Labor is promising a “living wage” rather than a “minimum wage” if elected.
It will ask the Fair Work Commission to first determine what wage would offer a “decent standard of living for families”, and then to determine the time frame over which it should be phased in, taking into account the capacity of businesses to pay, and the potential impact on employment, inflation and the broader economy.
It is selling the idea of what would be a very big increase on the present minimum wage as “good for workers and good for the economy”.
“Consumer spending makes up 60% of the Australian economy,” its employment spokesperson Brendan O’Connor said. “When low-paid workers get a pay rise, they spend it in the local shops and help small businesses. It’s good for everyone.”
The idea harks back to the 1907 Harvester judgement, in which an arbitration court judge decreed that wages at a Melbourne factory should be based on the cost of living “for a worker and his family”.
To get there from the current bare minimum wage of A$18.93 per hour would almost certainly require increases bigger than the sum of productivity growth and inflation, which are running at a combined annual rate of around 3%.
Unacknowledged by Labor in spruiking the policy this week was the fallacy of its consumer spending argument, the cost of the proposal to jobs, and the likelihood that it won’t much help many of the people who need it.
The false increased spending argument
One of the claimed benefits of a living wage is that employees will spend most of their extra income, resulting in large increases in national spending, national income, and even the tax take.
An implicit assumption is that the extra money comes “as manna from heaven” with no second-round effects.
But given that other labour costs won’t come down (it is hard to see executive pay being cut), the labour cost for each affected business will climb, pushing down returns to the providers of capital, including the returns to shareholders and small business owners.
With lower returns, less capital will be put up to invest.
Where businesses can, they will pass on the increased costs not matched by increased productivity by increasing prices.
They will get away with it unless they face competition from imports or other exporters.
Where import competitors and exporters face international competition, they will reduce output. In turn, the greater amount of money sent out of the country will eventually push down the Australian dollar, pushing up the Australian dollar price of import and export products.
In the short term, the increases in prices of goods and services will cut the purchasing power of the wage increase. In the longer term, it might create a vicious cycle of wage and price hikes, with adverse economic consequences.
The bad news on jobs
It is well established that wage increases above the rate of productivity growth plus inflation lead to less employment than there would otherwise be, in both the number of employees and the hours worked per employee.
Labour costs are a major expense for most businesses.
In response to higher labour costs, many employers will choose less labour-intensive ways of making their products. The large and rapid wage increases in the mid-1970s and early 1980s resulted in sharp reductions in employment. In contrast, the recent low rates of labour cost increases have helped drive significant increases in employment and a fall in unemployment.
With the Australian economy facing a likely slowdown over the next year or two, a large increase in wages might be particularly poorly timed.
The false hope for those most in need
Universal education and health care, and the redistribution of income via social security payments funded by a progressive income tax, are the most direct and effective ways to fight household poverty.
The world today is very different to the world of the Harvester case in 1907. Then, most workers were in full-time employment and needed a living wage to support a family. Now, about a third are employed part-time. Redistribution via the tax and payments system is how we support families who need it.
A higher minimum or “living wage” would provide minimal assistance to some on low incomes, and would lift the incomes of many others not generally considered in need of support.
Many of those below the poverty line who are only employed part-time or not at all would not be lifted out of poverty. A higher living wage would provide more to those already in full-time jobs than it would to part-time workers.
And it would provide more to low-wage employees who are members of high-income families, who probably shouldn’t be our first concern.
We can do more more directly to alleviate poverty by reforming the income tax and social security systems. They are specifically designed to redistribute income according to need.
We should start by reducing income tax on low earnings, automatically indexing tax brackets, and increasing Newstart.
Our “state of the states” series takes stock of the key issues, seats and policies affecting the vote in each of Australia’s states.
We’ll check in with our expert political analysts around the country every week of the campaign for updates on how it is playing out.
Nick Economou, Senior Lecturer in the School of Political and Social Inquiry at Monash University
The first week of the 2019 election campaign is complete. So far the contest is looking like a dour football match between two defensive teams. Both Opposition Leader Bill Shorten and Prime Minister Scott Morrison have campaigned in marginal seats in the famed “western Sydney”, where – according to legend – national elections are won or lost.
By midweek, both leaders had made it to Victoria, where there might not be many genuinely marginal seats, but the Victorian Liberal party is really anxious about the number of mid-range seats like Deakin, Flinders and even Higgins, which might be lost if an anti-Liberal swing commensurate with the state election should be repeated on May 18.
The two major party leaders have sought to reinforce the themes that underpinned the budget and budget-in-reply. The government hopes swinging voters will be enticed to vote Liberal with promises of tax cuts and warnings about Labor’s fiscal profligacy. Labor seeks to appeal to voters on health policy with grand commitments to addressing the challenges of cancer. These policy espousals occur against a backdrop of visits to marginal electorates where traps await for even the most experienced politicians.
In the seat of Reid, with its significant Chinese community, Morrison greets someone in Mandarin only to discover they are Korean. Shorten, meanwhile, meets someone suffering from cancer and who wants to know (for the benefit of the television crews, no doubt) why state Labor has done so little after promising to boost health funding at the last two state elections.
The early loss of some major party candidates has been the only really interesting thing to happen so far. Labor has lost its candidate for Curtin, Melissa Parke, following revelations that she had criticised Israel in a speech she had previously made on Middle Eastern politics. Criticising Israel is hardly the thing Labor wants to be known for when it is seeking to defend marginal seats such as Macnamara in Victoria.
The Liberal party has lost two candidates as well. In a reminder of the ongoing section 44 debacle, Liberal candidates for the Labor-held seats of Lalor and Wills, Kate Oski and Vaishali Gosch, have had to withdraw. Apparently doubts about their citizenship status arose from questionnaires they filled in for the Australian Electoral Commission as part of the nomination process.
Given that the parliamentary Joint Standing Committee on Electoral Matters figured that up to 50% of Australians have been potentially disqualified from being candidates thanks to the High Court, something like this was bound to happen.
