Budget will worsen inequality

23 June 2014

Dr CHALMERS (Rankin) (12:56):  I rise today to speak in favour of the private member's motion moved by the member for Fraser, regarding the impact of this budget on inequality in Australia. He has done excellent work to advance our understanding of inequality in this country. I am pleased to support him on this motion. I also want to acknowledge the work of the member for Lilley on these issues. And what better time to debate them? As the rhetoric in the member for North Sydney's recent speech to the Sydney Institute shows, the political architects of this budget see rising inequality not as a challenge to overcome but as an objective to be met. We know that they cling to this idea—long disproven—of trickle-down economics. We know that they are seeking to construct in this society and this country a two-tier society of haves and have nots.

The scale and breadth of this budget's attack on low-, fixed- and middle-income earners are neither unavoidable nor inconsequential. They will increase inequality; not by accident, but by design. Theirs is a deliberate strategy and one that is particularly out of place given an international policy environment increasingly interested in reducing inequality and promoting social mobility. This new and welcome focus is founded on what has become mainstream economic opinion. Even the notoriously dry magazine The Economist has recognised growing inequality as 'one of the biggest social, economic and political challenges of our time'. This government ignores this challenge and instead focusses on making Australia less fair, by asking the poorest and weakest to shoulder the heaviest burden.

The NATSEM analysis of the budget's full impact on families really speaks to this. The member for Fraser mentioned it a moment ago. The data reveals that the poorest 20 per cent of households will see their disposable incomes fall almost 2.2 per cent, while the richest quintile will see a rise of 0.2 per cent. A budget like that can only lead to a wider gap between the wealthy and the low paid in our economy. That is why the Australian Council of Social Services described it—accurately, I think—as a budget that divides the nation. Not only does it magnify inequality today; it will ingrain inequality for many years to come. The cuts to health, schools and higher education make it harder for our nation to develop the deep pools of human capital needed to feed productivity and social mobility in the decades to come.

It is worth reminding ourselves why inequality matters. There is a wealth of literature on this topic but let me boil it down to three key things. Firstly, it destroys human happiness. Secondly, it weakens our society. Thirdly, it weakens our economy. Inequality destroys human happiness because people cannot help but judge their own personal worth by comparing the resources they have with those of others.

In a society like ours, the poor are surrounded, even bombarded, every day with images and living examples of people with advantages of money, status and possessions that they can only dream of. When these inequalities persist—and, worse, if they are handed down from generation to generation—it cannot help but breed a sense of hopelessness that no amount of effort will improve their situation and that social mobility is a relic of the past in an Australia we no longer recognise.

The second point is that large and enduring disparities make people feel that their society and their democracy are loaded against them, that somehow the game is rigged and they can never win. This breeds mistrust and weakens social institutions and democracy, with terrible consequences if left unaddressed.

The third point is that inequality is bad for economic growth. In a series of landmark studies, the IMF has clearly demonstrated the damage that inequality does to growth in the developing and the developed world. Jason Furman, President Obama's economic adviser, added to that literature over the weekend. Not only is this point striking for reaffirming what many of us feel instinctively but it also argues for different models of economic decision making, like inclusive capitalism, a concept fleshed out by Mark Carney, the Governor of the Bank of England. These models reflect the economic reality that equity and growth are not in conflict but can be mutually reinforcing.

We are here in politics—at least I and my colleagues like the member for Fraser, the member for Moreton and others are—to help people lead fulfilling lives and to build genuine social mobility that strengthens and grows our economy. That is the key reason why we are lining up with millions of Australians who reject the unfairness of this budget. It is why we are making the case for a country where fairness is part of the future and not just part of the past.