Higher taxes, higher spending all part of Turnbull government’s plan to look after the wealthy.

joko and malco

‘This government will deliver Australia’s economic future because only a Coalition government can. As Liberals and Nationals, sound economic management is in our DNA. We’ve done it before and we are doing it again.’

Tony Abbott National Press Club address 2 February 2015.

Every LNP government and its wealth-struck PM loves to brag endlessly that it is a ‘better economic manager’ which will always keep taxes lower than any Labor mob. Conservatives are born with an auditor’s pen in their mouths. They brag shamelessly about their mythic fiscal genius, or their capacity to make the nation’s fortune as they have single-handedly made their own. They venerate the wealthy and love to boast about ‘truly understanding business and finance’ and how it is in politics and life you take your chances and you talk them up.

Now with two legs of its race over and a late change of rider the Coalition is talking up its prospects of victory over the full distance, hinting at a ‘full term’ election, meaning one as late as possible next year. Suited by the longer journey, but with a novice jockey in the saddle the coalition is, nevertheless, daily, positively ‘Turnbullish’ about its prospects of victory.

The innovative and agile Mr Turnbull used the B word on Thursday to suck up to the Indonesian President, Joko Widodo. As former businessmen, they understand business. The economy, meanwhile, goes to the dogs. It doesn’t help that both Joko and Malcolm are essentially weak men, beholden to more powerful invisible, conservative factions. Even less helpful is our practice of dumping refugees on Indonesia in terms of providing a good foundation for renewing mutual trust and goodwill.

Foreign Minister Marsudi has been blunt, saying only that ‘Australia knows what its obligations are under the Refugee Convention’. She means that she doesn’t like the way we break them. Each party is determined, nevertheless, to get on famously with a trade relationship that is really quite insignificant in the wider scheme of the economies of either nation.

It pays to advertise, of course. You can’t fault self-promotion either. Like self-interest, at least you know it’s real. Yet increasingly, it seems, the nation is less accepting of LNP neo-conmen. A recent Essential Research polls, for example, shows that Australians are at last starting to challenge the myth after generations of torpid acceptance of deception. Disillusionment seems to be the one big legacy of Abbott and Hockey’s economic cocking-up.

Australians are not alone in their history of blind faith and misplaced confidence in conservatives, however. A naïve trust in the Tories to look after the money extends across the western world, despite all evidence showing that what Tories do best is look after their own money. Assiduously. Self-promotion and Tory self-congratulation come second equal.

The Coalition’s hoax was going to be exposed sooner or later. Reality can do that. Let it continue to claim ‘a mandate’ for ‘tax reform’ or ‘budget repair’ just because it won the last election. Everyone knows Labor made itself unelectable, with a bit of help from Rupert and the boys at the IPA. Coalition claims reflect no more than its own superiority complex and its fetishising of the economy. OK, also throw in for good measure, the LNP’s s compulsion for confecting history and its addiction to bluff and bluster or simply making stuff up.

Smirking is in LNP’s genes. Despite their assertions, which feature Peter Costello’s conceit that handling the economy is like driving a finely calibrated race car, the LNP in government has a cruder track record of high taxing and high spending with some very poor performances. As Costello himself told his former PM’s biographers, ‘the Howard treasurership was not a success in terms of interest rates and inflation’. Interest rates, in fact, reached a peak of 21% while inflation peaked at 12.5%. Yet you won’t find these achievements venerated by the Liberal National Party spin machine.

Propaganda, aside, the LNP’s actual historical record is dismal. When the times were good, it spent like a drunken sailor letting the good times roll with no thought of tomorrow.  PM John Howard had the good fortune to come to office at the same time as the resources boom yet he lacked the good sense to plan for its inevitable decline. Now the Abbott/Turnbull government faces terms of trade which are down 30%; reflecting revenue from resources which is down 50% from its peak in 2011.

John Howard was also spoilt by much lower household debt. Today high real estate prices have helped to push Australia’s household indebtedness to a whopping 134% of GDP; the highest in the world. Let LNP dries and diehards prattle all they like about cuts to services or as they call it ‘Budget repair’. Let them busy themselves preparing to levy higher taxes on every householder or as they call it ‘tax reform’.  Today there is a lot less to squeeze out of the old tea bag.

