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Peter Martin
May 14, 2012

"His choice will always be to look after his vested interests" ... Treasurer Wayne Swan said, of Tony Abbott. 

“His choice will always be to look after his vested interests” … Treasurer Wayne Swan said, of Tony Abbott. Photo: Penny Bradfield

THE Treasurer, Wayne Swan, will embrace the rhetoric of class warfare today as he defends his budget, accusing its opponents of wanting to keep Australia’s wealth in the hands of a fortunate few.

”We simply cannot claim to be a prosperous nation until all Australians can access the opportunities ahead of us – that’s what this budget was really about,” he will tell the Australian Council of Social Service in Melbourne.

”Of course, the usual suspects will call this class warfare … That’s fine, I am delighted we are having this debate. It is a debate about what kind of country we want to be – a country that capitulates to the demands of the vested interests and allows benefits to amass disproportionately to very few, or a country where we stand up for the fair go.”

Praising the council as an ”important counterweight to powerful vested interests”, he will say his fifth budget delivers on the values for which he has fought throughout his working life.

”A strong economy and disciplined fiscal policy is vital if you are going to build a fair community and support the most vulnerable. But without social mobility, you don’t allow people to achieve their potential. You sell the economy short.

”When Tony Abbott accuses us of class warfare for providing people with an opportunity to participate in the boom and for helping our most vulnerable, he is really saying that his only vision for growth is increased inequality.

”His choice will always be to look after his vested interests by making people frightened of change, and to equate the status quo with economic responsibility. In contrast, our choice will always be to tackle the big social and economic reforms that will build a better future for all Australians.”

Last week Mr Abbott attacked the budget’s schoolchildren bonus, saying people would ”blow it on the pokies”.

Yesterday the shadow treasurer, Joe Hockey, backed him up.

”What he said was, if you are handing out taxpayers’ money, there needs to be accountability,” Mr Hockey said. ”He is absolutely right, accountability is essential.

”The government imposed a $1.8 billion flood levy at the beginning of the year, saying they didn’t have enough money to pay for the Queensland floods. Towards the end of the same year they are handing out cash to people, no strings attached. It’s not good public policy and we will not support bad policy.”

In its final year in government, the Coalition delivered bonuses to pensioners, self-funded retirees, veterans and people with disabilities.

Mr Swan will say today his ”Spreading the Benefits of the Boom” package will benefit more than 1 million families. By delivering the schoolchildren’s bonus automatically, rather than upon the presentation of receipts, the budget will make sure nobody misses out.

Mr Swan will be tackled at the lunch about his decision to pay a Newstart bonus of just $4 a week rather than the increase of $50 a week demanded by a broad range of business and welfare organisations.

He will describe the measure as “providing a little more for our most needy”.

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May 11, 2012Opinion

Coal Loader working at Newcastle depositing mountains of coal from mining to be shipped overseas.Fair share … “The mining tax will add about $3billion a year to the budget bottom line. This helps, but miners will still be paying slightly less than their share.” Photo: Phil Hearne

This week’s budget contains some important myth-busting about Australia’s mining boom, the biggest since the gold rush days. It contains some extraordinary numbers.

Did you know, for example, that the resource sector has an investment pipeline of $450 billion in the coming years? That’s about a third of the total value of Australia’s entire annual economic output.

And while mining accounts for just 9 per cent of economic output, Treasury puts the combined output of mining and mining-related sectors at between 15 and 20 per cent. And get this: this resource and resource-related part of the economy is forecast to grow an average of nearly 9 per cent a year over the next two years. To put that in context, that is faster than Treasury’s growth forecast for the booming Chinese economy, which is 8 per cent.

By contrast, the rest of the economy is expected to grow at a below-trend rate of just 2 per cent. Not a recession, mind you, but on par with growth forecasts for the US economy. One foot in the furnace and one foot in an ice-bucket, as economists have observed.

The Gillard government has sold this budget as ”spreading the benefits of the boom”, but it’s fair to say most Australians’ understanding of the boom is pretty shaky.

For starters, most of us, about 85 per cent of the population, live in coastal cities far away from mining pits. The mining boom, to us, is largely invisible.

Meanwhile, the public slanging match between miners and the government has led to a proliferation of misunderstanding about the contribution of mining to the economy.

On the one hand, miners complain they already pay a disproportionate amount of tax. On the other, critics worry that the benefits of the boom are not enough to outweigh the negative impact of the higher Australian dollar on other sectors of the economy, like manufacturing and tourism.

Whom to believe? Neither, according to Treasury. Let’s start with the miners first.

Myth No. 1: Mining companies pay too much tax.

Last month, the mining industry printed ads complaining it pays 500 per cent more taxes and royalties than 10 years ago. But Treasury counters by noting that over the past decade, the mining sector still paid less company tax, as a proportion of its profits, than other sectors of the economy.

