Aspiration, $3 a day, and stagnation

Better income tax rates – is that enough?

Labor’s new income tax regime is now in place with everyone getting an income tax cut although those at the high end are getting less than they would have otherwise.

Relatively, it’s a much better outcome for most wage earners than the legislated “Stage 3 Tax cuts” from the LNP Morrison government.

In the end, it works out like this:

Taxable income ($)	ALP govt weekly	Morrison govt 3 Weekly
$40K	12.58	0.00
$45902.48 (National Minimum Wage)	15.46 = $2.70/day	0.00
$60K	22.67 $3.24 / day	7.21
$67600 (median wage)	26.32 = $3.76 / day
$72,810 (average wage)	28.63 = $4.08 / day
$80K	32.29 = $4.61 / day	16.83
$120K	51.52 = $7.22 / day	36.06
$160K	71.71 = $10.24 / day	89.90
$200K	87.10 = $12.45 / day	174.52

If Morrison's LNP had introduced these tax scales, who on our left would have opposed them?

That means the struggle over living standards for and by the majority will continue as it must, because of the real value of the ALP tax cuts and, continuing economic stagnation possibly getting worse.

That struggle now focuses on the Commonwealth budget and the Annual Wage Review and, for a minority of workers, enterprise bargaining under slightly improved bargaining laws.

These interactions provide fuel for big business and the Murdoch media to campaign for and in other ways help the return of an LNP government under Peter Dutton.  

And that’s not even considering the interaction of the tax cuts with other important parts of the social wage, including housing and, the family allowance for parents with younger children and homelessness.

Guardian Australia’s revelations, especially an average age of death among homeless Australians at 44 years, are a stark and necessary reminder of the disgraceful neoliberal management of housing and shelter policy by successive governments. Anyone who is angry about this have every right to be so, especially if that anger turns to intense and determined participation in housing for all activism.  

Aspiration – the word of the week (Macquarie Dictionary: “act of aspiring; lofty or ambitious desire”).

The LNP has tried to counterattack, (can one say breathlessly?) around “aspiration”. Deputy Liberal leader, Sussan Ley, described Labor’s package as a “lifetime tax on aspiration”. Others have joined in.

Nevertheless, the ALP has its version. Labor’s Treasurer, Dr. Jim Chalmers puts his take on “aspiration”, agreeing a person earning $160,000 a year was in “middle Australia”.

“I think of middle Australia as the people who get up and work hard to provide for their loved ones and get ahead,” Dr Chalmers said.

So, what does that mean for most of the working class who are paid far less to produce and distribute water, food, clothing, medicines, emergency services, aged care and child care? Were they not the heroes and heroines of the pandemic?

So, the difference in belief is marginal. In a separate post, we can put aspiration under the microscope. It’s actually quite destructive, especially how it dovetails with the beloved individualism of the LNP.

Right now, the essence of the old Stage 3 and the government’s new is that there is more scope from July 1st for higher income workers to take more by playing the negative gearing – capital gains “game”; that is, to deliberate run a property at a loss to end up richer. It’s popular for a minority but it’s hardly a solution for those close to and below the median wage through to poverty levels. And the message to them is that they are not hard-working enough!

Playing the “negative gearing game” produces nothing of value for society and can take capitalist investment away from things like climate change mitigation.

Of course, the champions of this aspiration do identify bad aspirations.

For example,  Aboriginal and Torres Strait Islander communities demanding and struggling to take more direct control over public funding to close the gap … bad aspiration.

And, wharfies employed by DP World struggling for an enterprise agreement that provided a 25% pay increase over 4 years … bad aspiration.

What do most wage earners – the real producers as the COVID pandemic showed - aspire to do? They want their wages to keep up with and be better than the real cost of living. They want the social wage (what they get back from the tax they pay) to provide for early child care and aged care, the protection and rescue of the natural environment, and the reversal of global heating, medicines and other health care, a strong education system, public transport, friendly and safe local communities.

The next 12 months and onwards will be a struggle between these 2 versions of aspiration: the working-class version that is fundamentally decent, seeking a bigger share of the wealth they have produced, and the LNP-wealth managers-capitalist version that is fundamentally selfish and destructive.

Back to the economy

The focal points for the struggle over the standard of living and getting climate heating down are the Annual Wage Review because it will affect all other wages indirectly, and the Commonwealth Budget. In the Budget ”debates” it seems the prime focal points will be housing, (here also), tax to income transfers, and climate change, and what is not happening with health and other social wage issues in some states will come into play.

