PASSWORD RESET

Magazine of Socialist Action in Australia

Spending cuts not required, Australia awash with wealth

Reading Time: 3 minutes

By Kirk Leonard

“We have to live within our means” chants federal treasurer Scott Morrison from his many media platforms as he cuts social spending. But there is plenty of wealth in Australia that could be invested to maintain or boost investment in education, health, welfare, transport and housing services.

Corporate elites have used the tax system and the federal budget to shift a huge amount of wealth from workers to themselves in the last three decades. Australia’s corporate tax rate reached 49% during the 1980s but now sits at 30%, ten points lower than the US. In practise many profitable companies pay as little as 10%, some none at all.

As tax rates on corporations fell, the federal budget increasingly relied on income taxes, mainly from wages. In 2013-14 taxes on wages contributed $166bn to the budget while profits only contributed $67bn. Last year journalists exposed the fact that one in three big companies in Australia paid no tax.

New record profits have been posted every year since 2009 by the Commonwealth Bank (CBA). In the past six years they have netted over $45 billion in profit, more than the total budget deficit. And it’s not just CBA, Westpac, ANZ and NAB all posted graph bursting results in recent years.

Last year the four big banks made a combined profit of $30.2bn. They spent much of this on dividend payments to shareholders, the rest is held privately by bank owners and the banks themselves, who may use it to become shareholders in other companies, buy land just to re-sell (pumping up the housing bubble), or hide it away until they find a more profitable outlet.

Moreover their methods of amassing such vast sums of money involved ripping off retirees through dodgy investment schemes, refusing insurance payouts to sick people and conspiring amongst themselves to manipulate the interest rates paid on mortgages. Little wonder that last month a Fairfax media poll found 65% support for a Royal Commission into the banks.

Banks are not the only companies flush with cash. BHP and Rio Tinto, Woolworths, Coles and Telstra all raked in huge sums in the last years. The kind of wealth that corporate Australia is awash with is more than enough to reverse both Liberal and Labor cuts to social spending, plug the budget deficit and even begin to invest in new projects and programs.

Cuts to social spending are a political choice, not a financial necessity. When treasurer Scott Morrison claims we aren’t “living within our means” he isn’t explaining that he is looking after corporate profits by artificially restricting “our means”.

Stamping out tax evasion conspiracies and reversing the trend to lower taxes on profits would be a good start to increasing our “means” to defend and extend a good quality of life for all people. But none of the parties in parliament can be trusted to do this.

When Labor were last in charge of the budget they cut support payments to sole parents, planned to cut $2.8bn from tertiary education and let the mining companies design their own tax system. Workers and students need to build their own organised and sustained political movement to fight for progressive tax reform.

A new political movement of workers and students shouldn’t stop at tax reform though. Tax reform is not enough because it still leaves financial and political power in the hands of big business. They will not give up their wealth and power easily. A movement that fights for more progressive taxation has the potential to go much further and pose an alternative to the entire profit-driven system of capitalism.

As Karl Marx – the founder of modern socialism – explained 150 years ago, profit is wealth produced collectively and cooperatively by the working class but ‘appropriated’, owned and utilized by the capitalist class. This fundamental unfairness is at the centre of capitalism. It is one of the key reasons that socialists argue that the big companies should be publicly owned.

On the basis of public ownership of key sectors of the economy it would be possible to democratically plan how the wealth that we all play a role in producing is distributed and invested, instead of that process being controlled by a tiny minority of capitalists and their assistants. This is the kind of alternative democratic socialist system that workers and students should fight for to defeat Scott Morrison’s budget.

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