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Labor must decisively reject austerity in its policy outlook

By Tristan Ewins - posted Thursday, 18 February 2016


Bill Shorten has recently made some extremely positive policy announcements which should go down well with Labor supporters looking for leadership on important issues. The announcements on negative gearing and capital gains tax concessions will save tens of billions over the course of a decade, and will go some way towards redressing the Federal deficit, while creating some room in the Budget for Gonski, the National Broadband Network, and the National Disability Insurance Scheme. Labor's strong endorsement of Gonski – implementing the final two years of the reforms amounting to almost $40 billion over 10 years – also seemed to indicate that Labor strategists were starting to learn their lesson.

But Shorten has disappointed recently as well. Recently - listening to the radio – I was concerned to hear Shorten mimicking the Conservative mantra on 'reducing government spending'. Sure this could be framed in the context of mainly reducing spending on superannuation concessions specifically (that would be a wise move – very smart politics) ; but the usual association is with cuts in social services and welfare. That must be clarified. And arguably there are several areas in which Labor must expand rather than contract spending if it wants to meet its social justice objectives.

We will consider this issue of austerity and 'smaller government' in this article ; but also we will consider Labor's existing suite of policies and where it must go from here.

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Conservatives have long argued that Turnbull must "slash government spending". And now it seems Labor leader Bill Shorten might be arguing for the same. But where would that come from? The unemployed already live in such poverty it interferes with their ability to seek work.

The Disabled already experience poverty through no fault of their own.

Student poverty forces mainly young people to seek out work that actually prevents them from getting the most out of their study.

The Aged are forced to sell their houses to access sub-standard Aged Care even when they are from a working-class background. There are insufficient staff to resident ratios in Aged Care facilities ; and no regulations ensuring a registered nurse is always on the premises 24/7.

Waiting lists are out of control in public health ; and we have the threat of a permanently two-tiered Education system which disadvantages those unable to afford private schooling.

Mental health is neglected and many mentally-ill (hundreds of thousands of Australians) can expect to die 25 years younger on average. There has been virtually no progress here for over 30 years.

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There is insufficient public money for infrastructure and privatisation passes on added costs that hurt the broader economy.

Public housing could increase demand and make housing affordable for more families.

So in fact more public money is needed – not less.

AND the deficit must be brought under control as well. Only PROGRESSIVE tax reform (not the GST) can tackle all these crises fairly. Cutting vital expenditure is not the answer. While Shorten has led on Gonski, the GST and on Negative Gearing and Capital Gains Tax Concessions, it appears he may be failing the Labor cause on austerity.

Bill Shorten has struggled attempting to cut through since the elevation of Malcolm Turnbull as PM. Yet the Liberal Party stands on the verge of another bout of bitter austerity: of the proportions which brought former Treasurer, Joe Hockey , undone. This could also bring Turnbull undone if Shorten's opposition to austerity makes him clearly distinct!

For too long Labor has pinned its fortunes largely to 'socially liberal' issues like Equal Marriage: but has neglected robust social and distributive justice policies. Hence the 'apparently socially liberal' but 'economically neo-liberal' Turnbull has capitalised on the prevalent discourse.

Labor needs to change the prevalent discourse – and quickly. Labor must not be afraid to engage in 'agenda setting' when it comes to distributive justice, and extension of social services, social insurance and the social wage. Labor cannot respond to Conservative fear-mongering on 'redistribution' by withdrawing on that front, conceding perhaps the most central principle of Social Democracy to the Conservatives 'without a shot even being fired'. It is only through leading that Labor can change the tenor of the prevalent discourse. If Labor merely responds and reacts to Turnbull's rhetoric on 'cutting spending' (adopting the same kind of language) then the consequence will be an endless policy retreat, with the Conservatives setting the agenda regardless of who is in government.

Indeed Labor has other options to fund a progressive as opposed to a defensive agenda that involves a policy retreat in 'the big picture' on the basis of austerity.