New South Wales
Chris Aulich, Adjunct Professor at the University of Canberra
At this stage of the campaign, Labor appears likely to hold about the same number of NSW seats as it did in 2016. A possible Labor loss in the city seat of Lindsay, where Labor’s Emma Husar isn’t recontesting, could be offset by wins in Gilmore or Reid, where sitting Liberal members Ann Sudmalis and Craig Laundy aren’t recontesting either. A small swing of less than 2.5% against the Coalition is needed for Labor to win Robertson, Banks and Page, but currently, the swing isn’t anticipated to be enough for the seats to change hands.
The Coalition has the advantage of the recent strong win at state level in NSW, although its win was marred by a backlash against the Nationals in many regional seats. The Coalition now faces the risk of losing regional seats to several strong independent candidates, such as Rob Oakeshott in Cowper and, less likely, Kevin Mack in Farrer.
In the city seat of Warringah, Liberal Party polling reveals a swing of about 12% against Tony Abbott, who is facing a serious challenge from independent Zali Steggall. If that swing were realised at the election, Steggall would win the seat from Abbott. While Steggall will gain some advantage from GetUp’s targeting of Abbott, the former prime minister has support from the Advance Australia lobby, which has already claimed that Steggall is a “fake” independent.
The battlelines are drawn between traditional and modern conservatives in this seat, with the focus on issues like climate change adaptation, refugee policy and foreign aid. After a feisty first candidates’ debate last month, and recent complaints by Steggall that Advance Australia has “sexualised” her advertising hoardings, this seat promises a close and bare-knuckle contest.
The loss of any of these seats would make Scott Morrison’s task of winning government more difficult. With redistributions since the 2016 elections, the Coalition notionally holds 73 seats in the new 151-member house and cannot afford to lose any seats.
This week we also include seats in the ACT. Redistribution has added a third seat to the ACT, and all seats now have new boundaries. The notional swings needed by the Coalition vary from 9% to 13%, suggesting comfortable wins to Labor. But the Greens are hopeful their candidate in central Canberra, environmentalist and musician Tim Hollo, may be able to capture sufficient votes from the young, urban dwellers in the electorate to win.
In the Senate, the status quo of one seat for Labor and one for the Coalition is likely to remain with Labor’s Katy Gallagher, who is expected to be returned after losing her seat over dual citizenship. Liberal Zed Seselja only needs 33% of the two-party preferred vote to secure a quota and hold his seat.
Maxine Newlands, Senior Lecturer in Political Science at James Cook University
The federal government’s final go-ahead for Adani’s groundwater management plan has sparked a large scale grassroots campaign pushing back against the two major parties in Herbert.
The LNP, ALP, and Katter’s Australia Party all support the mega mine. Herbert incumbent ALP’s Cathy O’Toole is on record saying:
If this project has gone through the processes and the regulatory requirements and it’s passed, as it appears it has, it will go ahead, and it will be good for jobs in this city.
The Greens are running on a Stop Adani ticket. Millennials and the undecided voters will play an important role in this election as climate change and mining jobs become key election issues.
An Australia Institute report this week shows that 68% of Queenslanders want strong government action on climate change, 50% want no new coal mines, and 64% are looking for a rapid transition to 100% renewable energy. Leichhardt in far north Queensland, one of the eight LNP electorates on a majority of less than 4%, sees climate change as a major issue.
Last federal election, preference votes from minor parties – mainly One Nation – helped get Labor over the line in Herbert. With One Nation yet to declare a candidate in Herbert, Labor’s early seeming rejection of a preference deal with Palmer’s United Australia Party (UAP) could backfire.
Labor assumed that Palmer would still owe A$70 million dollars to the Herbert community. That all changed on Monday with Palmer’s announcement he will repay wages owed to Queensland Nickel workers.
Palmer has announced he will run for the Senate, and he has nominated local rugby league star Greg Dowling as his candidate for Herbert. With no sign of a One Nation putting up candidates in Herbert, it could come down to a tight race between LNP, ALP, the Greens and the minor parties of UAP and Katter’s Australia Party. Rejecting a preference deal with UAP could be harmful to Labor, if Palmer’s payback bounce and recruiting of local sports star wins him votes come May 18.
Down south and Liberal incumbent Peter Dutton is facing a different challenge. Dutton’s role in Malcolm Turnbull’s undoing is still fresh in the minds of Dickson voters. As Michelle Grattan has pointed out:
Nationally, Peter Dutton will have a big footprint in the campaign. It won’t be a helpful one for Morrison.
Dickson is one of the eight marginal LNP seats with a majority of less than 4%. The campaigning there is already getting down to personality politics. Labor has taken the lead with a social media campaign weaponising Dutton’s role in the spill. Comments Dutton made about Labor candidate’s Ali France’s disability will not help shore up support.
Ian Cook, Senior Lecturer of Australian Politics at Murdoch University
Scott Morrison has his work cut out for him when it comes to convincing West Australians to accept his core message to voters: that they should reelect the Liberal-National Coalition government because they’re better economic managers than Labor.
He has two main problems. First, voters in Western Australia threw Colin Barnett’s Liberal-National Coalition government out in 2017, in part, because of its economic record. Second, many West Australians felt that their quality of life declined during the mining boom, so they know that lots of good economic data doesn’t necessarily mean that everyone’s lives will improve.
Economic management wasn’t the only issue that resulted in the Barnett government’s loss. Tension between the Coalition parties and the preference deal with One Nation didn’t help. But Labor focused part of their campaign on the Coalition government’s economic mismanagement during that election. And voters responded.
The evidence that conservative governments are just naturally better at managing an economy is thin, and there is just as much evidence that the reverse it true, as economics professor James Morley has pointed out. But the idea won’t go away as long as the economic orthodoxy is that governments shouldn’t interfere in the economy. And Australians believes that Coalition governments don’t interfere. Both views are open to question.
