Labor's defining mission

Bill Shorten

The theme that you’ve chosen for this gathering is ‘an uncertain world’. We live in an uncertain world. We live in uncertain times—yes we do, we most certainly do. But to varying degrees, we always have. I suppose that if you were a young Australian in the 1960s where you could be sent to a war in Vietnam, that must have been an uncertain time too. Today some of you might be concerned about North Korea. Some of you may even be concerned about Donald Trump. Some of you might be worried about Brexit, your superannuation, the share market. And now more than ever we are all concerned about terrorism.

But let me assure you, Australia remains a good place to be. We're peaceful, we're open, we are a country that's always had the courage and imagination to overcome its challenges. My opponent is not an extremist, neither am I. The media here aren't extremists either.

But people do have the right to be concerned. I submit today that concern springs from the fact that the economy is not working as it should, in the interests of working Australians. Australians are asking themselves, their family, their friends, their elected representatives about the country’s future and where people fit in, in our nation’s future. They are asking about what sort of deal will we pass on to the next generation.

Across our nation—hope, faith in that generational contract is retreating because inequality is on the march. Workers’ share of income is at its lowest level in a half a century. Too many people are working harder, for less. Less money in their pay packet, less security in their job. And for over one million under-employed Australians, they're working less hours than they would like to. More and more Australians are part-time or casualised, denied a proper income that they could live upon. They are able to be dismissed, put off, or have their contract varied at any time. 

The Australian Chamber of Commerce and Industry says that the current regulatory environment is ‘hostile’ to enterprise bargaining. The union movement knows that the current system is letting workers down. People are underpaid, under-represented and in many cases, too frightened to complain.

In the regions and the suburbs we are seeing the impact of a new technological revolution where thousands of jobs can be replaced by a handful. Entire industries, like car manufacturing have been displaced. When Australians are told that there is a shortage of employment in professions, in teaching or nursing or engineering—we tell our young ones to spend the years training. But then they take even longer to find full-time work, if they in fact do. More and more of us cannot afford to live in proximity to where we work.  We're left relying on transport systems designed in the 1880s and brought up to the standards of the 1950s or 1960s. And there are very many of our fellow Australians who live from one fortnightly pay to the next. For them, the hard decisions never stop. Our fellow citizens, they see the contrast. The most profitable banks in the world, ripping people off. An energy-rich nation with rapidly escalating energy prices. And housing prices locking out a generation who cannot rely upon rich parents.

In this set of circumstances I want to say to the politicians and the media commentators who bemoan in terms of Old Testament prophets about the rise of ‘populism’—they’re just shooting the messenger. It’s no good pining for the reforms of the 80s and 90s if we do not recognise the defining qualities that made those reforms possible: a voice for working people in the decisions which affect them, inclusion in the economy, fair pay, a social wage, a strong, world-class, world-leading safety net. Nostalgia does not prepare our nation for the decades ahead. We need a new focus on the biggest threat to our health as an economy and our cohesion as a society: inequality. 

  • Inequality in wages and tax.
  • In job security and bargaining.
  • In education and healthcare.
  • Inequality for women—in pay, in leadership and superannuation.
  • Inequality for our first Australians on nearly every measure that we can think of.
  • And inequality for home—buyers, first home—buyers and renters alike.

Every serious economic authority, from the International Monetary Fund to the chair of the US Federal Reserve is now warning that inequality threatens prosperity. The Governor of our own Reserve Bank has spoken so powerfully about the ‘crisis of low pay’. Inequality is an economic problem— but it is not just an abstract concept.

Inequality is why young people, young Australians are more uncertain than they've been for generations. But it isn't just about young people. Inequality is Australians going for years without a pay rise—but paying more taxes than their boss. Inequality is when women, due to the gender pay gap, effectively work for the first two months of every year for free, compared to their male colleagues. Inequality is when families are demoralised because they can barely afford to rent, let alone buy. Inequality is workers in their 50s and their 60s displaced, struggling to find work again—job interview after job interview, unsuccessful. Inequality is LGBTI Australians who are just waiting for a parliament to be good enough, to be strong enough, just to simply be fair. 

And it isn't just the gap between the very well off and everyone else. It’s the gap between those who live in the resource-rich, infrastructure-strong, centre of our big cities and those who live in the outer suburbs and our regions. It's the digital divide between access to good NBN and slow second rate internet. Between well-funded schools and those without resources. It's the gap between our generation and the next. And unless we act on the sources of inequality—then those gaps become tears, the tears become fractures and the fractures become chasms. Permanent fault lines in our country.

