Last week I became a great-grandfather. It seems extraordinary for someone as youthful (feeling) as me, but it’s true. Partly it’s because I started young. But it’s mostly because people of my generation are living longer, thanks to innovation.
I worry about what kind of Australia my great-granddaughter will live and work in. There’s a ticking time bomb in our economy and when she grows up she’ll be impacted in two ways – she’ll have to pay much higher taxes than any of us today could imagine or she’ll receive fewer government services and benefits, or both.
That’s because she and her peers will have to pay the debt accrued from massive government spending programs initiated by former governments, particularly the last Labor government. Programs this government has failed to get under control, largely because of a hostile Senate where Labor, the Greens and cross-benchers block any steps to moderate spending.
Sooner or later governments must address this inconvenient truth. It will require tough measures. And the longer they wait, the tougher those measures will have to be. Australian social norms will have to adjust. People will need to retire later – probably in their 80s – and get used to retirement ages increasing with life expectancy. People will also need to get used to fewer government services and benefits.
Cutting spending now is one way to address this. Another is to get the economy fired up. Because economic growth gives governments the ability to maintain important public services that Australians value so highly, like universal health care and education.
Voters tend to trust Labor more on health and education and the Coalition more on economic management. But past Labor leaders like Hawke, Keating and Beazley understood the key to maintaining public services was economic strength. They also understood working class aspiration. Yes, Australians want universal health care. They also want to do better - own their home, build a nest egg, run their own business and earn higher incomes. Economic growth addressed both priorities.
Hawke and Keating brought in key economic reforms that made the economy stronger – like floating the dollar, privatising government assets, reducing tariffs, decentralising industrial relations and lowering taxes, including lowering the top personal tax rate from 60% to 47% and company tax from 49% to 33%.
This mindset attracted me to become actively involved in the Labor party, ultimately becoming its National President. So I was very disappointed to see the Rudd/Gillard government put the brakes on economic reform and actually take us backwards, like reversing even Hawke/Keating industrial reforms.
The way federal Labor are talking today, I fear more backward steps if they win government.
Consider the anti-business rhetoric in this election. Past Labor leaders understood government can only create the conditions for jobs and enterprise to thrive. It’s business that actually generates economic growth, through investment and innovation. Federal Labor don't seem to get this any more.
Coalition government policy is to reduce company tax to 25% over the next decade. Labor opposes this. Labor rhetoric is particularly disturbing with Shorten calling the policy a “$50 billion tax giveaway for large business” and declaring Labor will not be “dictated to” by business.
When former Queensland Labor Treasurer, Keith DeLacy, criticised Labor’s policy as “the most anti-business policy I’ve ever seen federal Labor put to an election” Shorten effectively accused him of self-interest and putting his hand out for benefits, saying “Shock horror, a company director saying he would like to see a company tax cut for his company.”
Calling company tax cuts a “$50 billion tax giveaway” is nonsense. Unlike people, companies can only spend profits in two ways – paying dividends to shareholders or growing their business. That $50 billion will be used to buy equipment and other goods and services, build new technology and infrastructure, pay wages to workers in newly created jobs, pay income to shareholders – including self-funded retirees, superannuation funds and small business owners – and invest in innovation, research and development, like the medical innovations enabling us to live longer.
What’s more, each of those activities generates tax revenue. Shareholders pay tax on dividends. Employees and contractors pay tax on income. Suppliers collect GST and pay tax on their own profits. Lowering company taxes allows businesses to use that money before it’s collected by government. The Coalition is backing Australian business to generate the economic growth needed to pay for our future and do a better job of it than government can.
In 16 years, my great-granddaughter will be completing her education and looking for her first job. Labor’s rhetoric will take Australia down a path where her taxes will be higher and her education will be more costly to her and her family. Economic growth is what will secure her future and, more importantly, ensure there’s a job available to her when the time comes.
This article was published in the Daily Telegraph, Herald Sun, Courier Mail and Adelaide Advertiser on 3 June 2016.
Labor: This isn't the party I was President of
3 June 2016
By Nyunggai Warren Mundine