Stagnation reigns

The context, however, is a stagnant economy. Around the world economies and the global economy are not going well and the problem is deeper than the wars in the Middle East and the Ukraine and the competitive battle between the USA and China.

Some employer organizations are onto this. The Australian Industry Group reports continuing, stagnant business activity, although it is interesting that it does not report on profits or profitability, their members’ critical metric. Despite the decline in manufacturing’s presence in society, its profit story is not terrible, as this graph from Staista shows:

The Reserve Bank’s latest Chart Pack tells the same story.

The data available shows that stagnation goes way back to the LNP governments after the 2008-9 crisis. The post-crisis story is continuity of stagnation not recovery or vitality. And, in that time we know that the working class has been made to pay for that, except for small pockets here and there, and that the richest and most powerful have been getting even more so.

At this time, we don’t know whether stagnation will get worse, although there are some signs of that in other countries.

The Reserve Bank gets the unemployment trend it wants.

The deteriorating employment situation is what the Reserve Bank has been trying to achieve and reinforces other ABS data that shows stagnation.

If things do get worse the Murdoch and other media will help Dutton’s LNP put the blame on the Labor government. The old, false refrain will be out: Labor is no good at economic management. The evidence shows the opposite: Labor inherits crises that have been mismanaged by LNP governments. However, The LNP want the stagnation to continue and morph into something worse, working for a loss of confidence in Labor’s economic credentials.

Do governments cause stagnation?

This is a vital question. The short answer is ‘no” because it (and worse) is endemic to how capitalist society works. However, governments can make a slump worse or better for the majority, and inversely for the business minority.   

The Annual Wage Review, with first submissions due in late March, will reveal what employers and governments want to do with living standards as stagnation continues or worsens. Already we know the Australian Industry Group says that Labor’s tax cuts justify a reduced minimum wage and minimum award rates outcome.

“Ai Group chief executive Innes Willox said the combination of tax changes and the upcoming minimum wage decision was a double whammy for employers.”

Just what the double whammy is remains a mystery, after all, tax cuts do not mean employers are paying higher wages. Some employers will find low-income workers buying more of their goods or services.

Meanwhile, Guardian Australia commentator, Greg Jericho says this:

“If the RBA is right and wage growth in the year to December last year will come in at 4%, that will still mean that over the past three years, while wages have risen a total of 10%, prices will have gone up 16.1%. That means the average wage is buying about 6% fewer things than it could in 2020.

“That will take a long time to recover.

“And even while inflation overall is now about the level of wage growth, it is worth noting that in the past 12 months the prices of non-discretionary items – those things you can’t avoid buying or paying for (energy bills, food, insurance and rent, etc) – rose 4.8%.”

Meanwhile, what has been happening to profits? Right now, it’s the 6 monthly profit-reporting season and we will know more in a couple of weeks. One example is the Commonwealth Bank bringing in an obscene $5 billion profit, down slightly   … a tough Reserve Bank interest rates regime for the majority is not so for them.

In the meantime, here is a general snapshot of profits relative to wages – the rate of exploitation.

The standard of living crisis that remains a reality for most wage earners and their families is one of several that the Labor government has inherited from 3 continuous LNP governments. The climate crisis intertwines the ecological and the economic and, even from a capitalist point of view, was dreadfully mismanaged by those governments.

Labor shows itself as more competent in managing and maintaining the system for big business. Now, over halfway through their first term, they face the biggest decision: how should the government deliver a better deal for both the working class and the business class, even if the economy worsens?  

The answer will not be decided by the parliamentary contest alone or, even in public debate by the major forces and their personalities; that is the employers, their mass media, workers’ unions, women’s, environmental, and social welfare organizations.

Can the people have a more effective say?

Whether or not the working class and other people’s organizations intervene and assert themselves, the intensity of their determination and coordination, at the Annual Wage Review and the Budget preparations will also shape the outcome.

Can they build a common programme and a common power? Where will the leadership of that come from?

Thus, the Labor government’s tax cuts have put the ball in our court also. The mass of workers and their families at about the median wage and below urgently need something better. Can we build a common voice that pushes the Labor government to do better and more of it, and at the same time, ensure another defeat for the LNP opposition at the next election?