John Menadue. Joe Hockey and class warfare.

In his speech to the Sydney Institute last night, Joe Hockey said that the criticism of the budget was unfair and reminiscent of ‘class warfare’ of the 1970’s.

Joe Hockey was right on one thing. There is class warfare and he is waging it particularly against the young and the aged in Australia. Warren Buffet a multi billionaire put it pungently in the US recently ‘There is certainly class warfare going on and my class is winning it’.

There has been wide-spread commentary about the unfairness of the budget. Ross Gittins for example has said: ‘This is the most ideologically driven budget we have seen … They cut the real growth in pensions but left high income earners absurdly generous superannuation tax concessions untouched. They tightened up the family allowance and cut young people’s access to the dole, but didn’t tackle the concessional taxation of capital gains, negative gearing or company cars, while ignoring the miners’ diesel fuel rebate and other business welfare. They imposed a co-payment on GP visits, but didn’t abolish the private health insurance rebate. … So it’s the “end of entitlement” for people in the bottom half, but no change to the entitlements of the well-off, save for a small three year tax levy.’ (SMH June 9)

Joe Hockey complains about welfare in Australia, yet government outlays here as a percentage of GDP are one of the lowest in the world. The OECD recently published a report on government outlays for the 18 highest income OECD countries in 2012. Australia was the second lowest in terms of government outlays. Only Switzerland was lower. Countries such as Denmark, France, UK, Germany, Norway, Japan and the US all spent more on government outlays than we did.

At less than 36% of GDP (all levels of government ) Australia’s public sector is a dwarf. The OECD average size of government is 40.4% of GDP and successful northern European countries such as Germany, Netherlands and the Nordic countries, all have public sectors above 43% of GDP.

Furthermore Australia has one of the most effective means-tested welfare systems in the world. This needs continual updating but it does ensure that support goes to those in greatest need. This means of course that if welfare payments are reduced it’s going to hit hard those least able to afford it.

There is increasing concern around the world about growing inequality in developed countries. It is much worse elsewhere such as in the US but the trend in Australia is significant. In the blog which I posted on June 9. ‘What to do about growing inequality in Australia’ you will find the following.

  • In Australia in 2011-12, the mean household net worth of the lowest 20% of our population was $31,205. The highest 20% had a mean household net worth of $2,215,032.
  • The same report quoted from a paper by Andrew Leigh, ‘from the mid-1970s, full-time wages for the bottom tenth of the income distribution had grown only 15%, while full-time earnings for the top tenth have increased by 59%. In recent decades the income share of the top 1% has doubled, the wealth share of the top 0.001% has more than tripled and the share of the top 0.0001% (the richest one millionth) has quintupled. In 2009, the top 20 CEOs earned more than 100 times the average wage. (We saw an example of this this week with the CEO of Australia Post being paid $4.8 million p.a., almost ten times the salary of the Prime Minister whilst sacking 900postal workers.)

There are numerous examples of corporate welfare and subsidies for the wealthy. This is where the real ‘welfare’ is to be found. Some examples include

  • Superannuation concessions costing $36 billion p.a.
  • Negative gearing costing $4 billion p.a.
  • Subsidies to private health insurance costing $5 billion p.a.
  • Income-splitting trusts costing $3 billion p.a.
  • Capital gain discounts costing $5 billion p.a.
  • Fossil fuel subsidies for polluters costing $11 billion p.a.
  • Funding of private schools costing $9 billion p.a. that benefit a lot of wealthy schools
  • Tax avoidance that I mentioned in my post of June 10 costing perhaps $10 billion p.a. or a lot more!

There is enough corporate and high income welfare here…$82b pa and counting …to more than meet the “structural budget deficit” of $65b pa. And of course there is also  paid parental leave.

In the face of growing inequality, government largesse and benefits are being increasingly distributed to the more prosperous members of our community. Joe Hockey probably regards all these benefits as incentives rather than welfare.Or as he more insultingly puts it, the government “should be rewarding lifters and not leaners”

His comments about class warfare are an ideological smoke screen to hide the unfairness of his budget. It is he and his supporters who are waging class warfare. And they are winning. The age of entitlement is still very much alive for the people Joe Hockey listens to…like the people on the Business Council of Australia or his own North Sydney Forum.

We need a just and efficient society. Growing inequality acts counter to both those objectives. But in the end the case for greater fairness and equality is a moral one. Taxes are the price we have to pay for a civilised and decent society.

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2 Responses to John Menadue. Joe Hockey and class warfare.

  1. David Menadue says:

    Why Hockey has got it so wrong.

  2. Bruce Kaye says:

    Quite agree John – well said. But what to do. Perhaps there is some relationship between the “small government” mantra now being introduced in our political debate and what Thomas Picketty describes as the inevitable tendency of unmoderated capitalism to enable the rich to get richer and the poor to get poorer. The rule of the market surely has some similarity in advanced capitalist societies to the law of the jungle. Powerful entities wield more power than less powerful ones. The question then becomes what might make them more likely to wield that power for the benefit of others less powerful. A resolute government might be one way if it has not already been enrolled in the project of the powerful.

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