- How Australia is advancing unfairly
- By John Hewson
- 16/06/2014 Make a Comment (1)
- Contributed by: BigJoe ( 26 articles in 2014 )
A relatively egalitarian society until the end of the 1970s, our nation as a land of equal opportunities for all is disappearing.
Inequality is a significant, worsening and global problem. The extremes are obscene.
For example: The Oxfam data provided to the recent Davos Conference namely that the richest 85 people on the globe - who between them could squeeze into a single double-decker bus - control as much wealth as the poorest half of the global population put together (3.5 billion people).
Or the Paul Krugman example, namely that the 25 highest-paid hedge fund managers in the US - all male - earned some US$21billion in 2013, that’s more than double the wages of all the kindergarten teachers in America combined.
From World War1, until about the end of the 1970s, Australia was a relatively egalitarian society, indeed, one of the most egalitarian in the world. This egalitarianism has been eroded quite dramatically ever since.
Our land of “the fair go” is disappearing.
As the report that I am launching today shows, the wealthiest 20 per cent of households now account for 61 per cent of total household net worth, whereas the poorest 20 per cent account for just 1 per cent of the total. In recent decades, the income share of the top 1 per cent has doubled, and the wealth share of the top 0.001 percent has tripled, and the share of the one-millionth richest (the top 0.0001 per cent) has quintupled.
Moreover, the inequality is worsening. Over the last decade, the richest 10 per cent have enjoyed almost half of the growth in incomes, and the richest 1 per cent has received 22 per cent of the gains.
At the same time, poverty is increasing, and many of those reliant on government benefits, including unemployment benefits, have fallen below the poverty line.
Most disturbingly, defining the poverty line as 50 per cent of median income suggests that some 575,000 (one child in six) were living in poverty in 2010. Some 37 per cent of those living on government benefits were living in poverty, including 52 per cent on Newstart allowance, 45 per cent of those on a parenting benefit, 42 per cent of those on a disability support pension, but only 14 per cent of those on an aged pension.
Greater inequality leads to greater stratification of the community, with adverse effects on trust, self-image, and equality of opportunity for disadvantaged groups, all of which, in turn, have negative effects on health and social stability. There is also mounting evidence that inequality impedes productivity and economic growth.
Power, money and resources are distributed unequally across our social hierarchy.
As researchers Sharon Friel and Richard Denniss have pointed out, this leads to unfairness and inequity in the immediate circumstances in which people are born, grow, live, work and age, including levels of pay and other conditions of work, access to quality health care, schools and education, social protection, the affordability of homes, and the nature of communities, cities or towns.
Clearly there are many factors at work here. The report identifies:
-globalisation in general, and the expansion of financial markets in particular
-asymmetric access to technological change
-the decline in union membership
-changes in compensation packages for top executives
-“rent seeking” behaviour, where wealthy, politically powerful and “privileged” companies, organisations and individuals use their position and resources to obtain economic gain at the expense of others without contributing to productivity.
By way of an aside, to add substance to this latter point, you could list big miners, big polluters, and even our big four banks, as examples. To expand on the Krugman example that I mentioned before, the hedge fund managers clearly don’t deliver high enough returns to justify their obscene fees, and they’re a major source of economic instability, indeed, they may represent a significant threat to the stability of the global financial system.
While our political leaders seem to wax on endlessly assuring us all that “we were created equal”, or promising “equality of opportunity”, “fairness”, “equity”, a “fair sharing of the burden of adjustment”, and the like, their policies of the last several decades have clearly compounded the problem.
Most conspicuously, tax cuts and tax expenditure concessions concentrated on the better off, especially those in superannuation, have led the way, combined with the failure to ensure that social security benefits kept pace with inflation, together with a host of other changes across many policy areas.
As the report says, to begin, there is an urgent need for a mature community debate about how inequality is impacting on our lives, our culture, our economy and our society.
The report lists nine other ways to advance Australia Fair:
1. Increase the fairness and adequacy of government revenue raising through taxation reforms
2. Implement fairer funding for schools
3. Invest nationally in early childhood development, especially for disadvantaged groups
4. Set all pensions and benefits no lower that the poverty line and index them to average wages
5. Establish more job creation programs in priority areas
6. Develop new models of employee management and cooperative ownership of business
7. Implement the World Health Organisation recommendations on social determinants of health
8. Encourage an inquiry by the Productivity Commission into the impact of inequality on economic efficiency and growth, and
9. Establish a national research program to monitor progress and test the impact of interventions aimed at reducing inequality
I might add another by suggesting that an inequality impact statement be an essential attachment for all major policy proposals to Cabinet.
However, we need to ask ourselves whether there is sufficient and widespread dissatisfaction with the status quo for significant, if not radical change, in distribution?
There is obviously a growing electoral awareness of the issue, and a growing constituency for change. The reaction to the recent Budget makes the point.
