000 to $200,000 (eliminating the 37 per cent bracket), and increase the 45 per cent threshold from $180,000 to $200,000. While the government’s plans are not announced, the Australia Institute modelled the impact of bringing forward both stages two and three to 2021–22, concluding: “The top 10 per cent of taxpayers would get 56 per cent of the benefit while the top 20 per cent would get 79 per cent of the benefit. Those on low incomes get little to no benefit. The bottom 20 per cent of taxpayers get no benefit. The bottom 30 per cent get one per cent of the benefit and the bottom half get only three per cent of the benefit.”

Alison Pennington, a senior economist with the Australia Institute’s Centre for Future Work, has already warned that these tax cuts would be like throwing an “inequality grenade”. It is straight out of the Thatcher-and-Reagan playbook of supply-side economics – recently cited as inspiration by Treasurer Josh Frydenberg – and if that’s not pre-GFC thinking, I don’t know what is. We will have to wait until October 6. 

There are some mixed signals, however: the Nine newspapers on the weekend flagged that Frydenberg would pull forward some $10 billion in infrastructure spending; and this morning economics columnist Jessica Irvine picked up on a podcast appearance by Treasury secretary Steven Kennedy, who says that the coming budget will be focused on jobs. “There is no doubt there is going to be more need for aggregate demand,” Kennedy said. “There is more pressure on fiscal policy to support this economic recovery than in living memory – possibly ever really – because of where we are, near the zero lower bound with interest rates.”

Read another way, the secretary’s comments suggest that, although there is no economic imperative for the Morrison government to revert to type – offering taxpayer largesse to the wealthy and austerity to the poor – they will regardless. 

“It is very tempting and I appreciate why everybody wakes up today, sees a low number, and everyone is hopeful and positive – and that is a good thing, but we have to stay the course on this.”

Premier Daniel Andrews downplays – but does not exclude – the possibility of an earlier-than-planned exit from Melbourne’s lockdown, after Victoria recorded just 11 cases and two deaths overnight.

“I do not now recall what, if anything, I did in response to that text message.”

Victoria’s top public servant, Chris Eccles, tells the state inquiry into hotel quarantine that he doesn’t know who made the decision to use private security guards, despite text messages from March showing the role of Australian Defence Force personnel was being considered before hotel quarantine began.

The grey pyramid scheme (part one)
For decades, we’ve been warned about a crisis in Australia’s aged-care sector, and the coronavirus pandemic has exposed its failures. In the first half of a special two-part series, Rick Morton traces the problems in aged care to Howard-era reforms, demanded by private, for-profit providers.


The increase in the aged-care pension yesterday – marking the first time in a quarter of a century that there has been no increase in line with indexation, according to Labor’s Linda Burney.

“The document released today calls for the following essential changes: (1) Mandated minimum staffing levels and required mix of skills and qualifications in every residential facility, over every shift; (2) Transparency and accountability for government funding; (3) Mandated training requirements … accessible to all staff and paid by employer; (4) Government funding is required to be increased, linked to the provision of care and the direct employment of permanent staff with decent pay and enough hours to live on.”

The four key demands of the “Action for Aged Care” reform plan released by the Australian Council of Trade Unions.

The list

“My own appetite for podcasts has risen exponentially in recent months: the sound of voices is a comfort. But, even given our apparent predilection for talk, not many podcasts, at least not locally, feature anyone talking about music.”

“Dealing with Indigenous culture requires sensitivity and caution, so it is right that Ken Wyatt, the minister for Indigenous Australians, is taking his time with the delicate negotiations over whether the government could buy the rights to the Aboriginal flag.”

“As Victoria battles the stubborn tail of its second wave of COVID-19, a confidential government document obtained by The Saturday Paper reveals that outbreaks of the virus have been reported in at least eight hospitals in the past 10 days … Staff at some of these hospitals have not been told about the transmissions happening in their workplaces and are not being offered extra protection.” 

Paddy Manning

Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is the author of Body Count: How Climate Change Is Killing Us, Inside the Greens and Born To Rule: The Unauthorised Biography of Malcolm Turnbull.


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