The burden of power and the challenge for Labor

The Labor victory

Dissatisfaction in the Australian community with the incumbent conservative government came to a head on Saturday, November 24, 2007. The Australian Labor Party was brought to power in a landslide: which even found former Prime Minister, John Howard losing his own seat.

Labor took power with a clear mandate to “tear up” the conservatives’ WorkChoices legislation: and to introduce what it called an “Education Revolution”.

Nevertheless, this program to provide computers to schools remains not fully implemented.

During the 2007 election campaign, Rudd Labor largely succumbed to corporate pressure, echoing the Conservatives in critical fields. Thus Labor went to the polls refusing to recognise any right to political strike action; enforcing ballots before any industrial action; limiting union access to workplaces; and refusing the right of workers to engage in pattern bargaining strategies.

Now the new government is under further pressure to limit unfair dismissal laws and to prohibit content in enterprise agreements (including, payroll deductions, health and safety training and union training).

Overwhelmingly, the Australian labour movement’s campaign against the extreme conservative government’s WorkChoices laws is recognised as being the central element in the 2007 ALP electoral win.

And yet this factor is not translating into policy influence. Indeed, the Australian Council of Trade Unions finds itself compelled to campaign to get the ALP to implement the reforms it embraced before the election.

That reform agenda had many failings, and did not restore the breadth of protection previously enjoyed by Australian workers. Many basic conditions, however, were established and certainly this has still been a victory of sorts.

Furthermore, there are a number of crises confronted by Labor that, as yet, have not been adequately addressed.

Rudd Labor prioritised the fight against inflation: but even modest increases in official interest rates helped contribute to dire consequences - compounding the housing affordability crisis in tandem with a vicious “bubble” of speculation. This bubble had been exacerbated by  the existence of generous first home buyer’s grants.

This crisis worsened as a consequence of a tight buyer’s and rental market. Over 100,000 Australians are now classified as homeless on any given night. And hundreds of thousands are experiencing housing stress “spending about one-third of their gross income on rent or the mortgage”.

This crisis in the cost of living has been compounded by the spiralling cost of fuel, dairy products, bread, poultry, electricity and bank fees.

Meanwhile, expensive new infrastructure projects (including public-private toll roads, communications and water desalination plans) are seeing massive increases in the cost of basic utilities. Proposed new communications infrastructure (a fibre-optic network), in particular, are set to comprise a part-private monopoly.

To tackle poverty, the spectre of unemployment, and the cost-of-living crisis, there are a number of responses the Australian Labor government must now consider.

Responding to the crisis: ideas for Labor …

Having committed to hold down taxation as a proportion of GDP (Gross Domestic Product), Rudd Labor now finds itself in a difficult position, unable to pursue major reform in health, aged care, education, infrastructure and welfare, without going beyond its mandate.

It is an important ideal for all democratic governments to aspire to remain true to an established mandate. But there must also be flexibility in the event of unforseen contingencies, especially those involving powerful practical and moral imperatives.

Here, the global meltdown in financial markets - and its consequences - must be considered.

Importantly, given the likelihood that US financial woes - including a severe liquidity crisis - lead to a global recession, there will be flow-on effects for the world economy.

Australia’s resource boom depends largely on the Chinese market, and has fed a massive increase in company tax receipts. It is only this surge that has made possible the regressive restructuring and lowering of tax elsewhere, under both Rudd Labor and the previous Coalition government.

Importantly, there are some who foresee a slowing of Chinese growth, with predictions that iron ore shipments will slow and that “iron ore and coal prices could fall by 20 per cent next year”.

But even if China maintains strong growth in its domestic markets, Australia cannot avoid the flow-on-effect of a recession in the US, Japan, and elsewhere.

Again, in such circumstances flexibility is essential. All governments must face the prospect of unplanned-for contingencies. And under conditions of global recession, budget surpluses simply do not make sense.

In order to maintain programs and fund nation-building projects, which themselves provide a counter-cyclical boost, the Australian government has signalled its intention to fast-track such initiatives.

Specifically, there is talk of drawing upon the Building Australia Fund - to bring forward $20 billion in infrastructure investment.

But perhaps an even greater commitment may be necessary.

Importantly, Labor must not use the current crisis as an excuse to implement austerity, or fail in its duty of care to vulnerable and struggling Australians. In the face of rising living costs, the question of pensions has loomed large in public debate. After originally prevaricating on the issue of pensions, Rudd Labor is now set to make a significant intervention in favour of these people.

A $10.4 billion stimulus package has been unveiled. Although action is necessary immediately, most pensioners will nevertheless be glad to receive a single payment of $1,400 as of December 8.

Pensioner couples, meanwhile, will receive $2,100

Following initial confusion, it now appears that this program will include aged pensioners, disability pensioners, carers, Veteran Affairs pensioners, and eligible self-funded retirees holding a Commonwealth Senior Health Card.

Such initiatives have been accompanied by promises to provide 75 per cent of families with dependent children with $1,000 for each child.

In further initiatives, a temporary expansion of first home buyer grants will provide $14,000 for established houses; $21,000 if the house is new. This will only apply until June 2009 and might be considered to be a stop gap measure to stimulate the economy until the effects of infrastructure construction flow through. There are dangers, here, of sparking another dangerous housing market bubble.

