Labor’s ‘Living Wage’ Will Hurt The Poor, Unemployed

True to form, the unions are using clever marketing to beat the drum for a lousy idea. And true to form, that lousy idea is finding its way into the policy platform of the Australian Labor Party.

Yesterday, opposition workplace relations spokesman Brendan O’Connor hinted that Labor could adopt the Australian Council of Trade Unions’ calls for what they refer to as a ‘living wage’. This comes a day after Bill Shorten used his National Press Club address to declare that ‘[o]ur goal should be a real, living wage – effectively raising the pay of all Australians’.

But by ‘living wage’ Labor and the unions just mean a massive hike in the minimum wage. It’s a cute motherhood statement that disguises a policy which will lock even more Australians out of the labour market.

Currently, the minimum wage is set by the Fair Work Commission in accordance with the Fair Work Act. It’s far from perfect, but at least requires that the FWC consider a range of economic factors in determining the minimum wage. Importantly, one criterion is ‘promoting social inclusion through increased workforce participation’. In other words, the FWC must set the minimum wage with at least some consideration of unemployment, with a view to getting more Australians into the workforce.

The ACTU’s ‘living wage’ would scrap this system, and instead peg the minimum wage at the arbitrary level of 60 per cent of median wages. Under this formula, the minimum wage would rise substantially from its current levels.

Labor and the unions claim that driving up wages so dramatically is urgently needed to achieve greater ‘fairness’ and ‘equality’. But conveniently, they are ignoring several facts.

The minimum wage is already high

Even under the current system, Australia’s minimum wage is among the highest in the world.

In fact, according to the latest-available OECD data, our minimum wage is the third-highest in the developed world, a fraction behind Luxembourg and the Netherlands.

Minimum Wage

Hourly minimum wage, as at 2016 levels, shown in US dollars (based on 2015 purchasing power parity)
Source: OECD

In real terms, minimum wage earners receive almost as much – or more than – the unions are asking for anyway

The ‘living wage’ envisioned by the ACTU, as explained above, would require that minimum wage earners receive 60 per cent of median wages.

But the ACTU is ignoring the substantial impact of Australia’s tax-and-transfer system – that is, tax revenue collected by government and redistributed in the form of cash transfers, largely to lower income-earners.

OECD figures show that, taking into account tax and transfers, minimum wage earners receive close to, or in excess of, 60 per cent of median wages.

Income levels

Income levels provided by full-time minimum wage employment, value in percentage of median household incomes, 2015
Source: OECD

Few Australians are actually on the minimum wage

As high as it is, the minimum wage is becoming increasingly irrelevant as fewer and fewer Australians are actually on it.

As the IPA wrote in its report last year, Fair Work and the Right to Work:

[The minimum wage is] being rendered increasingly meaningless by ‘creep’ in pay and conditions contained in awards… The 122 ‘modern’ awards created under [the] Fair Work [Act] almost all contain pay above that set by the FWC. As a result, the award system creates a ‘shadow minimum wage’… across a range of low-paid and low-skilled jobs… Of the 2.3 million Australians on awards, 92 per cent receive pay in excess of the statutory minimum.

Minimum Wages

Minimum pay per week (lowest classification, excluding trainee rates) under various awards, compared with the statutory minimum wage.
Sources: Annual Wage Review 2015-16 [2016] FWCFB 3500; Restaurant Industry Award 2010; Building and Construction General On-site Award 2010; Clerks – Private Sector Award 2010; Cleaning Services Award 2010; Australia Post Enterprise Award 2015; Waste Management Award 2010; Fast Food Industry Award 2010; Banking, Finance and Insurance Industry Award 2010.

In short, for all the bleating of Labor and the unions about how low the minimum wage is, the fact is that the vast majority of Australians earn a wage far in excess of it.

A higher minimum wage will drive up unemployment

Of course, any wage rise is good news for someone who already has a job. But the benefits to workers are far outweighed by the consequences for the unemployed, as higher minimum wages effectively raise the barriers preventing people from entering the workforce.

