The Coalition is targeting wealthy retirees in an attempt to secure another ‘miracle’ election win. But its policy platform contains little substance beyond the purchase of votes. By Mike Seccombe.
What the Coalition is promising
It was pretty small beer by comparison with the billions of dollars promised elsewhere in this election campaign, but the extra $70 million the government announced it would spend broadening access to the Commonwealth Seniors Health Card last week said a lot about how Scott Morrison hopes to win.
It also said a lot about how the Labor Party plans to stymie him.
The government promised an extra 50,000 older Australians would get the card, which not only cuts their health and pharmaceutical costs but also gives discounts on electricity and gas, and other benefits. It would raise the income threshold from $57,761 to $90,000 for singles and from $92,416 to $144,000 for couples.
This is extraordinarily generous, says Brendan Coates, economic policy program director at the Grattan Institute.
“We’re talking about people with a lot of money,” he says. “The average wealth for that cohort – not including their house – is $1 million for singles and $1.5 million for couples.”
He questions the fairness of the measure. “If we’re going to spend more money to help people, is that the place you should go? Or should you have gone to rent assistance for retirees that are struggling to pay the bills? Or expand dental treatment for people whose teeth are literally rotting and can’t afford to get a set of dentures?”
The policy is not really about fairness, of course; it’s about electoral demographics. The fact is retirees, particularly wealthy, self-funded retirees, vote heavily Liberal. At the 2019 election, voters over the age of 65 were the only group who gave a majority of their first-preference votes to the Coalition: 55 per cent to the Liberals and 4 per cent to the Nationals, according to the post-poll Australian Election Study. The seniors’ vote was crucial to keeping the government in power then and could be again now.
Hence, more subsidies for millionaires and multimillionaires.
Coates points to other policies from the Coalition aimed at shoring up support from this group. The rate at which retirees must draw down their tax-free superannuation was halved during the pandemic, in expectation that the value of shares and other assets would fall. But, he notes, those assets have since more than recovered their value, and yet the government is saying it will extend the measure.
Likewise, the government reduced deeming rates – that is, the assumed rate of return on a person’s financial assets, including their investments, used in determining the size of any pension they receive – in response to record low interest rates. But it has promised not to raise the rate for at least the next two years, even as real returns are expected to be higher.
These perks add up. Taken together, says Coates, “the deeming rates, the seniors healthcare card extension, the minimum drawdown requirements … total about a billion dollars out to about 2025”.
It is a measure of the electoral power of wealthy retirees that as soon as the government made its expensive pitch for their votes, Labor matched it.
When the government announced it would reduce prices of medicines under the Pharmaceutical Benefits Scheme, so the maximum cost of any medication on the PBS would be $32.50, Labor announced it would cut the price to $30.
Similarly, Labor adopted the popular parts of the government’s housing policy – despite all evidence from economists that such home-buyer deposit policies drive up the cost of housing. Labor added its own shared equity scheme, whereby the federal government would contribute up to 40 per cent of the purchase price of a new home, or 30 per cent of an existing home.
On Defence, the government has committed to spending above 2 per cent of gross domestic product, which Labor also matched.
The government’s election campaign began in earnest with the budget. The big-ticket items there were several short-term giveaways to voters. There was a one-off $250 handout to pensioners and welfare recipients, costing $1.4 billion; a halving of petrol excise, to expire after six months, costing $2.9 billion; and one-off expansion of the low- and middle-income tax offset by $420, costing $4.1 billion. Labor waved them all through.
Beyond that, though, the government is running very light on policy. Morrison, the masterful negative campaigner, has few credible lines of attack. Criticism of the cost of Labor’s policy offering has gained little traction, given the Coalition’s own huge deficits, racked up in response to the pandemic. That response, however, is one of the few achievements it has to point to from its time in office.
“Their greatest achievement this last term,” Coates says, “is getting the unemployment rate down to 4 per cent, is the rapid economic recovery from the recession. Labor would argue that they would have done the same thing, based on advice from the Treasury, but I think you’ve got to give the government a fair bit of credit for actually doing it.”
Asked to nominate the big, distinctive policies the government has, however, Coates pauses. “Jeez. The Coalition. Is there anything?”
The government’s pitch has come down to essentially two arguments: that it is better at running the economy and that it is the party of lower taxes.
In support of the first, it points to the rapid improvement in the budget bottom line, although much of that is due to forces beyond its control. Australia’s earnings from commodity exports are forecast to hit a record $424.9 billion for this financial year – fully one-third higher than last year. Driving this, says the latest Resources and Energy Quarterly report, “is the upsurge in the price of energy commodities since Moscow’s Feb. 24 attack on its neighbour”.
As for the second claim, Morrison insisted during Wednesday night’s leaders’ debate that it was true. “We have always delivered lower taxes,” he said. “Under our government, taxes will always be lower.”
He has made the same claim ad nauseam throughout the campaign. But it’s not true, says Richard Denniss, chief economist at The Australia Institute.
The government – with Labor support – has legislated tax cuts worth $15.7 billion a year, to come into effect in July 2024. But the low- and middle-income tax offset, worth $7 billion a year, is due to end this year.
The net result, according to the institute’s analysis, is that 80 per cent of taxpayers will be worse off.
“When the low- and middle-income tax offset ends, middle-income earners like teachers, nurses and midwives will pay $1080 more in tax,” the report says.
Meanwhile the biggest benefit of the tax cut will go to those earning more than $200,000.
These findings tap into the electorate’s well-documented understanding of the Coalition parties – that while they are competent economic managers, they govern for the benefit of employers and the wealthy.
Now, in the closing stages of the election campaign, Labor is seeking to exploit that.
When challenged last Sunday in the second leaders’ debate to support the right of gig economy workers to at least the minimum wage, Morrison prevaricated. Then, on Tuesday, Anthony Albanese was asked at a media conference if he would support an increase in the minimum wage equal to at least the current inflation rate of 5.1 per cent. He replied, “Absolutely.”
Morrison, along with various business lobby groups and conservative economists, has since issued repeated dire warnings that employers could not afford to pay such an increase, and that workers would just have to accept their wages would rise more slowly than inflation.
It should be noted here that the Reserve Bank, among others, has argued for years that low unemployment, which we now have, would eventually lead to wage rises, and that this would be desirable. The government itself has argued that case. Numerous economists have noted that over many years the benefits of productivity gains have flowed disproportionately to capital, rather than labour, and that over the long term, standards of living fall unless the rate of growth in wages exceeds inflation.
But in the final leaders’ debate on Wednesday night, Morrison was put in the uncomfortable position of defending a real-term cut to workers’ wages.
No doubt it shored up support for the Coalition among business owners. His political problem is the fact there are many more workers than bosses.
And Albanese’s argument was emotionally persuasive.
The “heroes of the pandemic,” he said, “people on the minimum wage, are cleaners, they’re people working in the care sector, they’re people who work in retail, they are people who helped get us through the pandemic. They deserve more than our thanks. They don’t deserve a wage cut.”
Having “boxed clever”, as they say in the fight game, throughout most of the election campaign, absorbing every policy hit the government tried to land, Albanese and Labor have come off the ropes.
And Morrison, the slugger, is left looking increasingly punched out.
This article was first published in the print edition of The Saturday Paper on May 14, 2022 as "What the Coalition is promising".
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