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Issue #1606      August 14, 2013

Editorial

Pie in the sky?

Imagine an Australia with a free, universal, public health system, without hospital waiting lists; an adequately funded and staffed public education system; free universities and TAFE with appropriate income support for students; an expanded public sector which builds public infrastructure, including public housing and public transport. A public sector that offers employees permanent employment, good wages and working conditions. Add to that a 35-hour working week; full employment and job security; pay equity; a social security system with uniform payments for recipients, at least 35 percent of male average weekly earnings; and a universal aged pension.

And imagine the responses from Liberal or Labor, or the media critics to such a vision: “unrealistic”, “unaffordable”, “pie in the sky”. Of course no Liberal government would dream of such pro-people policies and they are far removed from Labor’s neo-liberal agenda. But are they really “pie in the sky” or “unaffordable”?

That was not the view of Labor or the ACTU three or four decades ago. In fact, every single one of those aims was Labor or ACTU policy and some were a reality then. Over those years there have been massive increases in productivity and national wealth alongside the winding back of past gains and expectations. Now the Liberals are telling us (the people) that we are “living beyond our means”, that billions of dollars in cuts are required. But is this because such policies are unaffordable?

The question of affordability raises the question of government income. The federal government’s principal sources of income are from personal and company taxation. Twenty-five years ago, the tax rate for company profits was 49 cents in the dollar. The Hawke/Keating government began the process of reducing this rate, which is now 30 cents in the dollar. In 2012 alone, that amounted to a loss of over $40 billion in government revenue.

The highest marginal rate of personal income tax has been reduced from 60 percent in the mid-1980s to 45 percent, benefiting the rich and costing the government potential revenue. The government has also foregone billions of dollars in revenue through the privatisation of Telstra, the Commonwealth Bank, airports, ports and other profitable government assets.

But the amount of income is not the only consideration. Affordability also comes back to how it is spent. A quick look at the budget papers reveals a number of large items that could be slashed or axed, resulting in considerable benefit to the environment and people’s wellbeing. Top of the list is a bloated military budget which is set to rise to $36 billion in the coming period. There is the $5.5 billion-plus private health insurance rebate which is nothing more than an indirect subsidy to an otherwise unsustainable private hospital system. Abolition of the fossil fuel rebate to mining corporations would free up a few more billion dollars. So would phasing out state aid to private schools.

Savings can be made from expanding the public sector instead of contracting out. The private sector is far more costly than the public sector because of the layers of private profit involved. In addition, the private sector borrows the funding at higher interest rates than the government – ultimately passed on in higher charges. It would be far cheaper for the government to borrow through the issue of bonds. As the experience of the NBN, pink bat insulation program, school hall program and other such contracted out programs demonstrates, there is nothing cheaper, more efficient or safer about the private sector! As for taxation, company tax rates and higher personal marginal rates should be increased, and a genuine super profits tax introduced to cover all industries.

Claims of unaffordability are capitalist mythology. As the above examples illustrate, there is no shortage of money, it is the distribution of income that is the problem. It comes down to ideology and the political will of a government whether such economic goals are “affordable” or “pie in the sky”. What takes priority – the people and the planet or private profit?

Next article – Homelessness services delivering but too many still in need

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