While other Australians may not question these assumptions about economic management, their recent experience with a Coalition government means that many West Australians will question them, and they’ll need convincing that they shouldn’t.
We had a two-speed economy shoved in our faces and one takeaway from this was that everyone doing well is not just about the economy doing well. The prime minister will get a chance to explain how I’ve gotten things terribly wrong when he appears in the first of the Leaders’ Debate in Perth on April 29.
Rob Manwaring, Senior Lecturer in Politics and Public Policy at Flinders University
Political memories can be short. At the last federal election, perhaps the single biggest factor shaping voting patterns was the impact of Nick Xenophon’s Centre Alliance. For many years, Xenophon was a mainstay of South Australian politics, with a canny knack for finding appeal. The ubiquitous politician was both a longstanding member of the SA parliament, first elected in 1997, and then a federal senator from 2008 to 2017. Xenophon, at one stage touted as a future premier for South Australia, left Canberra to try and make a splash at the 2018 state election.
Three years ago, at the national level, the Centre Alliance were poised to become a third force in South Australian politics, and a key disruptor to the major parties. In 2013, Xenophon’s team picked up a remarkable 24.9% of the vote, and in 2016 this was a still an impressive 21.3% of the vote. Last time out, the Centre Alliance had one member of the House of Representatives – Rebekha Sharkie picking off Liberal Jamie Briggs in Mayo, and three Senate positions. In terms of vote share, just over 250,000 South Australians voted for the the Centre Alliance.
But what now? With the charismatic Xenophon off the stage, it remains unclear what will happen to their vote share. While Sharkie is likely to hold off the challenge from Georgina Downer again, and it’s unclear how much impact the Centre Alliance will have. They are running three candidates, including Sharkie, for the lower house. Skye Kakoschke-Moore will be their lead Senate candidate.
At best, they seem to be angling to play a key kingmaker role in the Senate, making noises about limiting a potential Labor government’s franking credits and negative gearing policies. Yet, this seems a reactive campaign, and lacks Xenophon’s ability to pick key outlier issues. Moreover, where will moderate liberal and conservative voters find their voice?
Richard Eccleston, Professor of Political Science and Director of the Institute for the Study of Social Change at the University of Tasmania
Labor now holds four of the five House of Representatives seats on the Apple Isle. With popular independent Andrew Wilkie’s vice-like grip on Tasmania’s fifth seat, the recently renamed electorate of Clark (formerly Denison), the chance of a Coalition upset next month seems remote.
But Tasmanian voters have ignored national trends, and delivered more than their fair share of upsets in recent elections, so there must be an outside chance that the Coalition could claw back a seat against the national tide.
Labor’s Ross Hart holds Bass, which takes in Launceston and much of North East Tasmania, by a reasonably comfortable 5.4%. But history suggests Labor shouldn’t be complacent given the electorate has been a graveyard for political careers in recent years. The last time a sitting member was returned for a second term was back in 2001, with the last five elections delivering big swings and unprecedented volatility.
The Liberals will be pinning their hopes on Bridget Archer, the mayor of the working class town of George Town, near Launceston. Archer may be the circuit breaker the Liberals need. She has a high profile in a community traditionally dominated by Labor, and, unlike the vocal conservative Andrew Nikolic who lost the seat in 2016, she won’t have to run the gauntlet of a national GetUp! campaign.
Scott Morrison has visited Bass twice in recent weeks, and a new poll commissioned by a forest industry group put the Liberals in front on a two-party preferred basis. But this result may have been skewed by the design of the poll and its focus on the future of forestry, an industry long championed by the Liberals in Tasmania.
On the other side of the ledger, Labor’s commitment to more funding for health and education, and greater tax relief for lower income households, is more likely to resonate with the electors of Bass than the Coalition’s emphasis on smaller government, and retaining concessions for property investors and self-funded retirees.
While the smart money is on Labor’s Ross Hart holding Bass, history suggests that we shouldn’t rule out an upset on election night.
Once again, the public servants are trying to force the politicians to do things by the book. But the government would prefer to cut the inconvenient corner.
The heads of the Treasury and Finance departments on Wednesday warned the government that the first round of its tax cuts – due to be paid within weeks of the election – must be legislated before they can go out.
PEFO is presented by Treasury secretary Phil Gaetjens and Finance secretary Rosemary Huxtable and doesn’t have any political input. It’s a rare dose of spin-less numbers in the campaign.
Morrison argues the Australian Taxation Office can act before the tax legislation passes. He said on Wednesday that “what happens traditionally with the Tax Office, is where there is a bipartisan commitment to matters, they can often go ahead and administer the tax arrangements on that basis”.
But in PEFO the officials said that while many of the budget’s tax measures can be legislated later without affecting the estimates, “the immediate relief […] requires the relevant legislation to be passed before the increase to the low and middle income tax offset (LMITO) can be provided for the 2018-19 financial year.
“If not legislated prior to 1 July 2019 the revenue cost of this measure would need to be reassessed,” PEFO says.
Officials have been clear about how they see things since immediately after the budget, when the Australian Taxation Office told The New Daily: “The ATO requires law in order to deliver the measure as announced, and, as such, it cannot be delivered administratively”.
It isn’t the first time this issue over the process of implementing tax cuts has arisen. Morrison would remember that well – he was treasurer when it happened in 2016.
That year saw a prolonged face-off between the Turnbull government and the ATO, as the government pressed for income tax cuts to be delivered ahead of parliament passing them.
It was the same story. The measure (for those earning $80,000 to $87,000) was in the May budget, to come in July 1. There was no time to legislate before the July 2 election.
Turnbull said the tax cuts would be delivered “administratively”. But the PEFO of that year said “the [Taxation] Commissioner has indicated that the […] targeted personal income tax relief measure requires the relevant legislation to be passed before the change will be incorporated into the income tax withholding schedules”.
