An upside-down world.

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Homeless. Roel Wijnants. flickr cc.

Peter Whiting.

I can’t help but think we are living in some Alice in Wonderland moment, in which things are all upside-down. Around us, we are hearing regular commentary on the increasing inequality in Australia, and acknowledging that measures are required to improve the circumstances of those at the low end of the socio-economic scale. Some economists even tell us increasing wealth concentration actually works to reduce the rate of growth of economies.

Yet this week, we have witnessed the passing of legislation to reduce the company tax rate at a cost to government tax revenue of $27 billion over 10 years. The justification for such largesse is that it will create investment and growth. Remarkably, in the whole political brouhaha which has preceded this outcome, no evidence has been presented that this argument is valid, or, if it is, that it is cost-effective.

Inequality & housing

Writing about inequality in Australia in The Conversation in 2014, Professor Peter Whiteford concluded, “The most important source of inequality in Australia is whether you have a job or not. [T]he pillars of egalitarianism in Australia were high wages, high home ownership, and low unemployment. If we want to regain this position, we need to ensure that unemployment remains low, and that low-income earners are able to buy into affordable housing.”

How can we be assured that cutting the company tax rate will do anything to produce worthwhile jobs which will not only reduce unemployment, but also contribute to an improvement in average wage rates? Do we know whether a targeted increase in social benefits, or reducing personal taxes, or spending on needed infrastructure, or perhaps increasing the minimum wage would have equivalent or better outcomes with respect to improving the quantity and quality of employment and working to reduce inequality?

The answer to this question is not simply of academic interest. As Jenny Begent demonstrates in her article, How do we solve a problem like rough sleeping, there are seriously disadvantaged groups in our society which deserve improved policy discourse around the question of inequality and disadvantage. Yet we adopt reductions in the corporate tax rate without the knowledge of what it might do for employment levels, and certainly without serious thought to any impact on housing stocks and affordability.

Effects of low wage growth

Cutting minimum wages will only make things worse, according to John Buchanan from the University of Sydney Business School, republished here from The Conversation: “a cut in wages for low-paid workers will not create jobs; rather, it will reduce living standards for those earning them”. While the productivity of average workers has doubled in the last 30 years, wages have grown only slowly, and most of the gains have gone to upper-income groups, exacerbating inequality.

The importance of discerning policy discourse is borne out in the accompanying article by John Menadue, The litany of failed privatisations. His view is that ideologues and self-interested players persist with their fixation on privatisation, despite demonstrable failures. Certainly, we have seen enough privatisation activity to assess whether this approach is serving the nation. Clearly, John Menadue believes not. Where, then, is this informed policy discourse to ensure our politicians and the community are adequately informed to seek the best societal outcomes?

The budget process needs to focus effectively on moving Australia to improved levels of income and wealth equality. Jenny Begent, in her article on the budget, insists that it must be built on ‘a fair go for all’, and she lists key priorities: expand infrastructure, tackle child poverty and family violence, seriously address poverty, homelessnesss and the housing crisis, and expand employment. It is time to abandon this Alice in Wonderland upside-down approach, whereby those who have are favoured when the need is to address those who have not!

Lest we lose heart and believe that all is upside-down, the article by Frances Penington, Great news: child mortality is falling, reminds us that well-focused initiatives supported with adequate funding can, and indeed do, produce societal results which are humane and heartening. It is the sort of reading which will reassure the reader that, indeed, some things are the right way up!


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1 Comment

  1. Hi Peter,

    This reminds me of a radio program I listened to yesterday on ABC RN: one refugee brother came out via dangerous boat route on his own at 15 and got refugee status; 6 years later he speaks English fluently, is finishing an accountancy degree, mentors other students, is a refugee advocate, and nominated for young Victorian of the year.

    His younger brother, who came out later, only got a bridging visa (he was under the same threats as his older brother if he stayed in Afghanistan – they are Hazara), so spent two years unable to go to school or work.

    Which brother has been able to contribute to the health of this country?

    Spend some money on those who need a lift up and Australia will benefit. Reduce company tax rates? Who benefits? I think the big corporates have shown us that profits (from reduced costs) only end up back in their pockets (look at the banks – by the way, are we getting any better service?).

    How are you Peter? Hope all is going well in SPC land.

    Cheers to all, Audra

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