Inequality kills hope. It feeds that sense, that resentment, that the deck is stacked against ordinary people, that the fix is in and the deal is done. That it’s not what you know—it is who you know. That the wealth of your parents is becoming the defining feature and source of your future. That your success in life is pre-determined by your parents income. It fosters that sense of powerlessness that drives people away from the political mainstream, down the low road of blaming minorities and promising to turn back the clock. Inequality speaks to a fracturing of our nation, to a fraying of the old links: The link between hard work—and reward. The link between playing by the rules—and getting ahead. The link between Australians’ daily lives—and the political debate in Canberra.

I'm all for wealth and for wealth creation. I'm all for productivity increases, I’m all for savings and for profits. And I understand that no government, no matter what political persuasion, can legislate happiness. But the Hawke-Keating framework which took government out of some decisions, always relied on the automatic stabilisers working. Dealing with what you would expect from external economic shocks: the movement in wages growth, adjusting the exchange rate, the markets—this was the natural part of  the system which the automatic stabilisers would go to work in.

But we are now seeing weaknesses and uncertainty because the superannuation that should have gone up to 12 per cent, didn't. Because wages growth has continued to stagnate, because we have jobless growth.  We have growth which doesn't deliver a rising tide of wages growth. Because the bargaining system has become one-sided. Because productivity and investment growth are stagnating. 

For four years now the Liberals have invested in ideology and not in the nation. Now the Prime Minister, understandably takes every opportunity to tell Australians that he’s delivering, that he’s keeping his promises, that he’s achieving, that he’s getting things done. In a way, he’s right. He has actually given his supporters nearly everything they wanted.

  • There is no advance on climate and energy policy.
  • Negative gearing is still untouched.
  • There is a  massive tax cut on its way for multinationals.
  • There's an income tax cut for the top tax bracket.
  • And there is no free vote for marriage equality.

Not to mention:

  • Cutting funding for schools, for TAFE and for universities.
  • The penalty rates have been cut at long last.
  • Don't worry about the Medicare freeze, most of that's still there.
  • There'll be an income tax hike through the Medicare levy for low and middle income earners.

But I want to suggest, that reheating and repeating these policies only exacerbates inequality and it certainly hurts confidence. It's an approach which is taking Australia nowhere. Our country cannot persist with the failed policies of this government:

  • Just letting the market rip on jobs and wages.
  • Tax support for investors but not first home buyers.
  • Making it more expensive to go to university at the same time as cutting university funding.
  • Stopping an exorbitant, as the government would say, a $365 energy subsidy to people who are coming on the pension, but still handing over a tax cut this year to millionaires, of $16,400.

People know the consequences. They're living with them. And while they watch the Prime Minister and his party become a vacuum of infighting, obsessed with themselves—managing to spend days arguing with each other about what the late Robert Menzies meant in a speech he gave 75 years ago. The Australian people were left on their own. 'Worry about the basics on your own, while we sort out what Menzies meant.’

  • Left to find a steady job with decent pay.
  • Getting some relief from rising power bills. 
  • Accessing quality healthcare when your kids are sick.
  • The older Australians who, right now, are putting off filling a prescription because they have to pay their heating bill this week.

When people speak to me in my town hall meetings that I attend, when they speak to me about these issues, I do not think it is a sufficient and respectful enough answer to the Australian people, to hide behind some sort of philosophical objection to government intervention. I did not run for parliament to shrug my shoulders, and say: ‘Oh well the invisible hand. That'll help you. The market will decide’. I believe there are things that the government can do and should do. I believe there are investments that we have to make, reforms that we have to drive.

That is why tackling inequality will be a defining mission for a Shorten Labor government. And this begins with taking responsibility, not by hiding from it.

  • Working with business to drive the industries that deliver decent jobs. Jobs that people can build a life around, gain a mortgage around, form meaningful relationships and have dreams and hopes.
  • It's the responsibility to end the toxic politics of climate and energy—creating certainty to boost investment and drive down prices.
  • It's about putting the great Australian dream of owning your own home back within the reach of working and middle class Australians.
  • And it's investing in Medicare, so that Australians are healthier at home and more productive at work.

It's about recognising that the system as it stands is accelerating inequality rather that addressing it. It is entrenching unfairness, rather than alleviating it. A belligerent defence of trickle down economics is no kind of plan for Australia's future. Fiddling around the edges won't fund the vital investments in the human capital that we need—from the early years, to school, to TAFE and university. And simply running the same out-of-touch Liberal game plan, of tax cuts for millionaires and multinationals, at the same time as watching cuts to wages and implementing cuts to services—this will only deliver another round of low wages growth, low economic growth, low productivity growth, low investment.