Howard and Costello sold off the farm to pay off debt. It was not cutting spending and raising taxes which enabled them to achieve a surplus, they sold government assets. Between 1996 and 2007, these sales brought in $72 billion which not only ‘paid down the debt’ as Costello liked to gloat, it wiped it out entirely with $16 billion left over.

Flooded by corporate tax income from the mining boom and the proceeds of government asset sales, Costello risked being awash with money. In the end the treasurer set up his Future Fund which absorbed some of the nation’s embarrassing excess liquidity. Ultimately it would fund public servants’ superannuation and of course provide Costello with ongoing employment post retirement from politics. Further bragging rights were guaranteed in taking credit for the performance of the blue chip fund, although New Zealand’s has done better. How the world has changed.

So far, however, the changed realities have not produced any adaptive behaviour even from the new, ‘agile and innovative 21st century’ Turnbull government. Blind panic and denial seize LNP politicians and advisers. Unable to make any adaptive changes to a new set of external realities, they retreat into their rhetoric. What better to crawl into than the old, now internationally discredited, basket trap of austerity measures?

Cut, cut, cut. Tax, tax, tax.  Does it work? Look at Greece. The key demonstrable effects of austerity measures are to depress economic activity and to help induce recession, yet this is where the Liberal brain is hard-wired. Cutting is an automatic reflex.  Like raising taxes.

Nowhere is this better seen than in Credlin, Abbott and Hockey’s autocratic decision to ‘defund’ schools and hospitals $80 billion over ten years in the May 2014 budget without notice or any pretence at consultation even within cabinet. Hardest hit will be pensioners, concession card holders and disability support pension recipients, who will be expected to pay more to access health care.

Every government job cut, moreover, cuts off the flow on. While 11000 public servants found themselves unemployed last year in the biggest annual reduction since the 1990s, their spending power was also taken out of the economy, spreading the suffering even wider.

Bugger the need to define the problem, it is time, Abbott and Hockey said, for ‘a national conversation about tax reform’, although what they had set their sights on was simply raising the GST. With the GST, it can be pretended that it is really the states who are adding thousands to the average Australian’s expenses in running a household. The Liberals love collecting any tax but my, how they love to collect from the poor!

John Howard presided over the highest taxing government in Australia’s history. In 2004-05 and 2005-06, the tax to GDP ratio reached a record high 24.2 per cent. Howard is the only PM ever to take the tax to GDP ratio over 23.5 per cent. He achieved this on seven different occasions.  Conversely, the only government to keep the ratio under 22% has been Labor, an achievement it repeated no fewer than ten times.

The record shows that the Coalition has been a high-taxing big spending government, especially under Tony Abbott’s mentor and predecessor, Howard, the ‘man of steel’ who duped us while he squandered three billion over eight years in a war to destroy Iraq’s fictional WMD; the PM whose ‘WorkChoices’ aimed to lower wages by individualising employment relations and thereby marginalise trade unions and industrial tribunals.

Howard’s mean and tricky regime was as fast and loose with the truth as his protégé, Abbott. He created the ‘babies over-board’ crisis to manipulate popular sentiment against asylum seekers. He set back race relations and the pursuit of an egalitarian society with his inability to apologise to indigenous people, claiming there ‘was nothing to say sorry for’. Costly as these failings have proved, however, they should not distract us from his profligacy. Howard was the last of the big spenders, whose public purse-strings were, indeed, ‘relaxed and comfortable’.

In 2008, an Australian Treasury study found that real government spending grew faster in the final four years of the Howard government than in any four-year period since the 1990s recession. In 2013 The IMF found that the most profligate government in Australia in a hundred years was the Howard Government.

Financial prudence is also missing from the historical ledger. John Howard squandered the proceeds of the mining boom buying votes for his singularly underwhelming, underperforming government, a government that languished for eleven years and nine months without creating one major economic initiative. Rather than quarantine the economy from the mining bubble, Howard used the proceeds to deliver personal income tax cuts.