As IPA Research Fellow Matthew Lesh wrote last year:

The minimum wage prices out people from the employment market. That is, if the minimum wage is $17 an hour, but a person’s work is only worth $16, they will simply be unable to get a job. Pushing people out of employment and onto inevitably lower unemployment assistance is a guaranteed strategy to increase poverty. Stuck in the welfare trap, these workers cannot build on workplace skills that provide the human capital necessary to increase the value of their labour and secure higher incomes in the future. A low-wage job is just a start on the income ladder. A higher minimum wage cuts off the bottom rungs.

Accordingly, for the sake of the more than 700,000 people in Australia currently looking for work – not to mention the hundreds of thousands more who have given up on looking altogether – Australia must resist driving up statutory minimum wages. The only truly equitable industrial relations system is one that gives everyone the chance to enjoy the dignity of work.

Minerals Council Of Australia’s Pre-Budget Submission Points The Way To Cheaper, Reliable Energy And Less Red Tape

The 2018-19 pre-Budget submission from the Minerals Council of Australia provides a number of important public policy initiatives involving lower taxes, less regulation, and less tape. Many of these policy recommendations are consistent with a long line of Institute of Public Affairs research to limit the size, scope and reach of government and expand economic liberty to make Australia more prosperous. Taken together, these initiatives, if implemented, would help to ensure Australian’s have access to affordable and reliable energy in a competitive economy.

The recommendation to cut Australia’s high company tax rate to 25 per cent is the minimum necessary to ensure Australia is a relatively attractive place in which to do business. With business investment near record lows as a percentage of GDP, it is more important than ever that governments make sure Australia is open for business. Cutting the company tax will increase economic output by around $17 billion per year, which will flow to workers as higher wages and shareholders as higher returns.

Importantly, the MCA also recommends a series of sensible, middle of the road reforms in the energy market. The first is to establish One Stop Shops for environmental approvals and assessments between state governments and the Commonwealth government. Such an initiative will reduce red tape and duplication between the two layers of government. The second is to remove the ability of green groups to engage in vexatious litigation which delays the implementation of projects that have already been approved by the relevant Minister. The IPA found that such litigation undertaken under Section 487 of the EPBC Act has imposed costs of $1.2 billion. The IPA strongly recommends that Section 487 be repealed entirely.

The third initiative is to remove the water trigger for coal seam gas and large coal development. These requirements largely duplicate existing state requirements, and strangely targets water use in the mining sector, even though that sector accounts for less than 3% of national water consumption.

The fourth initiative is to remove nuclear actions as an automatic trigger in the EPBC Act and to lift the ban on nuclear power. Australia has around a third of the world’s total uranium supplies, yet it is a vastly under-developed resource. Governments in Australia should look to the potential of uranium energy to play a role in Australia’s future energy mix.

Overall, Australia’s energy market is suffering from years of poor public policy which has promoted unreliable, high-cost renewables at the expense of reliable, low-cost coal. Over the long term the only sustainable solution is for the government to stop picking winners, which means withdrawing from the Paris Climate Agreement and removing emission reductions requirements as a component of Australia’s energy policy. Australia makes no noticeable difference to the global climate, and it is not in our national interest to pretend that we do.

 

Mildura’s Hottest Day? Really BoM?

Honourable Josh Frydenberg MP
Minister for Environment and Energy

Dear Minister

Re: Suspend announcement of new record hot days – Inform WMO that Bureau’s measurements are currently not comparable with mercury thermometers – Give directive for release of more A8 forms – Establish an audit mechanism

1. BACKGROUND

I write to confirm my receipt of some preliminary information from Mildura – you may remember that I wrote to you on 26th September suggesting that the new record hot day for Mildura announced by the Bureau of Meteorology of 37.7 degrees Celsius recorded on Saturday 23rd September, was unlikely to be a valid record because it was not measured consistent with calibration.

