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Add your voice to the inequality debate

Rising inequality isn’t just being driven by economic change or even conservative public policy.  Bad corporate behaviour is making the problem worse.  To turn the problem around, we need more than just a new government with better ideas, we need broad public understanding of the need for change so that the private sector responds and plays its role in fixing this problem – and that means we need your voice.  Michael Cooney writes …

Rising inequality threatens Australia’s growth – and Australians believe in fairness.  So why is the inequality trend continuing?

Part of the reason is that there are trends in all modern economies which reward those who are already doing well, squeeze those in the middle and leave many who struggle well behind. Trends like the rise of Asia and the spread of new technology do mean rewards for those who have a good start in life, can build valuable knowledge and skills – and retain a strong position with their employer – have never been greater.

Even a determined public effort to preserve equality will have to deal with these realities.  But economic change is not the whole story – not in the slightest.  Two other explanations are key.

First, conservative public policy in Australia is making the inequality problem worse.

When we think about what a well functioning economy looks like, we point to five ‘building blocks’ of inclusive prosperity: jobs that pay, education for all, health care when you need it, a house you can afford and a secure retirement income in the end.  There is no reason a growing private sector economy in partnership with a progressive state cannot deliver these goods for people in middle Australia.

Yet the last two Liberal Prime Ministers have attacked all five of these building blocks.  Unemployment is up while wages are stagnant; they have made multi-billion dollar cuts to education and health care and abandoned structural reforms in these fields; the major city housing markets have all but run away from regulators and urban policy has been abandoned; while both the pension and the superannuation system are targeted by budgetary and regulatory attack.

Nothing in this is the necessary result of economic modernization. It is a bad brew; regressive tax changes would make it much worse; but it’s hardly news.

Conservative indifference to the consequences of inequality has been brazen since at least the then Opposition Leader Turnbull opposed the stimulus measures which kept Australia out of recession and kept hundreds of thousands of our citizens in work back in 2009.  The best solution is better public policy; in turn that awaits a change of Government in Canberra, and the sooner the better.

What is news this week is the extent of corporate cheating on tax.

This is the second point: it’s now clear significant elements of the business community have abandoned their responsibility to the economy as a whole.  Only public pressure can bring them around.

It’s easy to be cynical about the news that multinational firms are dodging tax – as the old newspaper joke went, ‘dog bites man isn’t news’.  But this week the Commissioner of Taxation made it clear that what is happen is anything but ordinary.  There are many losers here – not least, firms which operate overwhelmingly in Australia and don’t have access to tax havens and tax shelters.

Still, it’s hard to know what was more remarkable about Chris Jordan’s Senate committee evidence in Canberra this week – his angry language or the dreadful facts.

The detail? Following two big legal victories (over Chevron and Orica) the Tax Office has now moved six large corporations into its “high-risk” list; it is demanding in writing that another sixty companies change their arrangements.

The rhetoric?

“These companies have pushed the envelope of reasonableness — they play games, they string us along, they believe we can be stooged. However enough is enough — no more of this.

“How is it possible that companies known for their new-age technology and innovative products and services, fail to be able to furnish us with basic reports showing their business structures, their profits, how much tax they’ve paid and where?

“We are ruling the line under these protracted negotiations and proceeding immediately to raise assessments and create liabilities on these cases — potentially taking them all the way to court if necessary.”

That’s an independent public official speaking, not a Vermont socialist.

Former Treasurer Wayne Swan’s comments that these companies have acted to “smuggle literally billions of dollars out of Australia” almost looked like understatement in this light.

Australia is seeing the biggest attack on the public revenue since the ‘bottom of the harbour’ schemes of the 1970s.  Back then it was dodgy takeovers and asset stripping; today it is so-called ‘rolled-up’ loans and complex intracompany financing.

That’s why this weekend at the NSW ALP Conference Fringe, our Inclusive Prosperity Commission will be gathering a group of Labor Party members and supporters and trade union members to release some new online campaign materials.

There is a growing economic consensus – that rising inequality is harming growth, and that the global attack on tax systems is stripping governments of the revenue to deal with inequality properly.

This has to become a public conventional wisdom.  For that to happen, we need the voices of the many to speak louder than the voices of the few. This is the only way to win the argument on two fronts: the ballot box and the boardroom.

About Michael Cooney

Michael Cooney

Michael is a former Executive Director of the Chifley Research Centre. He was previously Speechwriter to Prime Minister the Hon Julia Gillard MP, Senior Adviser at the HR Coombs Policy Forum, Crawford School of Public Policy at the Australian National University, and was Principal Policy Advisor to Federal Labor Leaders Kim Beazley and Mark Latham.

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