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John Passant

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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

My interview Razor Sharp 11 February 2014
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Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. (0)

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Make Gina Rinehart work for her dole

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Me on Razor Sharp this morning
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No to Labor’s spending cuts: tax the rich instead

Labor is aiming for a budget surplus next year amid increasing unemployment.

Cutting public service jobs and services means unemployment will go up from the current 5.2% to 5.5%. At the last Budget it was predicted to fall to 4.5%, so Labor is delivering a one percent worsening in unemployment.

It’s not as if the economy is or will be in major trouble. In fact the OECD forecast Australia’s growth next year would be the best in the developed world. Even the Government’s own revised figures show growth will be 3.25% next year.

This Labor Party neoliberal government has a surplus fetish which makes no economic sense and probably no political sense either. In an economy with a GDP of around $1.3 trillion annually and spending and revenue of around $400 billion, a surplus or deficit of a few billion makes no difference. Even the current deficit of $37 billion is small beer.

The economy is in such good shape that Fitch ratings agency today increased the country’s rating to AAA, the first time in history all 3 ratings agencies have given Australia’s economy top ranking. The ALP’s attacks on spending are a political manoeuvre to placate ‘markets’, i.e. the one percent for whom Labor rule and the Liberals want to rule.

But the attacks may not go far enough for the rich bankers and others for whom the two parties of neoliberalism govern. Macquarie Bank for example has already been complaining that the cuts are a magic pudding. They say the ‘spending cuts won’t hurt anyone’ and are not ‘ a substantial structural tightening of fiscal policy.’ In other words for the one percent the cuts don’t go far enough and aren’t deep enough.

However the cuts will hurt. The Orwellian public service ‘efficiency’ dividend will be increased from 1.5% next year to 4%. This means, according to the Community and Public Sector Union, job losses of at least 3000 and a massive reduction in public services. Think much less staff in Centrelink, Medicare, the Tax Office.

One could hope against hope that the union might learn the lessons of resistance from around the globe and Baiada poultry workers and nurses in Victoria but this tame cat union leadership is afraid to mobilise its membership in protected strike action, let alone illegal strike action, against this rotten Labor Government boss.

Defence spending will continue to increase at 3% in real terms. Good to see Labor has its priorities for the one percent right. Withdrawing from Afghanistan would save $2 billion.

There is also a fair amount of fudge in the figures. Labor is bringing forward $6.3 billion worth of spending from next financial year into this financial year to make next year’s figures that much better. And it is postponing some spending for next year and tax changes into later years, again to make 2012/13 the show pony of surplus.

The Gillard Government spouted its commitment to battlers’ superannuation by saying it would use a little of the money from the Minerals Resource Rent Tax to cover the revenue foregone from an increase in the Superannuation Guarantee from 9% to 12%. Yet in MYEFO the government has announced it will make changes to the co-contribution scheme (in which the government matches superannuation contributions of low to middle income earners by up to $1000.) The government will cut the level at which the co-contribution can be claimed from a maximum salary of $61,920 p.a. to $46,920 and effectively cut the co-contribution amount from $1000 to $250.

The changes will save $1 billion over the forward estimates. So much for caring about battlers and their superannuation.

It is true that the Government’s previously announced low income superannuation contribution means workers on up to $37000 will get a rebate to compensate them for the 15% contributions tax. But the announced co-contribution changes mean it is low and middle income workers on salaries between $37000 and $61920 who will in large part pay for this.

What else is this government doing? Well, it is also cutting the capital budgets of some government agencies by 20%. This will save the Budget over $700 million, the Government says. This will have a major impact on service delivery by government departments.

Let’s just unpack these attacks on the staff and capital budgets of the public service. There will be less public servants, using less efficient and older technology, providing more services and whatever new ones (like administering the carbon tax and the minerals resource rent tax) the Government demands. This is a recipe for disaster.

But that’s not all the Government is doing. It is cutting the baby bonus, and freezing its indexation. Women without jobs will be penalised.

While the point may be that this baby bonus was an attempt to keep women in the home, the fact is that most mothers who stay at home do so because of the effective marginal tax rates and child care costs they face if they do return to work. Reducing the baby bonus also shows that the government is prepared, once again, to attack those less well off and the more powerless in our society.

An alternative approach would be to fully fund a government owned child care system with free access for all by taxing the rich.

The Government has changed the rules about dependent spouse tax rebates so that a taxpayer is no only eligible if their spouse is 60 years or more old. Previously the cut in age was 40. This will impact on 700,000 taxpayers with dependent spouses – often low income earners. It will save $1 billion.

There is a pattern emerging here. Labor is attacking the vulnerable and less well off.

The Government is also attacking education and some University students. It will cut $1 billion over the forward estimates from the education sector.

First it has axed payments to universities that score well on student experience and learning outcomes. This will ‘save’ $240 million.

Labor is also going to increase the student contributions for maths, stats and science students from $4691 to $8353. This will bring in an extra $400 million.

And Labor is going to postpone paying schools and teachers reward payments for a few years, saving a total of over $350 million.

Labor will change the living away from home allowance rules to make sure people have receipts for their expenses and live in Australia. This will hit not just overseas tax evaders but many ordinary workers receiving these allowances. The extra revenue raised will be over $650 million.

The Labor Government is also going to increase visa charges to raise an extra $600 million or so. Of course, overseas visitors don’t vote so it has a particular appeal to governments. However the increased charges won’t impact that much on rich travellers to the country. But it will see less backpackers coming here. Again, Labor has developed a policy that hurts the poor and less well off.