The Bureau have since acknowledged that their method of recording temperatures from electronic sensors is not accredited, though they claim it nevertheless gives readings equivalent to mercury thermometers. Interestingly, your office emailed a journalist, backing them up – claiming that a single electronic sensor can “mirror the behaviour of liquid in glass thermometers”. This is nonsense, because mercury and alcohol thermometers have different time constants. This is one reason the World Meteorological Organisation (WMO) insist on numerical averaging: alcohol thermometers (that measure temperature minima) have longer time constants than mercury thermometers (that measure temperature maxima).

Historically, alcohol thermometers were used to measure minimum temperatures, and mercury thermometers were used to measure maximum temperatures – across Australia. Then on 1 November 1996, the Bureau changed their ‘primary instrument’ to electronic sensors.

Anyway, I am grateful for the information recently received from the Bureau (following your directive), which does enable some comparison of measurements from a mercury thermometer with measurements from an electronic sensor, but only for Mildura for the period November 1996 to December 2000. I received this information in the form of over 4,000 scanned A8 forms, and have personally transcribed much of the relevant information, specifically the handwritten manual recording from the mercury thermometers.

2. MY PRELIMINARY FINDINGS

I can confirm, that the values recorded manually on the A8 forms from the mercury thermometers for the period November 1996 to December 2000 are significantly different from the official values recorded from the electronic sensors. If we consider just the values for September, the mean difference is statistically significant at the 0.05 level of probability, and is +0.34 °C, +0.27 °C and +0.28 °C for the years 1997, 1998 and 1999, respectively.

Somewhat surprisingly, the automatic weather stations at Mildura for these three Septembers recorded statistically significantly cooler temperatures than the mercury thermometers. (This is generally consistent with other values on the A8 forms, though winter and summer differences may be more extreme.)

This could suggest that the recent record hot day was, in fact, an underestimation of temperature. However, I’ve since been shown photographs that prove the electronic sensor in place at Mildura for those three years (1997, 1998, 1999) was shorter and thicker (with a correspondingly significantly longer time constant), than the Rosemount sensor that was in place on 23rd September 2017. Furthermore, the Bureau’s own documentation indicates that the Stevenson screen size has also changed – introducing yet another variable. Additionally, it has been brought to my attention that at that time – back in 1997, 1998 and 1999 – the official recorded temperatures were likely to be a numerical average taken over at least one-minute. The recent record was a one second-spot reading. I have confirmed this from the one-minute data for Mildura for 23rd September, also made available to me recently – following your directive.

While the current head, Andrew Johnson, claims the Bureau has always taken one-second readings from electronic sensors, this is at odds with a letter from Sue Barrell, Bureau of Meteorology, to Dr Peter Cornish dated 6th February 2013, available online here. The letter details a methodology much more consistent with World Meteorological Guidelines – specifically reference is made to numerical averaging.

The bottom line is that since the introduction of automatic weather stations over 20 years ago, there has been no documented standard against which Australian temperatures at Mildura, or anywhere else, have been recorded. Of most concern to me is the muddling, (including by your staffers), of the numerical averaging-period with the time constant. The Bureau somewhat confusingly often refers to the time constant as the sensor “averages”.

3. HISTORICAL TEMPERATURE RECORD

I have been reliably informed that when the various variables for Mildura are eventually determined – as they must – the actual hottest day on record for September for Mildura may be 22nd September 2003 or the 28th of September 1928 if temperatures before 1910 are ignored.

Interestingly, the hottest day ever for Mildura according to the official ACORN-SAT record is 10th January 1939; that summer of 1938-39 was exceptionally hot across south-eastern Australia. When I was researching the longer historical temperature record for Mildura a couple of years ago (at the same time I was correcting for Stevenson screen installations and moves from the post office to the airport in back-of-the-envelope type calculations), I determined that the hottest summer on record at Mildura was likely 1905/1906.