It's time for something bigger and bolder than that tired old prescription. A plan for the best. What is wrong with Australia wanting to have the best schools? The best teachers, for every child? What is wrong with having the best TAFE  and vocational education and apprenticeship system in the world? And having affordable and accessible world-class universities? Education is not something we dig out of the ground. Education is the luck we make ourselves, as a clever country. It's how we set Australia up for a high wage, high skill, high growth, high productivity future. It remains the best, and most enduring and most powerful instrument for tackling inequality.

And if we're going to fund these vital investments for the future and keep our budget strong, we need to look at the growing and old faults lurking in our tax system. The whole picture: revenue and expenditure, including tax subsidies. Including reforms in the past that we might have dismissed as too hard, too politically difficult. I believe Australians are smart enough for this conversation. I think people are hungry for something more substantial than the current political fare. It is time to go to the too-hard basket of tax reform and re-examine the issues. Australians are ready for an authentic, no-nonsense debate about whether our tax system accurately reflects the values of our home, our nation. They're ready for a debate about who our system helps and how. About what kind of behaviour it rewards.

Now, we pride ourselves on being the home of the fair go. Egalitarianism. In Henry Lawson's words, we ‘call no biped lord or sir, and touch our hat to no man.’ But he's not describing our two-class tax system in Australia, with two sets of rules. There is one for the vast bulk of Australians: the pay-as-you-earn workers, many of whom have probably already done this year's tax return. They get the group certificate, they fill in the forms, they may go online. Maybe they've claimed a couple of modest vanilla deductions. Perhaps $1500 on the salary sacrifice for the car, your work uniform or boots. This, friends, is the economy-class tax system.

But then there is the business-class tax system. Beyond the curtain. Where a different tax menu is served. A whole different set of rules for people who are fortunate to have the financial wherewithal, to mine the plethora of choices for aggressively minimising their tax. Significant property portfolios, complex deductions, parking the money in off-shore tax havens. People with the resources to opt-out, to upgrade themselves to the pointy end. People with sufficient wealth to utilise every loophole. To take advantage of every tax subsidy.

Now almost all of this is perfectly legal. But when a nurse on $50,000 asks why someone who earns 20 times more than they do, pays less in tax—saying ‘it’s legal’ is not satisfactory. The argument that says that you can opt-out if you have more money, and whilst the theory is that everyone can use the same tax act, the fact of the matter is that not everyone can afford to fly the business class tax system.    If you’ve made or inherited a lot of money, I don’t have a problem with that. I don’t judge or resent people who have made a fortune or who haven't made a fortune. But one of the great things about Australians, is even those who are personally secure—they are uncomfortable when they see the generational contract broken. When they see a system that is failing the future. And that is at the heart of what we must to ask about our tax subsidies.

What are we rewarding? What are we encouraging? What kind of message are we sending about effort and work and making a contribution to society. And what does it cost the federal budget? Because the more that people can opt-out, more falls upon those who can't opt-out. We now have a budget deficit racing past half-a-trillion dollars. In that set of circumstances I think we have to go back and look at some of our shibboleths.

We have a responsibility to look at more than just tax rates and spending levels. We need to look at tax expenditures, tax concessions—tax subsidies. For example, say the government wants to encourage more research in Australia. We might invest more money directly, by increasing funding for the CSIRO. Or we might expand a tax concession to encourage, appropriately, private firms to spend more on R&D. But from the point-of-view of the budget bottom line, there’s no difference as to which option we take. Both cost the budget money—either in spending or in foregone revenue. Both involve the use of taxpayer dollars. Both are expenditure. So we should look at them both.

Now governments from both sides have repeatedly tightened our payments system. Today Australia has the most targeted safety net in the world. That’s generally a good thing, except when it goes too far—but it means more often than not, the money goes to those most in need. We should apply this same unrelenting rigour to tax subsidies—we should ask ourselves:

  • Are the subsidies and concessions currently in place, working as intended?
  • Are they delivering the value for money?
  • Are they helping the right people?
  • And can Australian taxpayers afford them?

That’s why one of the very first economic policies I announced as leader, back in 2015, was a tightening of the overly-generous concessions for high-income superannuation. What started life as a concessional rate to encourage saving for retirement had become well and truly elongated up the wealth chain. It had become, for all intents and purposes, a tax haven for the very well off. And I have to say the government finally came to the same view that I'm enunciating. I mean, there was a shocking number of missteps, including retrospective changes to super. But to be fair, the government has partly adopted our policy—after years of criticising us. These are examples, these changes to super are an indicator of our rigorous, fair and balanced approach to tax subsidies. Could we keep affording to give overly generous concessions at the top end?