Next year the Government was going to introduce a standard work expenses tax deduction for most workers. It would mean if your expenses weren’t above $500 in 2013, rising to $1000 the year after, you would get an automatic deduction. It would save a lot of time and money having to stuff around with receipts and the like. The Government will save $1.2 billion by deferring the start up date of this standard deduction scheme.

So the targets for Labor have been public servants, other ordinary workers, students, foreign backpackers, middle aged dependent spouses and some new mums. All part of the 99%.

Are there any attacks on the one percent from Labor? Of course not.

The GFC Mark II is cutting billions in revenue. For example, capital gains tax receipts have dropped, and will drop, by about $7 billion over the forward estimates.

Most capital gains go to the richest 20 percent in society. But they are taxed very concessionally. Non-residents don’t pay Australian capital gains tax (unless it is land). And residents only include half the gain in their income if they hold the asset for longer than a year.

These capital gains tax concessions to the rich exist because Howard and Costello thought they were the wealth creators and should be rewarded and encouraged. Abolishing this largess would reintroduce some equity into the tax system, raise billions and solve the budget deficit ‘problem’.

The back down on the Resource Super Profits Tax and its replacement with the mini-me Minerals Resource Rent Tax has cost the revenue perhaps $10 billion a year. There’s your budget ‘problems’ wiped out too.

Taxing the rich however is not on Labor’s agenda. Pandering to them is.

Remember how Twiggy Forrest said recently Fortescue Metals had not paid one cent in tax? They are not alone. According to the ATO between 2005 and 2008 40% of big business didn’t pay any income tax. The figure is likely to be higher now because of the GFC.

The latest ATO Tax statistics show that almost 60% of all companies are non-taxable.

Maybe making companies pay tax might be a better approach than screwing over the poor and vulnerable? Not if you are Labor in power.

What about unemployment? Clearly the ALP Government doesn’t care. Its attacks on the public service will actually make unemployment worse.

We face an impending environmental crisis. A government of vision might tax the rich to fund a massive government investment in renewable energy – wind and solar farms, and thus create not destroy jobs. But that would mean forcing the one percent to pay for their global warming. The ALP won’t do that.

All Labor cares about is a Budget surplus and keeping the bosses happy. But the bosses aren’t happy. They know this is a pea and thimble trick by Labor. They think these MYEFO cuts are minor and some of them want a horror May 2012 Budget. Labor may well deliver.

These MYEFO figures are based on the assumption that Europe will be able to potter along. This is looking less and less likely.

If these attacks on public servants and public services, low and middle income superannuants, students, backpackers, middle aged dependent spouses and mums are what Labor is prepared to do to the Australian working class when we have the best performing economy in the world, imagine what it will do if the situation in Europe worsens and drags down the global economy and Australia with it.

The Australian ruling class and their politicians are sharpening the axe. We need to organise, organise, organise and fight, fight, fight to stop their attacks.



Comment from Lisa Vantanen
Time November 29, 2011 at 9:44 pm

Ouch! Yes, why not tax the 1%, who are the major polluters. I am really concerned about the environment, because if it isn’t healthy and safe, the rest is moot point.

Education is also a worry, and University education should be, in my estimation free for those capable, not those who can afford.

About the only thing I do agree with is the cutting, or culling of the ‘baby bonus’. A huge plama T.V. set does not make a parent out of a young person!!!

Comment from dl
Time November 30, 2011 at 12:55 am

Yes, but there is also something to the idea of getting public sector debt back into financial surplus, if only so that there won’t be the inevitable cries of “Austerity!” from the deficit hawks, should the financial contagion from Europe reach our shores. I’d much rather see more of such savings come via rises in revenue, as opposed to these spending paper cuts though, as they are in themselves contractionary & punitive toward the lower economic stratas of society.
Also, why on earth would Labor choose to raise raise spending contributions from subjects such as Maths, Science and statistics? Is this supposed to somehow increase enrollments in these fields, in which we also often hear that Australia has a dearth of graduates in?

OT , but I just finished reading the report written by Ajay Kapur from CITIBANK back in 2005, named “Plutonomy: Buying Luxury, Explaining Global Imbalances.” Canada, the U.S and the U.K are labelled explicitly as plutonomies, or countries in which consumption is predominantly driven by the wealth, as opposed to more Egalitarian nations such as Germany and Japan. Australia is heading down the same dead-end path of overall stagnating growth, but massive profits goiing to the wealthy as these other Anglophone nations.

Comment from Ninette
Time November 30, 2011 at 2:42 pm

All I know is when howard was in l was getting $1500 for my super co contributions now I am getting $800 No more voting for labour for me CARN THE LIBS

Comment from Ninette
Time November 30, 2011 at 2:44 pm

I was getting $1500 co contributions from the howard govt now l am getting$800 now I am going for the Liberals no more labour.
My super has gone right down.

Comment from David Grayling
Time November 30, 2011 at 6:45 pm

John, tax the rich you say! This is close to heresy.

John Howard made the rich richer during the ten weary years of his Government and you want to undo his life’s work.

Only joking, John. Tax the bastards out of existence I reckon. Get rid of the lurks for the jerks, I say. Let equality rule!

Pingback from En Passant » Massive pay rises for the one percent’s politicians
Time December 1, 2011 at 2:43 pm

[…] Readers might also like to look at No to Labor’s spending cuts: tax the rich instead […]