Backing this up, a relatively recent study published by Lucinda Coates and colleagues (Environmental Science and Policy, Volume 42, 2014) identified Januaries in 1879, 1896, 1906 and 1908 as being months with ‘significant heat events’ in Australia.

Our Bureau ignores this early pre-1910 historical temperature record, and after 1910 corrects for its political incorrectness through homogenisation as I have detailed elsewhere.

4. ECONOMIC IMPLICATIONS

Whilst the historical temperature record issued by the Bureau may have only been of limited, or academic interest, in the past this is no longer the case in view of the current scientific and public policy debate about global warming. These temperature recordings are now the primary input data which determine a range of scientific predictions, projections and model outputs with enormous, fiscal, economic and political implications both for Australia and internationally. If these temperature recordings are wrong then all the consequent scientific, fiscal, economic and political decisions based on this data may be wrong also.

On this basis, given the importance of the temperature record, I would suggest that there needs to be an ongoing and independent oversight audit mechanism/group established to ensure that you and the government can be confident that you are receiving reliable and accurate temperature records on which to base government policy decisions both nationally and internationally.

The fiscal records of government agencies are independently and regularly audited for amounts far less than the fiscal and economic impacts of global warming policies so it would seem only prudent and reasonable that the temperature records of the Bureau of Meteorology, which have such huge fiscal and economic impacts, should be subject to a similar audit regime to ensure their accuracy, integrity and reliability.

Historical temperature records back to 1880 are the primary input data which determine the range of scientific predictions, projections and model output with enormous fiscal, economic and political implications both for Australia and internationally.

Current and historical temperature records for Mildura, as measured and collated by the Bureau, are included in the calculation of global temperatures by the UK Meteorological office and NASA – subsequently relied upon by the United Nations Intergovernmental Panel on Climate Change informing the Paris Accord.

Perhaps unbeknownst to these organisations, our Bureau has a ‘novel’ method of recording temperatures from electronic sensors in automatic weather stations that cannot logically give readings consistent with the liquid-in-glass thermometers, which were the primary instruments for Australian temperature measurements until 1 November 1996.

5. RECOMMENDATIONS

Given the importance of the temperature record being correct: there is a need for an ongoing and independent oversight audit.

Inform the WMO that the temperatures recorded by our Bureau are not consistent with calibration, nor any international standard.

Direct the Bureau to desist from announcing new record hot days – not only for Mildura but for all 563 automatic weather stations recording surface temperatures across Australia.

Also, I would be grateful to receive more scanned A8 forms, specifically for the period 1 January 2001 until 30 September 2017 for Mildura. (It could be that I have only received A8 forms for Mildura until December 2000, as the Bureau is awaiting your directive to release the forms after this date.) I also await advice regarding the availability of scanned A8 forms from the other 38 locations with parallel data, as I detailed in my letter to you of 22nd October 2017.

Yours sincerely

Jennifer Marohasy BSc PhD
Senior Fellow, Institute of Public Affairs
Founder, Climate Modelling Laboratory, Noosa
Member, International AltMet Network

The assistance of AltMet Network members LP, KS, JV, MN, PC, PM and RM is gratefully acknowledged in the drafting of this letter.

Originally published on Jennifer Marohasy’s blog here.

Cutting red tape is eradicating poverty far more quickly and effectively than foreign aid

Due to the influential work of the IPA, it is becoming increasingly acknowledged that red tape in Australia is a $176 billion problem that holds back Australian prosperity. What’s less well understood, is that red tape is a massive problem in the developing world that keeps poor people poor.

The Atlas Foundation has launched a new initiative with its network of 480 independent local think tanks in 96 countries called Doing Development Differently. Its aim is to alleviate poverty by fighting for and expanding the economic rights of the poor.

Whilst this consists of improving a range of institutions such as property rights and a transparent judiciary, in large part, it involves removing the masses of archaic red tape faced by small businesses in the developing world. This is because even marginal improvements in red tape can lift huge numbers of people out of poverty.