In the end, delivery was delayed, but it came before the legislation’s passage, when the Tax Office was (sort of) persuaded the cuts had bipartisan support.
The first round of the 2019 tax relief does have bipartisan support in the broad, but there are a couple of twists. Labor proposes more relief for low income earners, and the government’s tax plan is a long term package, with Labor rejecting the later stages.
It is more likely than not the 2019 tax cuts will end up delivered on time. “It’s certainly our intention to legislate them,” Morrison said. Whichever side wins, parliament is expected to sit at the end of June to deal with them. The PEFO stand is just making sure of that.
Unsurprisingly, the PEFO validated the numbers in the budget brought down early this month, including the forecast $7.1 billion surplus next financial year.
A minor adjustment was made in this year’s forecast deficit, from $4.2 billion to $4.3 billion, because of the extension immediately after the budget of the energy payment to those on Newstart and a number of other payments.
In what was in general a groundhog day in the campaign, Bill Shorten on Wednesday said he had used the wrong words when on Tuesday he claimed Labor would not increase tax on superannuation – overlooking the $34 billion of proposed changes the opposition has announced.
His gaffe, leapt on by the government, received wide coverage, marring his first week in the campaign.
“I thought I was being asked, have we got any unannounced changes to superannuation,” Shorten said.
“But obviously we have changes which we outlined three years ago, and of course I should have picked the words better, no question. We have no proposals other than what we’ve already announced previously.”
He also argued that ALP policies closing down concessions and loopholes in superannuation “is not some massive increase in taxation”.
Meanwhile the treasurers of Victoria, Queensland, Western Australia, the ACT and the Northern Territory have written to Treasurer Josh Frydenberg asking him “to confirm that there will be no further funding cuts to hospitals, schools, infrastructure and other essential services.”
This follows analysis undertaken by the Grattan Institute arguing the government’s budget projections would need a cut to spending of about $40 billion a year by 2029-30.
“As we are in the process of finalising our respective budgets, it is imperative that you are transparent about any planned cuts in payments to states and territories,” the Treasurers say.
“States and territories should not be forced to fill funding gaps created by cuts by the Commonwealth Government across our respective hospitals, schools and transport networks.”
Labor’s 2016 “Mediscare” has entered political memory as a campaign tactic that almost changed the game in that election. Using robocalls and text messages purporting to come from Medicare, government proposals to outsource management of back-office business became inflated into an all-out “privatisation” of Medicare.
Both the Whitlam government’s Medibank and Hawke’s Medicare faced withering hostility from Australian conservatives.
Australia became one of the only nations to introduce universal health coverage in 1975. This aimed to ensure all Australians had access to a wide range of health services at little or no cost, no matter where you lived or how much money you earned.
After three years of debate about the role of private health insurance, and indivuals’ responsibility to pay for their own health care, universal health care was re-established in 1984 by the Hawke Labor government, under the new name: Medicare.
I want to say with all the frankness I can muster, the Liberal and National Parties do not have a particularly good track record in health, and you don’t need me to remind you of our last period in government.
Howard’s 1996 electoral success relied on defusing the Medicare issue. He assured voters that “Medicare will remain totally in place under a Coalition government”.
However, he retained some of his ambivalence. Howard supported Medicare’s role as a “safety net” to support people with few financial resources. But the Coalition believed those who could afford it should pay their own way, through private health insurance.
The Abbott government’s 2014 Commission of Audit report restated this call for a two-tier health system:
Higher-income earners should be required to insure for basic health services in place of Medicare.
The incoming Turnbull government rejected this advice. But the debate reinforced an image of a reluctant and half-hearted convert.
When the Coalition extended the Medicare benefit freeze, which was originally introduced by Gillard’s Labor government, the extension hurt the Coalition far more than it had Labor.
The Coalition has been determined to avoid this trap again. The Turnbull and Morrison governments have underlined support for Medicare. The 2019-20 Budget documents are punctuated with statements about “guaranteeing” and “strengthening” Medicare. It also declares: “The government’s commitment to Medicare is rock solid.”
The Medicare Guarantee Fund was established in 2017 to emphasise this commitment. Tax dollars generated by the Medicare levy (minus the portion set aside for the National Disability Insurance Scheme), go into the fund. These are topped up with enough personal income tax receipts to meet the combined cost of the Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS).
But the fund has been criticised as mere rebadging and an “accounting trick”. It offered no new funding or new policies; it simply changed the name of existing policies, and extended the definition of “Medicare” from payments of medical benefits to include pharmaceuticals.
But the “Medicare guarantee” wasn’t extended to guarantee adequate federal funding for public hospitals, which remains a problem.
Labor’s new attempt at scare tactics over Medicare uses well established themes. It will test how far the Coalition has been able to inoculate itself.
The attack has again focused on the out-of-pocket costs from declining bulk-billing levels, especially in cancer treatment.
Despite the Gillard government’s Medicare rebate freeze, Labor has held the high ground in this cost debate. Its cancer package focuses on extending bulk billing to minimise out-of-pocket payments.
In the field of hospital funding, Labor’s “Mediscare 2.0” focuses on a A$2.8 billion “cut” in funding to the states to pay for public hospitals.
In 2011, the Rudd/Gillard government pledged to share the cost of public hospital funding growth with the states with a 50-50 split to end the “blame game”. The Abbott government abandoned this policy in the 2014 budget.
The Coalition, under Turnbull, offered to return to funding 45% of the cost of public hospitals. The Labor-held states rejected this, and Shorten has now promised to restore this to 50%. Labor has made traction with these attacks, though much of the detail has been lost or confused in media soundbites.
Election campaigning in health has forced the Coalition to accept how much Australians value Medicare and the principle of universal health coverage. As the common ground between Labor and the Coalition expands, we may be able to have a more rational debate over Medicare’s virtues and deficiencies. But not in the partisan heat of an election.