Now, we took the same approach in 2016 when we announced our plans to reform negative gearing and capital gains. It does feels like a lifetime since Mr Turnbull came to this conference, in 2015 I think, and said ‘everything was on the table’ for economic policy. Back then, the Treasurer was still talking about the ‘excesses’ in negative gearing. Yet when Chris Bowen and I announced Labor’s plans to only allow negative gearing on new homes and to halve the capital gains tax discount, the government rejected it, outright. Because they wanted the clearest possible political contrast for a scare campaign. Now that was always a risk—it’s part of the reason the negative gearing can has been kicked down the road for more than 30 years.

But I want to take you back to those questions I posed earlier: Is negative gearing as it is currently constituted working as intended? Is it delivering value for money? Currently, 93 cents in every dollar of investment goes to the purchase of existing housing stock. That’s not creating jobs or boosting housing supply. But there’s no question that it does hurt housing affordability. So it is not value for money, or the intention of the concession. Is it helping the right people? Well, when we developed our policy, we looked at the data, we looked at the evidence:

  • An Australian in the top tax bracket is two-and-a half times more likely to be a negatively geared landlord than someone who is not in the top tax bracket.
  • The wealthiest 20 per cent of Australian households own 72 per cent of investment property—and 51 per cent of investment property debt.
  • Indeed 64,000 Australians used negatively geared property to reduce their taxable income to zero. 

So no, I don’t think these subsidies are helping the right people. Australia shouldn’t be giving more support to an investor purchasing their 7th property than a young person trying to buy their first property.

Which brings us to the last point—can the taxpayer afford them? Over the decade, these two concessions will cost the budget $37 billion dollars. Or let me put it in individual terms. It costs the average taxpayer $310 a year to pay for someone else’s negative gearing. How do you tell a young couple in Sydney who’ve missed out at auction after auction, that not only is the person they’re bidding against getting a tax concession—but they are paying for it.

In my 2017 Budget Reply, I announced that Labor would be taking-on another vehicle for aggressive and unsustainable tax minimisation: the massive deductions for management of tax affairs. This has become a tax deduction for tax minimisation. The average Australian spends $348 to manage their tax affairs. But some of the most fortunate tax-minimisers spend an average of $2.5 million. So Labor will be capping the deduction at $3000 for individuals. This change affects fewer than one in 100 taxpayers—but it will save the budget $1.3 billion over the medium-term. The principle is just as important as the revenue. We shouldn’t tolerate a two-class, opt-out system, just because that’s how it currently stands. And we cannot ignore unfairness, even if there is political risk in remedying it.

In conclusion, the first time I spoke to this Conference as Labor leader I promised you we wouldn’t waste our time in Opposition. I said we wouldn’t fall into the ‘complacency trap’. My promise stands. Labor will continue to develop and announce our policies, putting together a program for the future of the nation. Policies that are focused on the sources of uncertainty, to tackling inequality.

We live in a great country.  But if we want to stay ahead of the pack, we need to invest in the future now. Our health system is good, but pressure is increasing. Our energy market has tremendous potential, but prices are rising.

Our growing cities and regions are great places to live. But if you live in the outer suburbs and you’re sitting in traffic two hours a day because of a government that chose not to invest in public transport or build a better road.You know, better than most, the price we pay for complacency, for putting off the hard decisions to those who come later. So Chris Bowen, Jim Chalmers, Katy Gallagher, Andrew Leigh—my economic team and indeed my whole party are continuing their hard work on a comprehensive set of policies for a fairer tax system and a stronger budget. We’ve identified the need, we’ve agreed on the approach and I suspect we will continue to lead the debate.

Optimism has its place, sunny optimism most definitely has its place. But in public life I think determination counts for more.  We will do as a government, what this government is not doing. We will reduce the uncertainty and give Australians a plan and commitment. I am determined to give Australians a vision to vote for, not just rely upon the mistakes of our opponents. I am determined to give Australians an agenda to believe in, an explanation of where they fit in.

  • Rewarding hard work
  • Investing in the future
  • Protecting the fair go all round

It will not just be a list of government failures—but a plan to tackle inequality and restore confidence in our economy. When there is confidence in the economy than anything is possible. When all Australians are sharing the national dividends of our hard work on a fair basis, then we see things begin to hum. It is the vision we have for families, for businesses, for the future of this nation. That’s what we can do and that’s what we will do.


Bill Shorten is the national leader of the Labor Party. This speech was presented to the Melbourne Institute on Friday 21 July 2017 as 'Tackling inequality: a Labor mission'.


See also:

Suggested citation
Shorten, Bill, 'Labor's defining mission', Evatt Journal, Vol. 16, No. 4, September 2017.<http://evatt.org.au/papers/labors-defining-mission.html>