For example, last year the Centre for Civil Society in India successfully campaigned for the elimination of minimum capital requirements for new business registration. These regulations disproportionately impacted the poor due to the obvious difficulty those living in extreme poverty have in accumulating capital. The removal of this one piece of red tape translates to 321,000 people lifting themselves out of poverty.

In December 2016, the Samriddhi Foundation in Nepal successfully campaigned to reduce the time it takes to register a domestic business down from several days to a maximum of 30 hours. Businesses funded by foreign investments had the registration period reduced from weeks down to seven days.

The Ukrainian Economic Freedoms Foundation successfully fought for the abolition of 22 business permission procedures including the license for catching fish in internal waters, the quality certificate for fishing ships and obligatory registration for certain types of fertilizers. The removal of the fertilizer registration effectively dismantled a de-facto Russian monopoly on local fertilizer that was costing businesses USD 300 million per year in direct costs. As a result of the change, EU fertilizers can be imported into Ukraine without prior registration—a process which previously averaged 500 days.

These simple reductions in red tape can eradicate poverty far more quickly and effectively than foreign aid and charity. Red tape isn’t a dry preoccupation of the business community. For some, it’s the difference between a life of dignity and meaning or grinding poverty.

Unleash Competitive Federalism: IPA Sparks National Conversation on GST Reform

This week the Institute of Public Affairs released a new report Time to End GST Redistribution, authored by IPA Research Fellow, Morgan Begg.

The report reveals that over the life of the GST, Western Australia has lost $16 billion (22 per cent) of the GST revenue that was raised in that state. By contrast, almost $19 billion (24 per cent) of South Australia’s GST revenue is raised in other states.

The report was featured in The West Australian in this story by Economics Editor, Shane Wright.

Morgan Begg joined 6PR in Perth to discuss the report:

The report was also featured in the Australian Financial Review, under the title ‘Institute of Public Affairs advocates state income taxes’

The article says:

Free market advocates have called on Prime Minister Malcolm Turnbull to revisit the debate about state-based income taxes, claiming GST equalisation “propped up” states like South Australia.

The Institute of Public Affairs warned the lack of political will to fix the flawed GST distribution system was holding back more sweeping reform of state-federal relations essential to the economy.

IPA Executive Director John Roskam weighed in on the issue:

IPA executive director John Roskam said the changes would unlock the benefits of competitive federalism.

“The heavy centralisation of fiscal responsibility has been a drag on Australia’s economic performance,” he said.

“When we talk about declines in productivity and flat lining wages that is something that I don’t think people in Australia have spent enough time talking about.”

Mr Roskam said premiers had “run away at a million miles an hour” last year when Mr Turnbull raised the prospect of states and territories applying their own income taxes from 2020.

“Our position is one of competitive federalism, that the states should be able to compete on rates of tax as they do in nearly every other federation, as states do in the United States and as provinces do in Canada,” he said.

“The trouble is (state) politicians have found it easier just to blame Canberra rather than take responsibility.”

It wasn’t long before poor performing states started making noise about potentially having to rely on their own economic performance instead of leaching off other states. This story was featured in the Hobart Mercury.

This story in the Adelaide Advertiser titled ‘SA Treasurer Tom Koutsantonis slams proposal for states to introduce their own GSTs’ clearly shows the Treasurer’s frustration.

A PROPOSAL for the states to introduce their own GSTs has been slammed by the South Australian Government and Business SA.

The Institute of Public Affairs has called for an end to the system where revenue from the consumption tax is divided between the states based on need and suggested that each jurisdiction instead levy a GST at a rate of its own choosing.

Another option was for each state to receive all of the revenue raised from the GST within its borders.

IPA researcher Daniel Wild said ending the current system of revenue-sharing would encourage states such as SA to be more competitive.

“There would be more direct pressure on state governments to be engaging in reform that’s going to grow their economies and grow their revenue base,’’ Mr Wild said.

SA Treasurer Tom Koutsantonis said scrapping the current system would result in American-style inequality where standards of government services depended on where people lived.

