In a stinging critique on Sky news yesterday, Victorian Liberal president Michael Kroger complained that the Turnbull government had not sold its company tax cut plan properly. In particular, Kroger said that the government had not given figures for how many jobs the tax cut would create.
Kroger had inadvertently exposed the central flaw in the government’s economic plan. The government’s own modelling shows no change in unemployment as a result of the $48 billion business give-away. In fact in some scenarios modelling shows a loss of jobs in the first years of the cut as the benefits of the tax break goes to foreign capital.
The election, if anything, was a resounding rejection of the core policy of the election campaign: the Coalition’s “10-year plan” for “jobs and growth” (aka cutting the company tax rate). The reality is that the company tax cuts got politically and economically smashed during the eight weeks of campaign 2016.
A series of analysis showed that the public did not support the big business largess, and a series of economic assessments showed that the economic claims did not stack up at all, or were so weak they could not possibly justify the huge price tag of the cuts.
But something bigger happened as well. Saturday’s election result will likely achieve what 30 years of economic data has failed to do: drive a stake through the heart of trickle-down economics. Despite the fact that even the IMF argues that reducing inequality is a good way to boost economic growth, the Coalition government went to the 2016 election telling the public that the best way to boost the wages of the poor was to give a tax cut to the rich. It was a spectacular failure.
The Coalition could lose almost 20 seats, many of which are outside of the capital cities, with weaker labour markets and lower wages than metropolitan centres. While the “great transition” from the mining boom to ideas boom might make it an exciting time to start a start-up, it is a terrifying time to have a mortgage in a regional centre with a slowing economy.
Running government is not running a business. This statement seems self-evident, but you would not think so, listening to much of what passes as political commentary from many in the conservative commentariat. Entrepreneurs might like to spread their bets around and “fail fast”, but most people hate the idea of failing at all.
It is much easier for investors to pull their money out of a new IT company that is underperforming than it is for a teenager to switch from one apprenticeship to another if their employer goes broke. Workers in in their 50s with a family in a regional town do not usually feel excited on hearing that the job they have held for decades is heading offshore.
The Coalition government appeared to offer little to the millions of Australians who are not sure what their place is in our rapidly changing economy. The 2014 budget tried to make it harder to get the dole after redundancy, harder to see a doctor if you got sick and harder for children to afford to go to university if they wanted to escape the industries that the free trade agreements Tony Abbott was so proud of had helped to destroy.
Then there is the accusation that Labor’s scare campaign over Medicare was unfair. Leaving aside the irony of the party that warned of the $100 leg of lamb crying foul, Labor’s attempt to scare the public was actually about something bigger, in my opinion. People were being reminded of something that they already want: strong, quality public services.
While political common sense tells us that the public wants tax cuts, empirical data and the experience of this campaign tells us something else. When presented with a choice of tax cuts or public services, the public goes for the later. If the election was a referendum on anything, it was this.
There are more than 700,000 people officially defined as unemployed in Australia and more people still wishing they had more work and greater job security. The government did not argue that the $50 billion trickle-down tax cuts would create jobs in the short or medium term because of a failure in communication strategy, it was simply because they could not credibly do so.
If the House of Representatives does not knock off the big business company tax cuts, the new Senate will. The central policy of the election campaign is dead on arrival. It will not just be a vote against a big business company tax cut; it will be a defeat for trickle-down economics.