Statements - Economy

We often hear from Labor about what they say is rising inequality. The recent report from the Productivity Commission and the report in yesterday's Australian that wages have risen faster than inflation debunk this continually perpetuated myth. It's a sad reflection of how far Labor has fallen that in the 1980s the Labor Party under Hawke and Keating was focused on market based reform to grow Australia's economic pie. Today, the only thing that interests Labor is dividing that pie up—redistribution according to socialist ideology.

Inequality has become something of an obsession for those opposite. The consultation draft for Labor's national platform mentions the word a total of 49 times. The document mentions inequality more than twice as much as it mentions, for example, living standards, wages or even electricity prices. Under Bill Shorten's leadership, Labor has started singing from the same extremist songbook as Mr Sanders in the United States and Mr Corbyn in the United Kingdom. Mr Shorten has nominated stemming the rise of inequality as one of Labor's top economic priorities, should it win office.

The problem is that the facts don't support him. All of the recent studies show that inequality in this nation is not rising. It's a pity that fact doesn't make for a handy campaign slogan. Mr Shorten plans to do this by implementing a raft of taxes that will sap the incentive for Australians to work hard and will punish households that are trying to get ahead. Scrapping tax refunds for share dividends won't give a single unemployed person a job, but it will make life a lot harder for tens of thousands of self-funded retirees who have worked really hard to get to where they are. Abolishing negative gearing won't lower a single pensioner's or other person's electricity bill, but it will make it that much tougher for working people who want to invest in property, as so many do, to save for their future. The majority of people who do this earn less than $80,000 a year.

The logic that underpins Labor's plan is clear: put simply, they believe that the path to making society fairer and more equal is to pull people down rather than lifting people up. The opposition fashions its regressive tax grab as part of a positive plan. In truth, the outlook that animates Labor's philosophy isn't optimistic. It's hard to see much that's positive, much less optimistic, about a political philosophy that is more interested in punishing success than rewarding effort.

To my mind, Labor's notion that the best way we can improve the lot of others in life is through the heavy hand of government redistribution is incredibly disempowering. When Mr Shorten says that inequality is creating a sense of powerlessness or killing hope, what he's really saying is that Australians aren't capable of backing themselves, that they aren't empowered, that they'd be better off letting the welfare state do it for them. They're about entrenching the Labor victim mentality that inequality in Australia is endemic.

Perhaps they think it's an advantage for them come election time. But I've got good news for Australians: Labor's claim that inequality has rotted Australia's social contract to the core has been thoroughly debunked. The Productivity Commission, the Australian government's peak economic advisory body, recently published a report titled Rising inequality? A stocktake of the evidence. The report provides the most comprehensive overview of inequality in Australia in living memory. It analyses inequality not through the lens of class envy, but in the context of understanding other important concepts like poverty, entrenched disadvantage and economic mobility. It's worth recounting some of the Productivity Commission's most important findings. The first is that inequality has barely budged in this country in the last 15 years. By international standards, Australia is in the middle of the pack compared to other developed nations. The picture is much the same over the previous 30 years, with inequality rising only slightly. Considering that the last three decades overlapped with substantial economic change and upheaval brought on by the dismantling of industry protection and the introduction of the market based reforms of the 1980s and 1990s, this ought to be regarded as a positive result.

The report is also explicit in confirming that the bounty of the last 27 years of uninterrupted growth has been shared among all Australians. It finds that the living standard for the average Australian in every income decile has improved. What's more, since the turn of the millennium, relative poverty—the number of Australians earning less than half the median wage—has actually decreased. Of course that doesn't mean we shouldn't act to help those who remain in relative poverty, but we should also be realistic about the numbers we're talking about. Notably, equality in Sweden, a nation that many in this place might hold out as a socialist utopia, has deteriorated sharply. The report also reaffirms the immutable truth that the biggest inequality in society is between those who have a job and those who are without. Indeed, whether a person has paid employment is the single biggest determinant of whether they are likely to be stuck at the bottom end of the mobility ladder in the long term.

This should serve as an overdue reminder that most of the preferred solutions that are touted by Labor, the unions and the Greens are misguided at best and counterproductive at worst. In terms of policymaking, the lesson here is clear: idealistic thought bubbles like imposing new restrictions on casual work or drastically lifting the minimum wage, fixing these things from afar, or even undoing penalty rate changes, which undercut rather than sharpen the incentive for employers to take on inexperienced workers, must be treated with caution. That's why, if you really do care about inequality, there are far more potent ways it can be addressed than to ponder the vagaries of interfering with family trusts or removing incentives for Australians on average incomes to have a go at an investment property or to try and build up a share portfolio to earn its dividends.

Cutting red tape burden on business and restoring balance to our industrial relations laws would do far more to extend opportunity to those who need it than using tax rises as a weapon of class warfare does. Doing away with the tax-free status on the multitude of business-like activities that the union movement involves itself in could be another good initiative.

Another of the Productivity Commission's crucial insights is that Australia's social safety net is working as intended. The commission says, 'Australia’s progressive tax and highly targeted transfer systems substantially reduce inequality,' thanks largely to the means-tested design of our social services system. The takeout is that, when Mr Shorten tells us we have a two-class tax system, he is being patently dishonest. If lifelong welfare dependency is what Labor is going to promote, the truth is we are going to run out of money.

Recent analysis by Robert Carling, former Treasury official and research fellow at the Centre for Independent Studies, has found that the bottom 60 per cent of households now receive more in benefits from government than they pay in tax. The Liberal and National parties have always believed that looking after those who cannot take care of themselves should be one of the first duties of government. But it seems that, when half of society is receiving more than they give in one of the wealthiest societies in the world, we are doing much more than meeting our duty to those who genuinely need help.

We need to treat with caution this policy from Labor. Rising inequality is something that they think, if they repeat the lie often enough, Australians will believe is true. But what it really is is divisive, and, in many ways, it's demeaning of the great country we're in—it's a privilege to live here—and the great people who work so hard to continue to forge it ahead.