Whereas these outlays will provide much-needed respite for many, the more cynically minded might conclude that since job seekers, single parents and students have not enjoyed the same public profile or sympathy, then neither the government nor the Opposition felt compelled to regard their plight as being of the same order.

Importantly, there is a further and most dire need for a broadening and deepening of protections for low-paid and vulnerable workers, including those without children. Means tests for pension eligibility - given the circumstances - ought to be relaxed also. The call must go out now among the ranks of both Government and Opposition - as well as from the Greens, Family First and independents - that double standards are not acceptable.

As to whether or not a more ambitious plan is affordable, a sense of proportion should be maintained. After all, the broader Australian economy is valued at more than $1 trillion.

Expanding the tax base further could provide a windfall for pensions, services in health, aged care, community child care, education, housing; and in the construction of transport, communications and other infrastructure. And proceeds of tax reform should provide for counter-cyclical purposes, as well as ameliorating unemployment levels.

With an increase in public expenditure as a proportion of GDP of between 1 per cent and 3 per cent, the annual commitment, here, could be of the order of $10 billion to $30 billion, depending on the real and underlying need for social security, infrastructure and services.

To provide further support to vulnerable workers - as well as pensioners - reform could include the progressive restructuring of the tax mix. This could include the introduction of wealth and inheritance taxes; altering the brackets and rates of PAYG income tax- including indexation of the tax-free threshold; raising Company Tax by as much as 5 per cent; halving dividend imputation (tax credits for investors); and introducing tax credits for low income earners.

Progressive and systemic restructure of the broader tax system is also a definite must to offset negative consequences for equity with the implementation of a carbon emissions trading system.

In the longer term, more permanent reform of the pension system is necessary. Here, we include - the Aged Pension, Disability Support Pension, Single Parents pension, Carer’s Allowance, Newstart and Austudy. All full pensions should be raised to at least 30 per cent of male average weekly earnings (MAWE) (up by 5 per cent of MAWE or more to $AUS 646.16 in total).

Whatever the final process, the aim must be to eliminate poverty in a real and meaningful sense. All Australians must have access to quality social goods and services as discussed in this paper, as well as access to affordable energy and water, and a varied and healthy diet.

And a modern program to eliminate poverty must also consider the need for social activity, and inclusion with regards to the digital age - in pace with ever advancing standards and means of communication.

Recent initiatives by Rudd Labor are timely and welcome but nevertheless there is more to do.

In conclusion

Even if such moves as suggested in this essay go beyond Labor’s mandate, there is a moral imperative for immediate action on minimum wages and welfare: as well as social wage expansion, including public housing.

The conservative Coalition Opposition has been vociferous in its condemnation of pensions failing to keep pace with a spiralling cost-of-living. Such a stand as this, however, must be taken with a grain of salt. After all, it was they who slashed the Disability Support Pension while in government: and who have unambiguously supported regressive tax cuts and restructure of the tax system, regardless of the effect this has on social services in health, education and elsewhere.

Public investment here could help give the Australian economy relative buoyancy - to resist any world-wide recessionary trend. On this front, at least, the Australian government seems set to take action - but public finance - as an alternative to Public Private Partnerships - would be more efficient, and less susceptible to abuse.

The worldwide meltdown brings to the fore the debate concerning the legitimacy of neo-liberal ideology and the much-vaunted free market. Foreign debt, dependence on credit, and reckless lending standards had long since reached critical levels.

Nor can Australia’s effectively private retirement savings initiative (superannuation), provide the country’s citizens with security. The scheme cannot be depended upon to channel investment into critically-needed infrastructure, and exposes people to unnecessary risk. The fundamentals of a system which greatly magnifies social inequality among retirees - must also be called into question. This again raises the prospect of an equitable, secure and guaranteed public pension fund.

To conclude: in Australia - and worldwide - socialisation of risk and of losses should not simply prop up the private profits of rapacious, unaccountable corporations.

Should government intervene to protect the savings of investors, then clearly there needs to be a just and equitable public benefit as well.

The SEARCH Foundation (ie: Social Education and Research Concerning Humanity) is discussing a proposal that urges Australians to “embrace the pragmatic process now underway to nationalise banks and insurance companies … throwing away the idea of a free market in finance altogether, because it is just too dangerous.”

And further: “Any public funds used to stabilise a bank or finance agency should be offset with public equity, board positions, and in many cases by full public ownership.”

The full statement can be found here.

Indeed, moves to socialise sectors of the finance and banking systems could lead to better standards of prudential regulation, provision of banking services on the basis of need, diversion of profits into progressive social programs; and availability of credit for nation-building infrastructure projects and the like.

There is much more that is worthy of discussion: but unfortunately it is beyond the means of this paper to explore all such issues in depth.

In closing, though, it is enough to say that the new Labor government in Australia has been handed a golden opportunity to break the cycle of neglect and the abuse of power of its predecessors.

The Greens and Family First, meanwhile, have a chance to apply leverage to ensure real justice and compassion in the process of tax and welfare reform, including justice for the unemployed, students and single parents, and expansion of the social wage.

In the case of Family First, organised Christians, need not naturally gravitate towards the political Right - as evidenced by the historic compromise between Communists and Christian Democrats in Italy through the 1970s. Engagement is central as part of the process of building a political and electoral bloc necessary for the implementation of compassionate, decent and just social and economic policy.

It is an opportunity that all concerned would be best advised not to waste.