Continuing its run of outs, in 2013 the coalition government with ‘economic management in its DNA’, elected Tony Abbott as PM, a politician who professed no real interest in economics and who showed even less understanding. Nevertheless all hands on deck stood by and watched as he arbitrarily cut funds to the states for health and education in his first Budget. His ‘captain’s call’ ensured funds were abruptly cut with no consultation and with no plan for alternative funding.

Now, while bad captain Abbott has been ditched overboard and the LNP is trialling the Great Gatsby as PM, it has done nothing to fix the economic mess it has created in its first two years. Huge stresses placed on the health system are resulting in major hospitals in Victoria for example unable to pay their bills. They must rely instead on Health department letters of guarantee to continue to operate on credit.

Internationally also, the coalition’s claims to economic wizardry are wearing embarrassingly thin. Joe Hockey’s Brisbane action plan was going to get world leaders to achieve growth of 2.1% just by pledging to do so.  It is not happening. The ‘global infrastructure hub’ he promoted as a peer pressure type of solution to low growth is also looking like a con job. After one year it is no more than a website and a business plan.

Conservatives love to lecture us on how the national economy is like a household budget, a comparison, akin to saying that an ATM is like a slot machine because you can put money into both.  Yet even according to their own set of precepts, they seem to have forgotten the duty of government to pay its bills.

What could have caused this public health oversight? Apart from hating Medicare and apart from wanting to push state premiers into agreeing to a hike in the GST, the LNP has been preoccupied with its main mission, the need to ensure that those with money are given every possible advantage to make more.

Now the Abbott government made the right noises at election time. It promised a return to budget surplus, cutting government debt and having a pro-business strategy in its economic policy management. None of these have been kept but there is still a slim chance that it may under Turnbull at least pass a law to allow big business to hide. Surely that counts.

Hiding your balance sheet helps you avoid tax and even the ATO has been keen for big businesses to reveal their financial dealings. It would boost tax revenue. In 2013, the ATO claimed that disclosure by companies with revenue of more than $100 million would ‘discourage large corporate tax entities from engaging in aggressive tax avoidance practices’.

The coalition, however, does not want to embarrass its wealthy mates, whatever it says about its love of tax reform, a phrase which is code for getting low income earners to pay more tax. Hence its beaut new law which it calls ‘Better Targeting the Income Tax Transparency Laws’.

Even as bills go it’s not much of a title but it beats ‘A law to help the rich pay less tax’. For this is what it is. It would come to the aid of up to 1000 of Australia’s biggest privately owned companies, including charity cases, James Packer, Gina Rinehart, Lindsay Fox and 7-Eleven owner Russ Withers, all of whom are in dire need of special extra help from Treasury just to buy their next cup of instant noodles. 

Lobby groups can take the uncertainty and the democracy out of Australian politics and the rich can be very resourceful when it comes to keeping what they have. Enter The Family Office Institute Australia. This lobby group impressed the socks off the Senate Committee.

The Family Office’s submission was quoted all over a Senate report which, incredibly, recommended the government shield privately owned companies with income over $100 million from increased transparency. You never know, you could be kidnapped if people knew how rich you were, explained former apprentice Treasurer Josh Frydenberg to the party room. Yet the Family Office institute has no members. Still it represents what the LNP wants to hear.

Joe always said he had a plan and it was working but he could never tell us what it was. Turnbull also has a plan even if his treasurer Scott Morrison can do nothing but rule nothing in or out. Make no mistake, he will cut taxes and impose a GST if he possibly can. You don’t need to explain your plan if you are an LNP government. Nor do you need a new one, despite your crafty posing and your pseudo concern for fairness. In the end it’s always the same plan.

For all its fetishising on increasing GST, and its obsession with ‘tax reform’ the Coalition will continue the LNP tradition of being a big taxing, big spending government which will do whatever it can to protect the top end of town at the expense of the average worker, the elderly, the poor and all other vulnerable members of society. It’s in their DNA.

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