With the federal election a little over a month away, it appears many Australians have little faith the winners will be able to provide the type of leadership that can change the country in a meaningful way.
According to our recent research, nearly a third (29.8%) of respondents believe that the Coalition shows no “leadership for the public good”, compared to just 5% who believe the Coalition shows such leadership to an extremely large extent.
Labor fared only slightly better – 24.9% of respondents believe it shows no “leadership for the public good”, compared to 7.3% who said it shows it to an extremely large extent.
Our findings revealed that minor parties, the Greens and One Nation, didn’t inspire confidence, either. About a third (32.9%) of respondents believe the Greens show no “leadership for the public good”, while just over half (50.3%) believe the same of One Nation.
Equally concerning is the collapse of Australians’ trust and confidence in their democratic institutions of government.
Just over a quarter (26.3%) of respondents believe that the federal government, as an institution, shows no “leadership for the public good”. This score is somewhat worse than perceptions of state governments (24.6%) and significantly worse than perceptions of local governments (16.2%).
The findings come from the initial results of the Australian Leadership Index, a new quarterly survey from the Swinburne Business School that measures and tracks community perceptions and expectations of leadership across 12 institutions in the government, public, private and not-for-profit sectors.
These results were drawn from two nationally representative surveys of 1,000 Australians we conducted in March.
Taken together, the results provide more bad news for the Coalition in the lead-up to the federal election on May 18.
Accountability and ethics are key
We hasten to add that the disillusionment with the federal government does not extend to voters’ perceptions of the public sector. On balance, voters think the public health and education sectors show leadership for the public good.
This indicates that public disillusionment lies squarely with the people who make the policy, rather than those who implement it.
Consistent with other studies, our findings confirm the importance of transparency, accountability and ethics to perceptions of trust and confidence in leadership.
From a community perspective, political leadership for the public good occurs when leaders demonstrate high ethical standards, prioritise transparency and accountability even when it could have a negative impact on their administrations, and are alive and responsive to the needs of the people they serve.
In other words, leadership for the greater good is reflected in what value leaders create, how they create this value, and for whom they create it.
Political leaders in Australia are currently lacking on all counts.
For whom is value created?
Our survey results shed light on where the public thinks the federal government is failing to create value and what the community expects of political leaders to serve the greater good.
Notably, creating economic value has no bearing on perceptions of politicians’ leadership for the public good. As former Liberal Party leader John Hewson recently observed, voters now take effective economic management for granted from governments.
The same could be said for the creation of social value through, for example, the provision of social services and the enactment of policies that enable people to flourish.
From the public’s perspective, the creation of social and economic value is essentially “core business” for the federal government.
In order to be seen as showing leadership for the public good, the federal government needs to go beyond business as usual.
What looms largest in the public mind when thinking about leadership for the greater good is how political leaders create value and for whom they create value.
Specifically, politicians need to behave ethically and demonstrate accountability for their actions. Australians have had enough of the opportunistic, short-term game of point-scoring and blame-shifting.
Moreover, political leaders need to be seen as responsive to the people they serve, in addition to balancing the needs of different groups of stakeholders. Concern about the use of donations to gain access to, and exert influence over, politicians looms large in the public mind.
In the lead-up to the federal election, and in the wake of recent Royal Commissions into banking and religious institutions, it’s the ideal time for Australians to consider the kind of leadership we need for the Australia we want.
But putting aside the spin, how do the promised tax cuts compare? Will they make the tax system more progressive, or less? And what do they mean for the budget bottom line?
Tasting each plan
The Coalition plan comes in three stages.
The major part of Stage 1 is the Low and Middle Income Tax Offset (the LMITO, or “lamington” as some are calling it), which gives everyone earning less than A$126,000 a cheque in the mail come July and then another one in each of the following three years.
Stage 2 (2022-23) will lift the thresholds of the 19% and the 32.5% brackets.
The biggest cuts come in stage 3 (2024-25) when the 32.5% tax rate is cut to 30% and the 37% bracket is removed entirely.
The effect would be that everyone earning between $45,000 and $200,000 would face the same 30% marginal tax rate from July 1, 2024.
The Labor plan gives a slightly higher offset (up to $95 a year more) for people earning less than $48,000 and then matches the lamington for people earning $48,000 or more.
Under Labor the lamington will be permanent, but Labor will not proceed with stages 2 and 3 of the Coalition’s tax plan.
From July 1, 2019, Labor will also increase the top marginal tax rate paid on incomes above $180,000 from 45% to 47% for an unspecified time, making it essentially a return of the Abbott government’s “temporary deficit reduction levy”.
The Coalition’s plan will cost the budget about A$298 billion over the next decade. Labor’s plan is at the moment much cheaper at about A$63 billion over the same period.
Who wins, who loses?
How will different taxpayers fare under the two plans? That depends on what point in time we compare them.
If we focus on the next three years, there will be no difference in tax under the two plans for most people. The lowest income earners won’t pay income tax under either party’s policy.
About a quarter of taxpayers with taxable incomes of between $22,000 and $48,000 will be up to $95 better off under the Labor plan.
At the other end of the income spectrum, the top 5% of taxpayers earning more than $180,000 will pay more under Labor (equivalent to about $400 additional tax for someone earning $200,000).
The big differences between Labor and the Coalition’s tax policies open up when we get to stage 2 (2022-23) and particularly stage 3 (2024-25) of the Coalition’s plan.
By the end of the next decade, assuming both parties make no further changes to income tax policy:
• The third of taxfilers earning up to $40,000 will pay no tax or be slightly better off under Labor’s plan because Labor retains the Low and Middle Income Tax Offset.
• The third of taxfilers earning $40,000-$90,000 will be a bit better off under the Coalition’s plan. A taxpayer in the middle of the income distribution, earning $63,000 a year by 2029-30, will be approximately $432 a year better off under the Coalition.
• The third of taxfilers earning more than $90,000 will be at least $1,000 better off under the Coalition, and people in the top 8% will be over $10,000 better off.