Even though the Abbott government was at pains to argue that “fixing the Budget” would be done by sharing the burden of adjustment, the electoral backlash was driven by the obvious inequity of the Budget measures proposed.
The Budget proposed a cut of some 12-15 per cent in the disposable income of key lower income groups, but less than 1 per cent for those on higher incomes.
Moreover, the government burnt much of its political capital for little gain in terms of “fixing the Budget”, especially when the unfunded challenges of meeting spending commitments still persist in the out years.
However, it is possible to achieve the desired changes in a more equitable way.
Consider some examples. Better targeting of the aged pension by means of reformed asset and income tests would have been more palatable if the pension had also been increased for those who genuinely qualify under the revamped tests, and if the superannuation tax concessions, which overtly favour the rich, had also been reduced, simultaneously.
Super concessions cost roughly the same as the aged pension, but are increasing faster. An example of a conspicuous benefit to the rich is the concessional tax on contributions, such that it costs a person on an annual income of $20,000 about $118 to gain a $100 benefit, while it only costs a person on an annual income of $250,000 a mere $62.50 for the same benefit.
A surcharge on the super contributions by the upper income groups would have raised a considerable sum and ensured considerably more equity in the Budget’s treatment of the aged.
In a similar vein, the decision to give universities the capacity to charge course fees would have been more defensible if the government had decided to simultaneously shift overall funding from the universities to students by way of a voucher, thereby enpowering the students to select courses and so driving the universities to compete in terms of both quality and price of the courses offered, only being funded if they are successful in attracting students.
Finally, it is hard to defend the government’s decision to maintain the FBT benefits on cars, again a decision that favours the wealthy, when the previous government was prepared to knock it off, when the government has made a stand against further support for the car industry, and when it would have raised some $1.8 billion.
The Abbott government promised us no surprises but it would be good to have the surprise that they plan to return us to the "land of the fair go."
Dr John Hewson is a professorial Fellow at the Crawford School of Public Policy at ANU and a former leader of the Liberal Party. This is an edited version of his speech delivered at the launch of “Advance Australia fair? What to do about inequality in Australia", a report by Australia21 and the Australia Institute.
Inequality is a significant, worsening and global problem. The extremes are obscene.
For example: The Oxfam data provided to the recent Davos Conference namely that the richest 85 people on the globe - who between them could squeeze into a single double-decker bus - control as much wealth as the poorest half of the global population put together (3.5 billion people).
Or the Paul Krugman example, namely that the 25 highest-paid hedge fund managers in the US - all male - earned some US$21billion in 2013, that’s more than double the wages of all the kindergarten teachers in America combined.
From World War1, until about the end of the 1970s, Australia was a relatively egalitarian society, indeed, one of the most egalitarian in the world. This egalitarianism has been eroded quite dramatically ever since.
Our land of “the fair go” is disappearing.
As the report that I am launching today shows, the wealthiest 20 per cent of households now account for 61 per cent of total household net worth, whereas the poorest 20 per cent account for just 1 per cent of the total. In recent decades, the income share of the top 1 per cent has doubled, and the wealth share of the top 0.001 percent has tripled, and the share of the one-millionth richest (the top 0.0001 per cent) has quintupled.
Moreover, the inequality is worsening. Over the last decade, the richest 10 per cent have enjoyed almost half of the growth in incomes, and the richest 1 per cent has received 22 per cent of the gains.
At the same time, poverty is increasing, and many of those reliant on government benefits, including unemployment benefits, have fallen below the poverty line.
Most disturbingly, defining the poverty line as 50 per cent of median income suggests that some 575,000 (one child in six) were living in poverty in 2010. Some 37 per cent of those living on government benefits were living in poverty, including 52 per cent on Newstart allowance, 45 per cent of those on a parenting benefit, 42 per cent of those on a disability support pension, but only 14 per cent of those on an aged pension.
Greater inequality leads to greater stratification of the community, with adverse effects on trust, self-image, and equality of opportunity for disadvantaged groups, all of which, in turn, have negative effects on health and social stability. There is also mounting evidence that inequality impedes productivity and economic growth.
Power, money and resources are distributed unequally across our social hierarchy.
As researchers Sharon Friel and Richard Denniss have pointed out, this leads to unfairness and inequity in the immediate circumstances in which people are born, grow, live, work and age, including levels of pay and other conditions of work, access to quality health care, schools and education, social protection, the affordability of homes, and the nature of communities, cities or towns.
Clearly there are many factors at work here. The report identifies:
-globalisation in general, and the expansion of financial markets in particular
-asymmetric access to technological change
-the decline in union membership
-changes in compensation packages for top executives
-“rent seeking” behaviour, where wealthy, politically powerful and “privileged” companies, organisations and individuals use their position and resources to obtain economic gain at the expense of others without contributing to productivity.
By way of an aside, to add substance to this latter point, you could list big miners, big polluters, and even our big four banks, as examples. To expand on the Krugman example that I mentioned before, the hedge fund managers clearly don’t deliver high enough returns to justify their obscene fees, and they’re a major source of economic instability, indeed, they may represent a significant threat to the stability of the global financial system.