While miners paid about 16 per cent of their profits (”gross operating surplus” in economist lingo) in company tax, the finance sector stumped up tax of about 40 per cent of profits. The average of all sectors was close to 20 per cent.

Over the past decade, the mining sector has come to generate a higher proportion of total profits.

The mining sector’s share of profits has risen from 16 per cent in 2002-03 to 29 per cent in 2011-12.

This has been accompanied by a massive investment boom in machines, equipment and buildings. This has meant that mining companies have been able to reduce their taxable income by claiming tax deductions for the depreciating value of that equipment. This has reduced the amount of tax they pay.

Budget papers show that while miners now generate about 30 per cent of company profits, they contribute only 15 per cent of the company tax take. The mining tax will add about $3 billion a year to the budget bottom line. This helps, but miners will still be paying slightly less than their share.

Australians are, however, benefiting in other ways from the boom, which brings us to …

Myth No. 2: The benefits of the boom are confined to the mining sector, while the rest of the economy is harmed by a higher dollar.

First, it is true that the mining sector directly employs only 2 per cent of the workforce. But a range of other industries also benefit.

For instance, mining activity leads to jobs in the construction of mines, plants, roads and rail infrastructure. The mining industry accounted for 60 per cent of investment in new buildings and other structures over the past year, up from 29 per cent at the start of the mining boom in about 2003.

Parts of manufacturing benefit too – particularly the manufacture of mining machinery and equipment. Jobs in research and development and exploration have also been created, as have jobs in transport, the finance and insurance services sectors, and the professional, scientific and technical sector.

Indirectly, the mining boom has helped to support retail jobs in some parts of the economy. Retail sales in Western Australia have grown 6.4 per cent a year since the start of the boom, compared with 4 per cent in Australia.

The rise of ”fly-in, fly-out” work, which now accounts for half of WA’s mineral and energy sector workforce, has also helped to directly spread income from the boom to many other parts of the country.

Indirectly, the higher dollar has made imports cheaper for consumers. According to Treasury, the price of goods, including manufactured goods and food, have grown just 0.6 per cent a year since the start of the boom, while household incomes have, on average, grown by about 7.2 per cent a year. Much of this spare income has been spent on services, boosting service sector jobs.

As yesterday’s jobs figures show, Australia’s unemployment rate remains at near historic lows.

This boom is not all gloom. And miners can afford to share a little more of the sunshine.

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We are witnessing the emergence of a new working poor

Brian Howe April 20, 2012

The divide between blue and white-collar workers has become much uglier.

THERE is a new divide in the Australian workforce. It is no longer between the blue-collar and white-collar worker, but between those in the “core” of the workforce and those on the “periphery”. Those in the core are likely to be in full-time employment, either permanently within organisations, in management positions, or possessing skills for which there is steady demand and for which they can charge a premium. They are likely to have sick leave, paid holidays and in many cases parental leave above the government’s minimum standard. For them, flexibility means the chance to work in a variety of industries, to work overseas, to earn good money freelancing or in a secure part-time arrangement. Periods of unemployment are likely to be short or voluntary.

Those on the periphery are employed on various insecure arrangements – casual, contract or through labour hire companies, on low wages and with no benefits. Many do not know what hours they will work from week to week, and often juggle multiple jobs to attempt to earn what they need. Their skills are low, or outdated, and they are not offered training through work. They shift between periods of unemployment and underemployment that destroy their ability to save money. Their work is not a “career”; it is a series of unrelated temporary positions that they need to pay rent, bills and food.

For them, flexibility is not knowing when and where they will work, facing the risk of being laid off with no warning, and being required to fit family responsibilities around unpredictable periods of work. For many, life on the periphery is not a temporary situation; there is no pathway into the core. For the past six months I have been the chair of an inquiry, commissioned by the ACTU, into the phenomenon of insecure work. In hundreds of submissions, and during hearings around the country, we have come across a multitude of stories from people on the periphery.

Although 40 per cent of Australian workers are in insecure work, this is a development of the Australian economy that has avoided proper examination for too long. For people in their late 20s, with children and mortgages and no time to retrain; or older men in their 50s who have lost full-time work, this is their permanent position. Increasing numbers of workers are engaged in unpredictable, uncertain work that undermines their security.

Others fear that the loss of a good secure job will push them into the world of insecure work they see around them. This uncertainty makes people more sensitive to rises in interest rates, power bills and petrol prices. For the first time in our history since Federation, Australia is seeing the development of a working poor. As long as we can retain our relatively high minimum wages and public health system, we will not see the extremes of poverty of the United States, but we will see a society with families where one or both parents work, but who are unable to save or own a home, and remain vulnerable to the slightest financial crisis.

What this means for social mobility and social cohesion is the great unknown, and a subject that is only obliquely referred to in political debate. This is particularly the case when combined with a growing number of inter-generational jobless households. The economic changes of the past two decades cannot be unwound. But the unforeseen consequences of insecure work must be addressed to continue to produce jobs that will preserve the Australian social contract that has provided a decent welfare safety net, and a chance at social mobility, for generations of citizens and migrants.