The Coalition would refund bracket creep only at the top
The top 15% of earners would be fully compensated for bracket creep under the Coalition’s plan, paying the same average tax rate or less in 2029-30 as they do today.
But middle income earners would still face higher average tax rates than today.
If Labor were to make no further changes to income tax policy over the decade, Labor’s plan would see around 80% of taxpayers facing higher average tax rates in 2029-30 than at present. Top income earners would receive almost no insulation from bracket creep. This is why Labor’s plan results in a much healthier bottom line.
But it is difficult to imagine that any government could resist offering tax cuts to compensate for the effects of bracket creep over such an extended period.
Shadow Treasurer Chris Bowen has already indicated that a future Labor government would consider tax cuts on a budget-by-budget basis, meaning that today’s policy doesn’t necessarily tell us what policy will be in a decade’s time.
The Coalition would make the system less progressive
The “progressivity” of a tax system — the degree to which it reduces income inequality — can be measured by the Reynolds-Smolensky Index. It shows the tax system will at first become more progressive under both parties’ policies — meaning that post-tax income will become more equally shared.
This is because of the boost to the Low and Middle Income Tax Offset. But the final two rounds of tax cuts, at this stage offered only by the Coalition, will make the system significantly less progressive as the benefit is concentrated among higher income earners.
What Labor is offering at the moment will make the system more progressive and only becomes slightly less so over time.
But both sides are virtue signalling
Despite the hype, the personal income tax system will look pretty similar for the next three years regardless of which party wins office.
Labor will tax high income earners more and low income earners slightly less. But for around 70% of people, personal income tax rates will be identical in three years time whether Scott Morrison or Bill Shorten is prime minister.
The big differences lie in the distant future, beyond 2024-25. Since it is almost unimaginable that either side of politics would leave its tax policies unchanged through another two elections the differences in the announced plans have more to do with signaling philosophy than reality.
The Coalition’s philosophy is about restraining tax as a share of the economy, even if that means it will need to shrink government spending as a share of GDP (in ways that are not yet unexplained).
Labor is signalling that it is more comfortable with the tax share creeping up — mostly thanks to increased contributions from high income earners — but it will make sure lower income earners don’t end up worse off.
The election contest continues to focus on tax and health, with the government setting out the tax benefit people in particular occupations would get in the long term under its plan, and Labor announcing funding for pathology from its cancer package.
The government says teachers, nurses, police officers and tradesmen would pay significantly more income tax under Labor.
According to its figures a NSW nurse manager earning $199,029 in 2024-25 would pay $11,740 less tax than under Labor; a Queensland public school principal on $183,201 would pay $9049 less tax than under Labor, and a Victorian public school classroom teacher on $115,745 would be $3699 better off.
Labor has rejected the later stages of the government’s income tax plan, saying it is not fiscally responsible to produce details at this stage. It however has left the way open for a Shorten government to give tax cuts – beyond those promised to be delivered within weeks of the election – when budget circumstances allow.
Treasurer Josh Frydenberg said: “Anyone earning more than $40,000 will better off under our plan. It means school teachers, nurses, bus drivers and emergency service workers right across the country will have more money in their pocket.
“This is more money to spend as they see fit. Our plan provides greater reward for effort while ensuring top earners continue to pay their fair share.”
“Our tax system will maintain its progressive nature under our reforms, with the top 5% of the taxpayers paying around one third of all income tax.”
Tax and health have dominated the first days of the campaign, with the government using numbers from the Treasury to butress its argument about Labor as high taxers and figures from the Health department to claim Labor’s plan to slash costs for cancer sufferers was massively under-costed.
Both Treasury and the Health department distanced themselves from the exercises, saying they had responded to government requests rather than costed opposition policies.
In the case of the attack on the cancer package the government’s attack was based on a false assumption about rebates.
In its latest slicing and dicing of its $2.3 billion cancer package Labor says it would invest $200 million to keep pathology tests free for older people and people with cancer.
“Bulk billing for blood tests is at breaking point – cancer patients will either have to pay, or there will be a reducation in services,” Bill Shorten and health spokeswoman Catherine King say in a statement.
A Labor government would work with the sector and lift the bulk billing incentive. Older people will have about 20 million pathology tests a year; people with cancer have about three million.
The CEO of Australian Pathology, Leisel Well, said that “without adequate funding, pathology services will be forced to stop bulk billing.
“This will impact unfairly on poorer Australians, including pensioners. Many will simply not be able to afford tests, which means diseases will get diagnosed later at a greater cost to taxpayers, and most importantly with a greater impact on the health outcomes of Australians”.
Health is proving a bone of contention in the 2019 election campaign. Labor has positioned health as a key point of difference, and the Coalition is arguing that Labor’s promises are untrue in one case and underfunded in another.
This cheat sheet will help you sort fact from fiction in two key health policy areas: public hospital funding and cancer care.
In his budget reply, Opposition Leader Bill Shorten promised that Labor would restore every dollar the government had “cut” from public hospital funding.
The government counter-claimed that hospital funding has increased. So who is right?
The short answer is both.
In 2011, the then Labor government negotiated a funding agreement with the states for the Commonwealth to share 45% of the growth in the cost of public hospital care, funded at the “national efficient price”. This price is based on the average cost of the procedure, test or treatment.
The funding share was to increase to 50% of growth from July 1, 2017.
At the 2013 election, the then Liberal opposition agreed to match that promise and, indeed, claimed they were the only ones who could be trusted to keep the promise:
A Coalition government will support the transition to the Commonwealth providing 50% growth funding of the efficient price are hospital services as proposed. But only the Coalition has the economic record to be able to deliver.
However, in the 2014 budget the Coalition scrapped its promise. The 2014 budget papers list the savings that were made by the decision. It was a clear and documented cut that the Coalition was proud to claim at the time.
