The Coalition can choose not to revert to trickle-down economics in the budget
While the health and economic challenges our governments have confronted over the past six months of the pandemic have been profound, the actual politics have been remarkably straightforward.
Governments at both state and federal level acted on advice from experts to contain the virus, worked collaboratively and invested behind people and businesses to soften the impact of the consequent disruption. Smart oppositions recognised there was little point in carping and did their part in taking the partisan politics out of the crisis.
The public responded well, accepting limits to their normal freedom of movement, accepting mistakes would be made and positions changed, recognising that in this unprecedented moment, governments that took their responsibility seriously really didn’t have much of a choice.
All that changes in two weeks when the federal government will deliver its delayed 2019-20 budget. This is the point where choices will have to be made, and these choices will rightly attract both scrutiny and political accountability.
The critical choice facing the federal government is whether to continue to invest behind people or to revert to the sort of trickle-down economics that have become the conservative orthodoxy.
The government is already flagging it will fast-track radical structural tax cuts for high-income earners in the budget – a move that will see those earning over $180,000 receiving the whale’s share of the benefit, as our progressive tax system gives way to an effective flat tax.
The government’s logic lies in its ecclesiastical faith that with increased money the wealthy will splash their cash in shops and services to the extent that it will get people working again. But judging from this week’s Guardian Essential report, appetite for this type of economic stimulus is lukewarm at best among the flock.
The vast majority of our respondents believe the government should either stick to the existing timetable or scrap the increases altogether. This is a majority sentiment across all voting segments against the cuts, while in a separate question, just 21% see the logic of tax cuts as economic stimulus.
“Trickle-down” is not just a discredited economic theory, it is also a political choice because there are competing models that are currently being put forward to maximise the collective benefits of government budget spending.
Some argue the money could be better spent on building social housing – creating construction jobs and adding to the much-needed stock of affordable housing.
Or the money could go to maintaining jobseeker and jobkeeper payments, in the knowledge that money to those individuals and businesses most in need is more likely to be spent on the basic goods and services that so many small businesses provide – not so much trickle down as bubble up.
Or even more expansively, the government could simply employ more people – in the depleted but necessary caring industries such as aged care, or in a new system of free early learning, or through turbo-charging renewable energy.
In a separate question, our respondents were given the choice of all these options, and the idea of fast-tracking personal tax cut to the well-off is the least popular. When asked to indicate their top three priorities, a paltry 8% thought it was their top pick, with even Coalition voters left cold.
There’s one final point about this new period we are entering: material consequence.
Until now, the long-term decisions the government has made have lacked immediate consequence. With jobseeker and jobkeeper and eviction moratoriums in place, these have been largely academic exercises. Yes, there have been decisions to exclude the tertiary sector and cultural producers from jobseeker, but even here the doubled newstart payment has provided at least a modest buffer from poverty.
From October the levels of support for business and jobless individuals will be reduced substantially and many Australians face the very real prospect of falling off an economic cliff.
If this occurs, the impact of the choices the government makes in the upcoming budget will become material. If unemployment sours, it will be a consequence of the choice not to invest in jobs. If homelessness increases, it will be a direct consequence of the choice not to invest in social housing. If children fall into poverty, it will be a direct result of the government’s choice to wind back jobseeker.
None of these outcomes are inevitable; they will be the result of the budget choices being finalised in the next 14 days. With those choices will come accountability and thus the political combatants will reengage.
• Peter Lewis is executive director of Essential Media. He will discuss this week’s results with Guardian Australia political editor Katharine Murphy at 1pm on Tuesday