Changes are needed not only to our employment and labour laws, but to the role of government and the social security and tax transfer systems, to education, training and labour market transitions and, yes, to our trade unions. We are witnessing the emergence of a new working poor

Brian Howe April 20, 2012

Brian Howe is a former deputy prime minister of Australia.

 This is an edited extract of a speech he gave to the National Press Club on Wednesday.

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A potential game-changer for the government

March 18, 2011
Thumbnail image for video asset. 
Carbon tax to help cut household taxes?

Professor Ross Garnaut says that a portion of the carbon tax revenue should used to reduce taxes for and middle-income households

Tony Abbott has been rehearsing for an election campaign in which he is the champion of the stretched household budget and the working man’s job, the guy who promises to repeal a great big new carbon tax. But a campaign where he can’t afford to match a personal income tax cut for most struggling families would be something else altogether.

Professor Ross Garnaut’s suggestion that the government link its floundering climate change reform with the Henry review’s proposed personal tax reform, shelved before the last election when things were getting a bit on top of them, could recast everything.

That’s why the government is considering it very seriously indeed. Julia Gillard and Greg Combet are working hard to claw back the early advantage Tony Abbott has gained with his blitz of radio interviews and visits to regional centres.

Garnaut insisted the Coalition’s Direct Action plan would be more expensive for households and less efficient in reducing emissions, a throw-back to Soviet-era central planning. He said this was in no way partisan because he (the professor) had been advocating free markets back when the Coalition had also believed in them and it was the Coalition that had changed its mind.

The intellectual antecedents of his policy have not mattered a jot to the Opposition Leader, who every day raises the spectre of what the tax could cost an industry or a family if there was no compensation at all, even though he knows generous compensation will be coming.

But it is difficult for the government to make the case that its scheme is comparatively less scary without details of exactly what it would cost and what the compensation would be.

Loy Yang Power Station in the Latrobe Valley, Victoria.

Loy Yang Power Station in the Latrobe Valley, Victoria. Photo: Paul Jones

And, given the complexity of the policy and the difficulty of funnelling every decision through the multi-party committee, we are unlikely to see those for some time.

The Garnaut report only starts to fill the information vacuum that has allowed the Coalition scare campaign to thrive. It concedes the government is going to have to offer generous industry compensation, at least in the short-term. It lays the groundwork for any petrol price increase to be delayed.

It will be influential, but it is not policy. That means a sensible debate comparing the cost of two schemes designed to meet exactly the same emissions reduction goal is still a way off.

Huh, a misleading heading. Annoying.

Anyway, looks like this will be a rerun of the GST debate, with two issues being sorted out simultaneously.

(1) Do we have the scheme at all? The Coalition currently says no, along with ACCI, predictably. It will be interesting to see how long the Coalition will be able to continue its Policy-free, Say-No-to-All-Change Policy. The Greens and Labor are now on the same page, arguing for a hybrid scheme: carbon tax now, emissions trading scheme later. The scheme is set for a right/left debate, with the middle ground of Australian politics deciding the issue. The ALP, once it has neutralised the short-run dissapproval of Rudd’s backdown and Gillard’s promise not to do it, will at least be able to count on a greater share of the youth vote, and the dissaffected middle-class urban vote that drifted to the Greens after Rudd’s withdrawl from the debate.

(2) What gets covered? Apparently agriculture may not be included. Dunno how much Co2 argriculure emits, but the sector will be a major player when the debate hots up about tax-funded abatement programs (schemes set up up to capture and absorb carbon dioxide, a task where agriculture will be the major player…). The next two sectors to spit the dummy will be the coal industry and the petrol industry. This is the biggest threat to the carbon tax scheme. These two industries account for at least 50% of CO2 emissions. But they directly impact on household costs and living standards. Will Australians accept the medium term pain of a new household cost structure, if it means that the global community can start reducing the amount of CO2 we are pumping into the atmosphere? Or will the major polluters plead, supported by penny-conscious people out there in community, that they cannot afford precidely the competitive pressure that a carbon tax will bring?

Time will tell…gjmt

Jobs real reason behind carbon tax – Labor MP Janelle Saffin

February 28, 2011 9:08AM

JOBS rather than the environment are the reason the Government wants to tax carbon, one Labor backbencher says.

Prime Minister Julia Gillard has proposed a carbon price regime to begin in July 2012 as a means of tackling climate change.

But when asked whether the plan was about jobs or the environment, Janelle Saffin was firm.

“It’s about jobs,” the backbencher said today.

The development of the regime is in its very early stages and already agriculture, a large carbon producer, has been made exempt.

Now a debate has erupted over whether petrol will be taxed.

“It’s really important that we have the debate,” Ms Saffin said.