When you change the government you change the country. So said Paul Keating. He was right back then, and he’ll be right again if the Australian people soon elect a Shorten Labor government. For the many company executives asking what that change will mean, Labor will support entrepreneurship and the creation of jobs and wealth while expecting companies to pay their fair share of tax, compete in an open economy and play their part in rebuilding trust in the nation’s institutions.
In assessing how Australia’s alternative government would be different, consider first the macroeconomic environment. As I warned more than 15 months ago the Australian economy has become a house of cards. Falling house prices, persistently weak wages growth and sharply rising household debt are combining to sap consumer spending, which constitutes almost 60 per cent of Australia’s GDP. The IMF is warning of a global economic slowdown. When last in government, Labor responded to the Global Financial Crisis with a stimulus package that is widely acknowledged to have spared Australia from recession.
If, again, the Australian economy headed towards a sharp downturn, a Shorten Labor government would activate stimulatory measures to prevent spiralling unemployment and business bankruptcies. But if the macroeconomic environment were to remain reasonably benign, Labor has announced policies that will enable it to pay down debt faster than the Coalition.
To facilitate faster budget repair, Labor has released a set of structural measures that would broaden the income tax base. They relate to negative gearing of investment properties, dividend imputation refunds and family trusts.
Critics of the negative gearing changes want to maintain a tax advantage for property investors over first-home buyers in bidding for established housing.
Opponents of the no-refunds policy have claimed the removal of cash refunds would tear up the dividend imputation system. They whitewash from history the fact that Keating’s imputation system never allowed for cash refunds; it is a Coalition contrivance that enables well-off retirees with low or zero taxable incomes not just to pay no tax but to receive cheques funded by other taxpayers.
The corporate tax rate will be the same regardless of who wins government, but Labor will introduce the Australian Investment Guarantee on top, allowing businesses to immediately deduct 20 per cent of all new investments upfront. However, a Labor government would take a more aggressive approach to profit shifting by multinational corporations to minimise or obliterate tax payable in Australia.
Businesses that behave competitively would be well respected by a Labor government, but those engaged in conduct designed to substantially lessen competition would have a hard time. Again, Keating describes Labor as the party of competition. His protégé, Chris Bowen, was a very effective competition policy minister in the Rudd government, legislating, among other reforms, to make serious cartel behaviour a criminal offence. Shadow Minister for Competition, Dr Andrew Leigh, promised only last week a strengthening of the unfair contract laws between big and small businesses.
Labor has a history of supporting rational competition policy over political populism. Labor opposes the Morrison government’s “big stick,” Venezuelan-style legislation that would regulate the retail margins of electricity retailers and introduce a penalty of forced divestiture for corporations engaged in prohibited conduct. Government MPs have already called for the legislation to be extended to supermarkets and banks.
A Shorten Labor government would be committed to reducing carbon emissions consistent with Australia’s actual obligations under the Paris agreement. If it could not get the National Energy Guarantee through the Senate, with a 45 per cent emissions-reduction target for electricity, Labor’s Mark Butler would seek to end the climate wars through the government engaging in direct contracting with bidders to deliver both emissions reductions and reliability.
Changes, too, would be made to the industrial relations laws, in recognition of the rationale behind the ACTU’s Change the Rules campaign. Whether the unions get all they want remains to be seen, but Labor’s concerns include the size of the temporary work visa program and the ability of employers to lock out their workers for extended periods. Labor would address unsustainably weak wages growth and reverse cuts in penalty rates.
Shadow workplace relations minister, Brendan O’Connor, is highly approachable and capable of finding common ground between unions and employer groups. An underestimated attribute of Bill Shorten is his ability to bring competing sides together. Shorten is from the consensus-building school of Bob Hawke, a key reason he has been able to preside over a united Labor Party and caucus for more than five years.
Add deputy leader Tanya Plibersek’s engagement with business groups on skills development and shadow cabinet’s initiatives for deeper engagement with Asia and there’s ample opportunity for the business community to work with Labor.
Business will not like all policies of a Shorten Labor government, but it would have a seat at the table and, above all, would surely value the stability a united government would bring to policy making.