Words by Anonymous
In the wake of a re-elected Morrison government, three things are certain. Dumping Malcolm was a good power move from the men in Blue/Black. Deaths are still certain and so too are tax cuts.
During the election campaign (and first flagged at the 2019 Budget), the Morrison Liberal Government said income tax cuts would result in soaring economic growth, surpluses, and a little something for taxpayers. After the election result, it is evident that Australians are in favour of having more money in pockets.
The policy would see taxpayers on low incomes receive a rebate of up to $1,080 per person. Dual-income families would be entitled to approximately $2060. Not everyone will get this amount, though. The rebate will be based upon the tiered taxing system in Australia. Basically, the more you earn, the more tax you pay. Therefore, the more you earn, the more you’ll get back under this policy.
Expansionary fiscal policy is generally well-received by voters and governments alike. In theory, income tax cuts should stimulate growth through increased consumer spending. Taxpayers have more disposable income because they will not have to pay that amount to the ATO. They are then able to spend this extra money however they choose. A few Rio Tinto stocks? A new AJE frock? A cheap getaway to Bali? Taxpayers ultimately hold the power to either invest or save their money. Keep in mind though, that to stimulate economic growth, this money will have to go back into the Australian economy.
So far, the tax cuts do sound quite rosy, but in reality, the outlook is quite bleak. The government will not reconvene until the AEC finishes counting and the election writs are returned before Parliament, which is expected to be sometime in mid-June. Then, a bill will need to pass through the House and the Senate. The End of Financial Year is June 30. Australians may not see this money until next year’s budget. But even if this post-election hot-take is wrong, there are some other worrying signs worth addressing.
The ABS has shown that Australia’s inflation rate remains unchanged and is close to zero. Usually, wages grow with increasing levels of inflation to accommodate for rising prices. The unchanging rate of inflation has seen that neither wages or prices (of let’s just say, food) increase by much, and in retrospect, stable prices for food is not necessarily a bad thing. RBA governor, Phillip Lowe cites concern for those who borrowed a heap of money, and now might not have the means to meet their accrued debts without real wage growth. This issue could also be extended to those at risk of employment insecurity. Additionally, wage stagnation means that your superannuation and future savings will be consequently lowered. These things all signal low levels of economic activity and can further entrench inequality. Some inflation is better than none.
So all this for in a return of $1,080 in liquid assets? (or more if you already have heaps of assets).
If we spread the amount over a year, this would equate to an additional $20.76 per week for the taxpayer. Double that if you’re a dual-income household. Realistically, the rebate will be enough to pick up a few extra groceries, pay off some bills, fill up the car with a schooner’s worth of petrol. Maybe a few cheeky bevs (or just one) at a pub with the boys?
Perhaps a broader approach in fiscal policy would better stimulate household consumption and the economy. If you want Australia to spend, then give them the means to do it. In addition to tax cuts, there should be a significant investment into social security and a commitment to increase wages and secure employment.
Those on casual, part-time wages are unlikely to see any rebate if they are earning $18,000 or less. They’re also likely to be relying on penalty rates to supplement wage stagnation and make ends meet on odd hours. An increase in wages will give all workers a greater sense of financial security and set them up well for the future.
We must also remember that GPD growth is not the best indicator for happiness and well-being. The Guardian recently reported that an elderly citizen with Cancer on Newstart and NDIS payments died before their process claims were completed. There appears to be a causal link between financial insecurity and poor mental health amongst young people. Furthermore, Food Bank Australia has reported a growing number of regular clients approaching their services, which may indicate that the number of Australians doing it tough is on the rise. A wealthy country that is becoming increasingly reliant on charities should speak volumes about the way our systems are currently treating people.
It is high time to raise the rate of social security payments because this money goes straight back into the Australian economy. Considering the fact that this demographic is most likely to spend their money on daily essentials, it seems unfathomable that they will not be seeing any benefit from this policy or the Liberal budget, which on a whole, reeks of austerity. Revenue will be raised, as per usual, through taxes while investments in infrastructure, social services, hospitals and education will flatline.
We are likely to see an increase in GDP growth from this policy. Budget surpluses are nice to have during a recession, however, when people are currently hungry, dying and struggling to make ends meet, economic uncertainty is even more acute. It is important that fiscal policy aims to benefit the greater public. The tax rebate empowers taxpayers which is a great thing. Simultaneously, the Morrison economic plan punishes low-income earners by reducing their purchasing power. Those on low-income, unemployed, or in receipt of welfare payments will receive little to nothing through these policies. Giving people the agency to make choices about their lives is good for the economy. In the long run, investments in social security and securing employment would perhaps be more beneficial to the public than just tax cuts alone.
Quiz: What does $1,080 get you nowadays?
Now circle what purchases are good for the Australian economy!
- ½ a return flight to Europe (~$2300 to flying with Emirates in July)
- 2 Camilla gowns from David Jones seasonal sales
- 2 pairs of R.M Williams Comfort Craftsman (you might be $100 short depending on styles/sizing)
- A fuck tonne of printing credit from Access Adelaide that probs will last for the duration of your degree.
- 310 St Raphael’s cart coffees.
- 72 Schnitzel + Chips meals from the New Unibar (with AUU membership, of course)
- A booking for a 10-person banquet at Africola
- Approximately 9 Law ball tickets for next year’s event, if you can get your tax returns in on time #aulsslawball2020
- All your semester 2 textbooks from the co-op (or, save a bit of dosh getting 2nd hand reads).