Since then, the Turnbull government has backtracked on the 2014 cuts to health but only to restore sharing to 45% of the costs of growth.
Labor has estimated the impact of the gap between 45% and 50% on every public hospital in the country, and spruiks the difference at every opportunity.
Hospital costs increase faster than inflation because of growth and ageing population, the introduction of new technologies, and new approaches to treatment.
As a result, the Commonwealth’s existing 45% sharing policy drives increased spending, and so Commonwealth spending is now at record levels, albeit not at the even higher levels that Labor had promised.
Labor’s promise is, appropriately, phrased as an additional quantum of money to the states, sufficient to restore the 50% share in the cost of growth.
The details of how this funding should be operationalised to the states should be left to detailed negotiations after the election as it is not good practice for all the details of your negotiating position to be aired in the heat of a campaign.
So Labor is right to say hospital funding is lower than it would have been if the 50% growth share commitment had been maintained. But the Coalition is right to say the Commonwealth is spending more on hospital care than when it came to office.
The second major element of the Labor campaign was a high-profile A$2.3 billion package to address high out-of-pocket costs for Australians with cancer. The package has three key components:
additional public hospital outpatient funding to reduce waiting times
a new bulk-billing item for consultations
more funding for MRI machines for cancer diagnosis.
Labor did not promise to eliminate out-of-pocket costs for cancer, not even for consultations. It claimed bulk-billing would increase from 40% to 80% of consultations.
This promise has led to another showdown between Labor and the Coalition. Health Minister Greg Hunt claims to have found a A$6 billion black hole in Labor’s cancer policy.
The Coalition has produced a list of 421 Medicare items used for cancer treatment – including treatment in private hospitals – and noted Labor has not allocated funds to cover the fees specialists charge for these items.
But Labor rightly claims the 421-item list is not what it promised. Labor’s promise was about increasing the rate of bulk-billing for consultations and is based on a new item which is only available if the specialist bulk-bills.
Expect more claims and counter-claims in the weeks ahead.
While Peter Dutton is fighting for his political life in his marginal Brisbane seat of Dickson, he is being “weaponised” by Labor in its efforts to defeat two of his strongest Victorian supporters, Greg Hunt and Michael Sukkar, despite their relatively solid margins.
Last August, a clutch of Victorian Liberals including Hunt and Sukkar thought the government collectively, and in some cases they individually, would be better off with the rightwinger from Queensland as prime minister.
Greg Hunt aspired to be Dutton’s deputy. If he and Dutton had won their respective ballots Hunt, rather than Josh Frydenberg, would now be treasurer.
Instead, he remains health minister and is facing a tough contest in Flinders, made more difficult by crossbencher Julia Banks running there as an independent. Banks, the Liberal defector who formerly occupied Chisholm, was particularly angered by the overthrow of Malcolm Turnbull and has made a feature of Hunt’s disloyalty.
Sukkar, the member for Deakin, a hard line conservative who was an assistant minister before the coup and a backbencher after it, did numbers for Dutton.
On Monday Labor launched a social media campaign weaponising Peter Dutton in the fight to unseat Hunt and Sukkar in Flinders and Deakin.
The targeting is based on internal tracking research showing Dutton is especially toxic in those two seats.
Quotes from the Labor focus groups included:
Even though I normally vote Liberal I’d love to see Peter Dutton and Tony Abbott stitched up
I am a Liberal voter but this time I can’t because of what Peter Dutton did to Malcolm Turnbull
In usual circumstances Deakin (on 6.4%) and Flinders (7%) should be safe. But after the November state rout of the Liberals – when the overthrow of Turnbull was a major factor and Dutton’s face had been on billboards – nothing is certain.
The Liberals think some of this anger has abated but the Victorian situation remains grim, with a number of seats at risk in a state John Howard has called the Massachusetts of Australia.
Labor has around ten seats on its “target” list for attention. While Dutton may be featured in other seats, there is less of a “hook” for him than in those of Hunt and Sukkar.
When Scott Morrison announced the election last Thursday, Bill Shorten delivered his speech later from a suburban home in Deakin.
On Monday Morrison was campaigning with Sukkar – who was anxious to leave most of the talking to the Prime Minister.
Asked how much Sukkar’s support for Dutton had contributed to the problems the government was facing in Deakin and Victoria, Morrison stonewalled: “That is such a bubble question, I’m just going to leave that one in the bubble”.
In the video Labor targets Dutton over a broad range of issues, including his support, as health minister under Tony Abbott, for a proposed $7 Medicare co-payment, which was later dumped.
His co-payment history is expected to get a wider outing in a campaign in which Labor is running heavily on health.
The video asks
How much will Peter Dutton and the Liberals stand up for Victoria? Let’s check. He tried to give a $17 billion tax cut to the banks, cut $14 billion from Australian public schools
Peter Dutton was the health minister who tried to cut more than $50 billion from public hospitals and also tried to introduce the $7 GP tax. He made fun of climate change victims and voted against the banking royal commission 24 times.
And with the other right-wing Liberals he plotted to dump Malcolm Turnbull and voted to make himself prime minister, twice.Right-winger Peter Dutton for the top end of town and himself.“
There are also customised posters in Victoria featuring Dutton, especially for Deakin and Flinders.
Dutton has played into Labor’s hands in the early days of the campaign, with his remark last week attacking his opponent, amputee Ali France, for not moving into Dickson, accusing her of using her disability as an excuse.
“A lot of people have raised this with me. I think they are quite angry that Ms France is using her disability as an excuse for not moving into our electorate,” he said.
“Ali has been telling people that even if she won the election she won’t move into our electorate. She has now changed that position, but I don’t think it is credible.”
Morrison initially defended Dutton, claiming he was taken out of context and was just reflecting what his constituents had said to him.
Subsequently Dutton apologised.
On Monday Morrison too had changed his tune. “Peter has made his apology appropriately. What I don’t want to see happen in this election campaign is, I don’t want to see people playing politics with disabilities. I have very strong personal views about this topic”.
