Economic inequality in Australia is the worst it has been in 20 years — if the goal is to improve living standards, our leaders should be addressing it, writes Carl Rhodes.
NEXT MONTH, LEADERS from business, unions, civil society and government will gather to tackle Australia’s economic future at the Economic Reform Roundtable. The stated goal is to identify how to improve living standards for Australians.
For a nation lagging behind its OECD peers on economic inequality, the importance of the roundtable cannot be overstated. Productivity, economic resilience and sustainable public budgeting will be the main themes.
Ahead of the roundtable, the Centre for Independent Studies (CIS) released a report provocatively titled Leviathan on the Rampage: Government spending growth a threat to Australia’s economic future. It claims that excessive government spending, welfare dependency, and the public service are driving economic decline.
The CIS has long prided itself on being a bastion of classic liberal ideas, in the spirit of foundational neoliberal thinkers such as Friedrich Hayek and Milton Friedman.
The report reflects a consensus that has been immune to reform for decades. A commitment to small government, coupled with advocacy for austerity budgets that affect the most vulnerable members of society, is stock in trade when it comes to neoliberal policy advice.
The report has much to tell us about how today’s Australian neoliberalism views the well-being and productivity of today’s Australians — views that need fresh scrutiny if improved living standards are to be achieved.
Neoliberal austerity
Robert Carling, Senior Fellow at the CIS and author of the report, argues that the community is expecting too much from the government. It is time to tighten the budgetary belt for the benefit of the nation.
He warns that a failure to rein in government spending will lead to a catastrophe of budget deficits, increased taxation, and low economic productivity.
The main culprit for the spending problems, Carling argues, is the National Disability Insurance Scheme (NDIS). Australia is being dragged down by a “culture of dependency”, he claims.
The report argues:
“If current trends continue, Australia will continue on the path towards a European-sized welfare state…”
Ominously predicting that:
“The culture of dependency and entitlement that has already taken root will continue to spread and deepen.”
Populist posturing
Far from offering an original contribution to the debate on public spending, the report recycles tired neoliberal tropes that blame the most vulnerable for structural economic issues.
The hackneyed arsenal of neoliberal economics is brought out in full flair. Welfare recipients are blamed for the nation’s troubles, the care economy is dismissed as unproductive, and government expenditure is bemoaned as wasteful.
While the report is light on originality, what is especially worrying is its populist pot-stirring. Much has been discussed about the cost and value of the National Disability Insurance Scheme (NDIS). Given its importance to the well-being of so many Australians, this is an important debate to have.
This report does little to advance that debate. Instead, it blames what it claims to be a growing class of Australians who call on social benefits. It is not just welfare recipients. Carling takes aim at all Australian Public Service (APS) employees, whom he decries as being “dependent on government for a living […] through public sector employment”.
Drunken sailors?
Predictably, conservative media commentators embraced the report. John Kehoe uncritically amplified it in the Australian Financial Review, emphasising that “The National Disability Insurance Scheme is the chief culprit”.
At Sky News, Steve Price used the report to claim that the Labour Party was “spending like a bunch of drunken sailors”. The Spectator headlined how government spending is a “disaster for the economy and our democracy”.
Despite such uncritical reporting, the CIS report is misleading and dangerous. Its so-called arguments are little more than an unthinking rehash of the most tired neoliberal economic orthodoxy.
The worst of it is that it engages in the egregious practice of blaming those citizens most in need by casting them as burdensome bludgers, while castigating hard-working public servants as government dependents. This is not just offensive, it is reckless.
Australia is a low-tax country
The CIS report focuses on changes to Commonwealth spending over the past twelve years, but fails to make any international comparisons. Doing so reveals a very different reality, as well as one that does not support the CIS’ populist rhetoric.
A report released last week by the Australian Council of Social Services (ACOSS) confirms that, measured as a percentage of GDP, Australia is the ninth lowest taxing country in the OECD. Similarly, the income tax paid by average workers in Australia is relatively low compared to other developed countries.
All this points to Australia doing relatively well when it comes to balancing taxes and expenditure. If there are any bludgers in the system, it is not hard-working Australians or those who need welfare support. In terms of NDIS expenditure, much of the problem with increased costs is caused by opportunistic entrepreneurs abusing the system for private gain.
Private enterprise and the public good do not always mix, as evidenced by the billions of dollars of tax owed to the Australian Tax Office that go unpaid by private companies. Let’s not forget the fossil fuel companies that received more than $10 billion in subsidies. Should that be labelled a “culture of dependency”?
What about equality?
Instead of a regulated and democratically accountable system of social welfare, the CIS proposes that Australia would be better off relying on “extended family supports, philanthropy, charities, volunteering and the spirit of self-reliance in place of state dependency”.
A nation that supports people in need does not create dependency; it cares for its citizens and believes in the value of a just and stable society. Here lies the real form of dependency we need to be worried about: casting people out so that they become at the mercy of free market fluctuations and the benevolence of the rich. This has never been a road to justice.
While Australia is amongst the world’s wealthiest countries, that wealth is unevenly distributed. The top 20% of Australians hold 64% of the nation’s wealth, and the highest paid 20% of Australians earn almost six times as much as the lowest earning 30%.
Amongst OECD nations, Australia has the 17th-worst level of income inequality and the 19th-highest level of wealth inequality. Economic inequality in today’s Australia is the worst it has been in twenty years.
Australia faces real economic challenges, but scapegoating welfare recipients is not a solution — it’s a mean-spirited distraction. A more constructive path lies in building a fairer, more inclusive economy that supports all citizens, not just those who already benefit from inequality.
Carl Rhodes is Professor of Business and Society at the University of Technology, Sydney. He has written five books on the relationship between liberal democracy and contemporary capitalism. You can follow him on Twitter @ProfCarlRhodes.
Support independent journalism Subscribe to IA.
Related Articles