Thomas Piketty is the epicentre of a seismic wave in economic discourse prompted by the publication last March of Capital in the 21st Century. In this book, he and his colleagues show that, among other things, wealth accumulation is not benign. They argue that current conditions have set us on track for a return to 19th century-levels of inequality, where inheritance — not labour, earnings or merit — determines quality of life.
Going over the Commission of Audit proposals, I couldn't help but think that the auditors and the Coalition Government seem keen to expedite this neo-Dickensian era.
Mandatory co-payments for GP visits, increased co-payments for subsidised medicines, students paying more for higher education, lowering HECS repayment thresholds to the minimum wage, with the minimum wage itself cut from 56 per cent of average weekly earnings to 46 per cent, pushing back the pension age as if increasing life expectancy matches capacity for work ... the list goes on and on and on. It is death by a thousand cuts, unless you have the wherewithal to pay.
For all the rhetoric about everyone pitching in to 'repair' the budget, it is clear the burden is to be inequitably borne. The audit, for instance, barely nips at generous superannuation concessions for the wealthy, deferring these for a later 'review'. With the Budget due in less than a week, tax breaks won't soon be rationalised.
Meanwhile the 'budget emergency' being used to justify historic changes to welfare — but not taxation — is unconvincing. Australian social expenditure at 19.5 per cent of GDP is lower than in OECD countries such as Germany, the UK and Italy. The deficit itself, as a percentage of GDP, is within the lower range internationally.
None of the chief economists interviewed recently by Fairfax think an urgent return to surplus is warranted, which exposes it as nothing more than a political fetish. Moreover, the structural changes they propose for addressing the deficit have nothing to do with social expenditure: abolishing negative gearing, taxing trusts like companies, broadening or raising the GST, reducing the capital gains tax discount and tightening superannuation tax breaks for high-income earners.
These ideas aren't as dramatic as Piketty's proposals, which include 15 per cent tax on capital and 80 per cent on very high incomes, nor do they directly confront the inequality that concerns him. Yet both sets of ideas highlight taxation as a key approach to self-perpetuating concentrations of