The tangible impacts of the returned ALP Government on Australian business and markets have so far been muted, despite a commanding election win and an even friendlier Senate. Still, the ALP’s industrial relations changes from the first term are starting to filter through the economy and are having predictable effects on the business climate.
Most notable reports include, further reduced flexibility, further limiting of employers’ ability to pay based on employee output, and a concerning push to standardise wages across industries, particularly in lucrative sectors such as mining. How the Government intends to improve productivity while presiding over changes such as these is a mystery, however we may not need to wait very long for the next leg of major policy.
Behold the “productivity roundtable” that Treasurer Chalmers is planning for August. It is being billed as a forum for business, unions, and other stakeholders to present ideas to improve productivity, which the ALP, to its credit, have identified as a clear objective for their second term. For those not in the know, Australian living standards have barely moved in years, and the lack of productivity enhancement is the key driver of this trend.
The trouble is though, the last time the ALP held a summit like this in their first term, it was essentially a stich up of business and rubber-stamped industrial relations changes the unions already wanted, the very changes that are now further constraining productivity and harming the business investment climate, even more so than the already deeply problematic industrial relations system the current ALP inherited from the Coalition, and its previous versions of itself.
The noises from inside the Government reported by the media hint that this talkfest will centre around tax reform to drive productivity, with any changes to GST or industrial relations ruled out. So, basically the two most promising areas have already been ruled out, unsurprising in Australian political discourse. More specifically, indications have been made that the Government will seek to rejig the tax take a little away from income, something I am skeptical of, and more heavily onto other things. The goal for reforms being neutral or revenue positive for the Government’s coffers.
This is the issue, the ALP is a spending machine, even more so than the Coalition, and the path of least resistance is for them to spend ever more and just sail tax increases through a friendly left of centre Senate. The types of tax increases are easy to work out by ruling out what they cannot do.
Increasing income tax on the middle class and/or other major changes around the generous tax treatment of the family home are political suicide. Corporate tax is also a no-go as Australia already has one of the highest tax rates in the developed world at 30% and lowering this is certainly not on the “productivity” agenda. Therefore, the only options are increasing taxes on capital gains, additional levies on higher income brackets, and further tightening up of concessions on Superannuation. Perhaps other levies could also be increased, though taxes on tobacco, fuel and alcohol are already tapped out.
This is where my feeling of dread comes from, this August meeting of the minds is just another attempt to manufacture a mandate for what the ALP already needs and wants to do, and that it did not have the integrity to take to the election. That is, increase taxes to pay for its currently unsustainable spending commitments. The cynical theatre of wrapping this up in a disguise of productivity enhancement is a political masterclass in gaslighting the public.
I will reserve my final judgement for the aftermath; however, productivity will not be improved by jacking up taxes on investment capital, maintaining an uncompetitive corporate tax rate and industrial relations policy, then followed by pocketing all the tax increases needed for out-of-control social programs, instead of rolling it into tax relief to middle class salary earners.
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