While the Coalition needs some common sense help from Australian Conservatives' Senators to get it closer to its core values, Bill Shorten's Labor policies are plain reckless.
Today's Weekend Australian reports, Labor is essentially on a unity ticket with the Coalition with both parties committed to sustaining a rate of population growth based on high rates of immigration. The Australian Conservatives want immigration rates halved and serious reform of our rorted visa and immigration systems.
Another area where it’s a case of two peas in a pod is the trashing of the principles of federation, leading to total confusion about the roles and responsibilities of state and territory governments and the federal government. There isn’t a significant policy area now in which the federal government plays no or little role.
Think schools, hospitals, disability services, energy, urban transport, sporting facilities, and the list goes on. In terms of funding and regulation, the federal government is involved in many areas in which it traditionally had no role at all apart from providing untied funding.
If anything, a Labor federal government would seek to intrude even further into the roles undertaken by state and territory governments. Labor’s pitch outlining more money for health and schools, for example, involves further restricting the autonomy of state and territory governments to deliver services, with an associated loss of efficiency and higher compliance costs.
Here are the specific risks that a future Labor government would create, for individuals and to the economy:
At the broadest level, Labor is proposing to raise an estimated additional $200 billion in taxes by hitting investors and savers, business owners, retirees and high-income earners while also pledging to spend more on health, education and other government services.
This is radical stuff. Notwithstanding the additional tax burden — the tax-to-GDP ratio could rise by up to two percentage points — Labor naively believes the economy will not suffer and its revenue projections will be met. Evidently, incentives don’t matter in the mind of Chris Bowen, Labor’s Treasury spokesman.
Investment, business formation, risk-taking and hard work will continue on as if nothing has changed, and the additional revenue can be redistributed to Labor’s favourite groups. There is a very large element of wishful thinking to this strategy. It’s worth looking at the detail of some of Labor’s policy proposals to assess some specific risks.
For example, the timing of the elimination of negative gearing save for new residential real estate now looks particularly threatening in light of recent sharp falls in house prices. Let’s not overlook the reality of real estate investment. The vast majority of investors — about one million — own only one property. There are about 15,000 who own five properties and another 15,000 who own six or more. In other words, these multiple property owners are outliers and should not be used as the basis for changing policy.
Also bear this in mind — 40 per cent of investment properties are positively geared, with the positively geared ones disproportionately held by multiple property owners. The group that has most to fear from Labor is the nurse, ambo, tradie or teacher who might purchase just one property.
Consider also Labor’s extreme pledge to reduce carbon dioxide emissions by 45 per cent by 2030. This compares with the Coalition’s promise to cut them by between 26 per cent and 28 per cent.
Mark Butler, Labor’s energy and climate change spokesman, has released some of the details of the measures that will be implemented to achieve Labor’s target, although it is still unclear how the target can be met. The refusal by Labor to use the so-called Kyoto carry-over — Australia’s overachievement of a previous international climate agreement — makes the target even harder to achieve.
The short of it is that such a high target must mean higher electricity and transport prices, slower economic growth, loss of jobs and falling real wages.
According to modelling undertaken by Brian Fisher, the estimates of the economic damage include cumulative economic losses of $472 billion by 2030, 336,000 fewer jobs and eight per cent lower real wages.
It’s simply naive to think that meeting such a high target of 45 per cent won’t be associated with economic costs and dislocation.
There are other risks a future Labor government would generate — think of the utopian idea of a living wage and the return to 1970s-style industrial relations.
But if you are in one of Labor’s favoured groups, to be bestowed with the gift of some of the redistributed income, your response might be: bring on a Labor government as quickly as possible. However, the larger risk is that economic conditions will deteriorate as a result of the much higher tax take and unemployment could rise, possibly sharply. This is a damaging outcome that affects nearly everyone but particularly young Australians.
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