Nationally, Peter Dutton will have a big footprint in the campaign. It won’t be a helpful one for Morrison.
With five weeks until the May 18 election, this week’s Newspoll, conducted April 11-14 from a sample of 1,700 people, gave Labor a 52-48 lead, unchanged since last week. Primary votes were 39% Coalition (up one), 39% Labor (up two), 9% Greens (steady) and 4% One Nation (down two) – One Nation’s lowest primary vote since November 2016.
While the two-party figure was unchanged, this poll is better for Labor than last week’s Newspoll, with Labor gaining two points in primary votes from One Nation’s drop. If we assess this poll as total right-wing vs total left-wing vote, the left (Labor and Greens) gained two points to stand at 48%, while the right (Coalition and One Nation) lost one point to fall to 43%. Analyst Kevin Bonham said this Newspoll was probably rounded towards the Coalition.
One Nation’s drop is likely the result of increased polarisation between the major parties. If One Nation had been affected by the NRA donations scandal, it would have shown up in last week’s polls.
Nominations for the federal election will be declared on April 24. It is unlikely that One Nation will contest the vast majority of lower house seats. Polling conducted after April 24 is likely to greatly reduce One Nation’s vote as they will no longer be an option for most Australians in the lower house. This reduction of One Nation’s vote may assist the Coalition on primary votes.
In the Newspoll, 45% of respondents were satisfied with Prime Minister Scott Morrison’s performance (steady), and 44% were dissatisfied (up one), for a net approval of +1. Labor leader Bill Shorten’s net approval was steady at -14. Morrison led Shorten by an unchanged 46-35 as better PM.
Since Malcolm Turnbull was ousted as prime minister in August 2018, the Coalition has recovered from a 56-44 deficit in Newspoll to 52-48 this week, due partly to the time that’s passed since the spill and partly to the relative popularity of Morrison.
Now that the election campaign is formally under way, some attention will shift to the opposition’s policies and proposals. The danger for Labor is the Coalition can scare voters about its economic policies, but the potential reward is that Labor can appeal to voters who are frustrated by the Coalition’s perceived inaction on climate change and low wage growth.
Large difference in voting intentions by age group
Every three months, Newspoll aggregates all the polls it conducted from that time period to get voting intention breakdowns by state, age, gender and region (the five capital cities vs the rest of Australia). For January to March, the overall result was 53-47 to Labor, a point better for Labor than the last two Newspolls.
This three-month Newspoll showed a large difference in voting intentions by age group. Among those aged 18-34, Labor had 46% of the primary vote, the Coalition 28%, the Greens 14% and One Nation 4%. Among those aged 35-49, it was Labor 39%, Coalition 35%, Greens 9% and One Nation 7%. And among those aged 50 or over, the Coalition had 44%, Labor 35%, One Nation 6% and Greens 5%.
It is still important to poll well with this oldest demographic. According to the 2016 census, those aged 18-34 represent 30.3% of the eligible voting age population and those aged 35-49 represent 26.0%. The share of the voting-age population aged 50 or over, however, is 43.7%.
Results by gender were similar. Men gave Labor 40% of the primary vote, the Coalition 37%, the Greens 7% and One Nation 6%. With women, Labor had 39%, the Coalition 37%, the Greens 10% and One Nation 6%. After preferences, Labor would be doing about one point better with women than men.
The best source for state voting intentions is The Poll Bludger’s BludgerTrack. Perhaps reflecting the Coalition’s victory in the recent NSW election, federal Labor’s lead over the Coalition in that state has been reduced to just 50.1-49.9 from about 54-46 in the last few weeks. This is about a 0.6% swing in Labor’s favour from 2016.
Labor has maintained a larger lead in most other states, however. In Victoria, Labor leads by 55.1-44.9, a 3.2% swing to Labor since 2016. In Queensland, Labor leads by 52.0-48.0, a 6.1% swing to Labor. In SA, Labor leads by 55.7-44.3, a 3.4% swing to Labor.
In WA, the Coalition still leads by 51.0-49.0, but this is a 3.6% swing in Labor’s favour from 2016.
Nationally, BludgerTrack gives Labor a 52.5-47.5 lead, a 2.8% swing to Labor.
One Nation wins two seats in the NSW upper house
In the March 23 NSW election, 21 members of the upper house were elected by statewide proportional representation, with a quota of 1/22 of the vote, or 4.55%.
The Coalition won 7.66 quotas, Labor 6.53, the Greens 2.14, One Nation 1.52, the Shooters, Fishers & Farmers 1.22, the Christian Democrats 0.50, the Liberal Democrats 0.48, Animal Justice 0.43 and Keep Sydney Open 0.40.
The Coalition was certain to win an eighth seat, and Labor and One Nation were best placed for two other seats. On preferences, Animal Justice overtook the Liberal Democrats, Christian Democrats and One Nation to win the second-to-last seat, with One Nation’s second candidate, Rod Roberts, defeating the Christian Democrats for the final seat.
It is the first time since 1981 that the Christian Democrats have failed to win a seat in the NSW upper house. David Leyonhjelm, who resigned from the Senate to run as the lead Liberal Democrat candidate in NSW, did not win.
The Coalition now holds 17 of the 42 total upper house seats (down three), Labor 14 (up two), the Greens four (down one), the Shooters two (steady), One Nation two (up two), Animal Justice two (up one) and the Christian Democrats one (down one). One Green member, Justin Field, resigned from the party, and is now an independent.
Overall, the right now holds 22 of the 42 seats. On legislation opposed by the left-wing parties, the Coalition will require support from One Nation, the Shooters and Christian Democrats.
The European Union leaders have decided to delay Brexit until at least October 31. Without a majority for any plausible Brexit option, the House of Commons could only vote to delay Brexit to prevent a no-deal departure from the EU, but this delay will likely not appeal to the general public or “leave” voters.