While our political leaders seem to wax on endlessly assuring us all that “we were created equal”, or promising “equality of opportunity”, “fairness”, “equity”, a “fair sharing of the burden of adjustment”, and the like, their policies of the last several decades have clearly compounded the problem.
Most conspicuously, tax cuts and tax expenditure concessions concentrated on the better off, especially those in superannuation, have led the way, combined with the failure to ensure that social security benefits kept pace with inflation, together with a host of other changes across many policy areas.
As the report says, to begin, there is an urgent need for a mature community debate about how inequality is impacting on our lives, our culture, our economy and our society.
The report lists nine other ways to advance Australia Fair:
1. Increase the fairness and adequacy of government revenue raising through taxation reforms
2. Implement fairer funding for schools
3. Invest nationally in early childhood development, especially for disadvantaged groups
4. Set all pensions and benefits no lower that the poverty line and index them to average wages
5. Establish more job creation programs in priority areas
6. Develop new models of employee management and cooperative ownership of business
7. Implement the World Health Organisation recommendations on social determinants of health
8. Encourage an inquiry by the Productivity Commission into the impact of inequality on economic efficiency and growth, and
9. Establish a national research program to monitor progress and test the impact of interventions aimed at reducing inequality
I might add another by suggesting that an inequality impact statement be an essential attachment for all major policy proposals to Cabinet.
However, we need to ask ourselves whether there is sufficient and widespread dissatisfaction with the status quo for significant, if not radical change, in distribution?
There is obviously a growing electoral awareness of the issue, and a growing constituency for change. The reaction to the recent Budget makes the point.
Even though the Abbott government was at pains to argue that “fixing the Budget” would be done by sharing the burden of adjustment, the electoral backlash was driven by the obvious inequity of the Budget measures proposed.
The Budget proposed a cut of some 12-15 per cent in the disposable income of key lower income groups, but less than 1 per cent for those on higher incomes.
Moreover, the government burnt much of its political capital for little gain in terms of “fixing the Budget”, especially when the unfunded challenges of meeting spending commitments still persist in the out years.
However, it is possible to achieve the desired changes in a more equitable way.
Consider some examples. Better targeting of the aged pension by means of reformed asset and income tests would have been more palatable if the pension had also been increased for those who genuinely qualify under the revamped tests, and if the superannuation tax concessions, which overtly favour the rich, had also been reduced, simultaneously.
Super concessions cost roughly the same as the aged pension, but are increasing faster. An example of a conspicuous benefit to the rich is the concessional tax on contributions, such that it costs a person on an annual income of $20,000 about $118 to gain a $100 benefit, while it only costs a person on an annual income of $250,000 a mere $62.50 for the same benefit.
A surcharge on the super contributions by the upper income groups would have raised a considerable sum and ensured considerably more equity in the Budget’s treatment of the aged.
In a similar vein, the decision to give universities the capacity to charge course fees would have been more defensible if the government had decided to simultaneously shift overall funding from the universities to students by way of a voucher, thereby enpowering the students to select courses and so driving the universities to compete in terms of both quality and price of the courses offered, only being funded if they are successful in attracting students.
Finally, it is hard to defend the government’s decision to maintain the FBT benefits on cars, again a decision that favours the wealthy, when the previous government was prepared to knock it off, when the government has made a stand against further support for the car industry, and when it would have raised some $1.8 billion.
The Abbott government promised us no surprises but it would be good to have the surprise that they plan to return us to the "land of the fair go."
Dr John Hewson is a professorial Fellow at the Crawford School of Public Policy at ANU and a former leader of the Liberal Party. This is an edited version of his speech delivered at the launch of “Advance Australia fair? What to do about inequality in Australia", a report by Australia21 and the Australia Institute.
Source: https://www.smh.com.au/comment/how-australia-is-advancing-unfairly-20140616-zs96x.html
Look we understand you trying to soften the blow for Tony and the libs John, by providing some balance and better alternatives, but if the libs were really united smart thinkers with a heart, all this would have been worked through before the budget.
Nope.. you've all fucked up!!!
As has already been mentioned on this site, Social Incentive Investment Schemes are what's needed for our public infrastructure, providing both service and investment, and peace of mind and security for the people.
We need creative lateral thinkers with brains and heart, not left brain political loonies.
Besides the obvious power brokers, who on earth is pulling Tony's strings with all these draconian measures? Perhaps you can help us out with that sort of insider info John instead of all the other first year journo stuff that you've regurgitated.
People should stop paying taxes which only pays off the debt we owe to rich people...bloody absurd. Where are our transparent profit/loss and balance sheets for Australia John and Tony?
People should start up their own businesses wherever possible and stop paying taxes.
People should stop pouring money into any corporation that does not true value.
Corporations only understand markets and money - hence take both away.
People have the power,,,boy I'm sure I've heard this before.
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