“This is an offensive report that gets all the facts wrong on GST, from a right wing lobby group for the Liberal Party,’’ Mr Koutsantonis said.

The IPA’s favourite South Australian Daniel Wild spoke to Leon Byrner on 5AA Adelaide about what the IPA’s proposal means for South Australia.

Andrew Bolt joins The Young IPA Podcast

Herald Sun columnist Andrew Bolt joined The Young IPA Podcast this week to talk about a range of topics. Here are some highlights.
Why he spoke at Milo Yiannopoulos’ events.

“I saw a clip of the Western Australian premier Mark McGowan saying ‘Milo Yiannopoulos isn’t welcome in Western Australia, we won’t extend any government building.’ And I thought ‘you bugger’ and I got really cross. And I thought I’d come out of my cocoon just to stick it up his kilt and so I went there and opened. Here’s a state with the rabbit-proof fence, now they’ve got a conservative-proof fence.”

How Milo has built his audience.

“He’s done it in a way that sometimes is yuck but done in a way that we notice. I put exactly these points to him on stage and he said ‘everyone else has failed.’ And I said if we dropped the civility that we believe conservatives stand for then we’ve failed already. But on the other hand, he’s part of a mega-reality show in which the audience are willing recruits, extras in it. And part of that is by saying certain things no more rude than the average leftist comic or commentator – in fact, less rude – and provoking an over-the-top reaction and a violent one that you never see outside a Barry Humphries thing. And the audience sits there and they are loving the fact that he’s tweaking the nose of the bear because conservatives and libertarians have been taking it for years without hitting back. Seeing those hypocrites [of the left] fume is pretty good.”

What the Liberal Party completely disassociating itself from Milo means.

“I addressed on tour with Milo a couple of Liberal Party meetings where the mood was sombre, angry, defeated. Particularly angry at the Liberals not standing for anything and not fighting for anything. Speaker after speaker in the Q&A sessions I did with Mike Nahan, former Executive Director of the IPA now opposition leader in WA, were furious about this, and despondent and wanting to fight back. Well, Milo Yiannopoulos does fight back – not with the weapons I’d choose – but he does fight back. And the energy in his audiences, by contrast, was amazing. I’m thinking if the Liberals can’t engage with these people, then who are they engaging with? These are libertarians, the people who are sick of political correctness, identity politics and all that. The Liberals aren’t engaging them – Milo is.

How the Liberal Party can be restored.

“When I went to Western Australia, people were saying ‘we’ll lose five seats here’. And then you go and look at the seats – Christian Porter, who’s actually been doing great work, Andrew Hastie, the future, his seat would also be gone. This is the thing. When we think ‘let’s destroy the Liberal Party in order to rebuild it’ the cockroaches will probably live and the good ones will be all dead.”

“It’s a big knock on me – I’m so mean to Malcolm Turnbull that all I’m doing is paving the way for Bill Shorten and that is infinitely worse, and that the Labor Party will have won. And I think hasn’t the Labor Party already won? What’s the point of a Liberal government that implements many Labor ideas?
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New Businesses Fallen By 60 Per Cent: Government Report

A new report from the Department of Industry has found that the Australian entrepreneurship downturn is worse than previously thought.

Earlier this month the IPA’s new report on entrepreneurship, Reigniting Australia’s Entrepreneurial Flame, found that there were 15,000 fewer new businesses created in 2016 than in 2003 and a fall in business entry rate of 16 per cent. This finding, which was based on analysis of the ABS business counts data, is despite working age population growing by almost one-fifth in the same period.

However, a new government research report finds entrepreneurship in Australia is even worse than ABS data indicated.

Department of Industry economist Sasan Bakhtiari has found that Australia’s business entry rate has actually fallen from 15 per cent in 2003 to 9 per cent in 2015. That is, a fall in the rate of new business entry by 60 per cent in just 12 years.