Superannuation concessions may cost taxpayers $50 billion/year by 2019 or even earlier, and Labor should be able to shave at least $20 billion of that from the well-off. Other areas of tax reform could include no further Company Tax cuts (crucial to avoid 'corporate welfare' – in this instance with corporates not contributing sufficiently to the infrastructure and services they also benefit from) ; gradually rescind Dividend Imputation (as much as $20 billion a year in today's terms arrived at over time); and index the bottom two income tax brackets for fairness.

Also Labor could do to restructure the income tax mix for fairness, and raise the rates for the highest brackets. And progressively restructure and raise the Medicare Levy.

All this could pay for a National Aged Care Social Insurance Scheme, reform of pensions, action on mental health, reducing hospital waiting lists more broadly, investing in public housing to increase supply and make housing affordable ; while improving Labor's economic credentials, reining in the deficit. An active industry policy could also achieve close-to-full-employment, with benefits from that flowing on to the Budget bottom line, and providing jobs for workers retrenched from the auto industry. (workers who otherwise might never again find rewarding and well-paid jobs suitable to their skill-sets)

Before the relatively recent announcements on Gonski, Capital Gains Tax and Negative Gearing – Labor's policy agenda ('50 costed policies' as expressed in its 'Practical Policies that Put People First' document) looked even more modest. But there were 'bright points'.

There were good policies promoting Science, Technology, Engineering and Maths, and encouraging girls to explore these fields, as well as computer coding. There was a commitment to TAFE and a rejection of "$100,000 degrees". Domestic Violence Leave is also an important innovation that can make a real difference for victims. Labor's policies are also clear in support of Marriage Equality, on medicinal use of cannabis, and supporting educational outcomes for indigenous girls. (though surely indigenous boys are also struggling and deserve a mention) On the other hand, the projected superannuation concessions savings in Labor's current policy document were cosmetic and did not address the scale of the developing crisis there, with the cost to the Budget bottom line spiralling out of control.

And while Labor Senator Sam Dastyari has complained of Corporate tax evasion amounting to over $30 billion a year, will Labor seriously pursue this line, bringing in many billions a year, or will the stand amount largely to posturing? For example, while Labor has committed to save $14 billion here it was unclear over how many years ; meaning the reforms are likely to be marginal ; maybe spaced over the better part of a decade. Last year 'The Age' journalist, Michael West, referred to Labor's policy at the time as "pocket fluff".

Further ; while Labor's Infrastructure policy will mobilise superannuation funds, arguably the policy is mistaken in light of the superior borrowing ability of the public sector – which pays lower interest rates - the consequence of a better credit rating. Also Labor's 'Sharing Economy' policy adheres to some good egalitarian principles, but in Labor's policy document there is a lack of detail.

Importantly, Labor's mental health policy commits to halving suicide rates. But what about addressing the 'elephant in the room' of mental health related mortality, with close to 300,000 Australians with schizophrenia who can be expected to die 25 years before their time?

And finally: while increased Tobacco Excise will bring in perhaps over $40 billion over a decade, does it largely hit people on low incomes in a regressive way? And therefore is it fair? Should low income earners and those on welfare be compensated elsewhere in the Budget ; with higher taxes sending a 'price signal' to improve public health outcomes through reduced smoking levels ; but not in such a way as to drive the disadvantaged into poverty in the process?

It has not been my intention in this article to criticise Labor in a destructive way. Rather I hope I have suggested the reforms that could help Labor seize control of the policy agenda, and redefine it in a progressive way. I hope Labor policy makers and strategists recognise that a change is necessary in order to put Labor on the front foot ; and to actually contest and define the policy debate. Government is not the end in itself, but rather the vehicle for reform.

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About the Author

Tristan Ewins has a PhD and is a freelance writer, qualified teacher and social commentator based in Melbourne, Australia. He is also a long-time member of the Socialist Left of the Australian Labor Party (ALP). He blogs at Left Focus, ALP Socialist Left Forum and the Movement for a Democratic Mixed Economy.
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