This means fewer new businesses creating jobs, competing with existing firms, providing consumers with products and services, increasing productivity and growing the economy. The essential dynamic process of ‘creative destruction,’ as described by Joseph Schumpeter, in which new firms compete with older businesses to ensure that jobs and investment are allocated to the most worthwhile ventures, is lacking in the Australian economy.

Nine of Australia’s top ten largest companies were founded before 1925. In contrast, 88 per cent of the United States’ top 500 firms did not even exist fifty years ago.

Bakhtiari finds Australia’s business entry rate has fallen behind the United Kingdom, Canada and New Zealand, however remains ahead of the United States. This indicates a less dynamic economy that will threaten Australia’s living standards.

The new report makes use of micro-data from the Business Longitudinal Analysis Data Environment (BLADE), which combines Australian Bureau of Statistics surveys and Australian Taxation Office (ATO) firm data. BLADE uses a precise definition of entrepreneur, measuring only unique producing entities with productive and employment activities.

Despite correctly identifying Australia’s entrepreneurship problem, the report failed to diagnose the cause of the fall in entrepreneurship.

‘Above all, I find it quite puzzling that entrepreneurship in Australia reacted to the GFC at all and that the effect lasted for several years,’ Bakhtiari writes. ‘All of this happened despite the government putting into motion a sizable stimulus package and despite the fact that through this epoch the Australian economy out-performed almost every other advanced economy in the world in terms of growth and stability.’

The IPA has identified three major causes of Australia’s entrepreneurial woes: red tape, which is costing our economy $176 billion a year in lost economic output, Australia’s archaic industrial relations system, and high taxes, particularly corporate tax which discourages investment.

Australia must undertake serious economic reform to unleash our entrepreneurs.

Highlights of Professor Sinclair Davidson on The Young IPA Podcast

Professor Sinclair Davidson, IPA Senior Research Fellow and Professor of Institutional Economics at RMIT University, joined us on The Young IPA Podcast this week. Here’s some of what he had to say:

Why Australia hasn’t seen meaningful tax reform since 2007

Well there’s two things that have really happened. The first is we’ve had a lack of economic leadership. Peter Costello leaving the Parliament was a huge loss to Australia, so that sensible economic leadership we saw during the Hawke, Keating and then Howard years kind of came to an end. And at the same time our budget has been in deficit ever since 2008. And what has actually happened is the federal government panicked, overreacted to the Global Financial Crisis and massively ramped up spending.

How do we get economic leadership back?

We need to be in a positon whereby the Treasurer and the Finance Minister can say to people “no new spending until we’ve got all spending under control.” The 2013 federal election was a huge missed opportunity. There was a change in government, the Coalition came in, and they almost immediately validated all of Labor’s irresponsible spending. And then they’ve built on top of that.

Getting debt under control and getting back to a zero net debt position should have been the number one priority of the Abbott government. And to be honest they just didn’t even try.

The current leadership of the major parties are very underwhelming. It’s been very disappointing. The Labor Party gave up on economic reform in the mid-1990s. The Liberal Party unfortunately [saw] all the sensible, hard-headed economics people all left after 2007 so we’ve got all the big-spending, airy-fairy economic types. We don’t have any serious people who are prepared to make tough economic arguments and tough decisions to actually bring budgets under control.

Why debt is such a big problem

Government can only finance itself, more or less, through taxation. That basically means you can tax the money now and spend it now, or you can borrow money, spend it now and then tax it later. So debt is simply a form of deferred taxation.

The government is taking money away from people in the future to pay for things now that we don’t really need. It’s not like they’re building massive infrastructure that’s going to last forever. And the young people of today are going to be paying those bills in future.

Why are tax cuts seen as the government doing us a favour?

This is the notion that we are somehow all tax slaves. That our pre-tax income belongs to the government and they let us keep some of our own money.

We have a system where the majority of the population actually comply with tax obligations because they know it’s the right thing to do. And when you start abusing people, start taking them for granted and start insulting them [through high taxes], you have to be unsurprised when you find yourself out of office.

 

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