Action on rising cost of living threat is critical to our future

Photo from Getty: A storm is on its way

Contributed by Joe Montero

There is no doubt that an economic storm is brewing in Australia, and that competing forces are jockeying to deal with it according to the interests they represent. In the eye of this storm is the rising cost of living for most, in contrast with the continuing protection for the wealthiest section of society and the monumental scale of corporate tax avoidance.

Talking about this is not the politics of envy, as some would have it. This is about injustice. The rise in poverty and greater insecurity for the majority of Australians is not accidental. Inequality of power means that some proper at the expense of others. To say this is wrong is not envy but to say that everyone should contribute to our shared wellbeing according to their capacity.

After all, we depend on each other to negotiate life. No one easts bread without the baker. We don’t have a home unless someone builds it. Try catching a train without those who drive it and keep the rail system going. We are social beings and rise or fall together.

Australia must not allow greed and parasitic sectional interest to prevail.

The Albanese government is taking some measures that provide a starting point and should be supported. Back to these later.

Photo from Sky News: Prime Minister Anthony Albanese. His government is providing a starting point

We will face the coming storm together. There are several sides to the rising cost of living. The increasing interest rate is making everything more expensive. There is the housing bubble. Prices might have dropped over recent months. The unaffordability of housing remains a critical issue, and rising interest rates means that those with a mortgage pay more with each rate hike. The Reserve Bank is about to impose a further 0.5 percent rise if the speculation is right. This will add another $148 to the average household monthly budget on a $500,000 loan. This makes a total of $760 since the rise started in May.

Rents are continuing to rise and there is the blowout in the cost of energy.

Despite all the talk about a labour shortage, jobs that are fulltime and permanent remain hard to find. This compounds the effect of the rising cost of living. Another factor is that most household are heavily in debt and facing the cost of repayment. Wages remain stagnant, while the profit share of national income keeps on growing and investment remains flat at best.

Each of these problems is significant. Together, they are much more serious. The immediate impact is on living standards. The other is that they undermine an already fragile economy in more ways than one. They shrink the market, and most importantly, they contribute to damaging the creation of goods and services, the engine that drives the economy.

Tackling the rising cost of living is necessary to avoid or minimise the damage from the coming storm.

A ceiling on interest rates on mortgages would help in the short-term. So would a ceiling on rents. Another move would be action to ensure investment that will create real, long-term, and sustainable jobs, while taking into consideration that the market is failing to do this. Government policy supporting the rise of the wages share is important.

The costs of mortgages and rents are going up and up

Lining government revenues with expenditure needs means ensuring the taxation system is used to deliver greater equality and the means to invest to create a healthy economy. The revenue gap can be filled by closing loopholes that allow large scale tax avoidance by the wealthiest individuals and large corporations. There has been some tilt towards more social housing. This must be better defined and there must be more of that which delivers lower rent towards those who are struggling. Although the states have the primary responsibility, what they can do depends on federal funding. This must be provided on a scale that meets the need.

Adequate investment in public services is investment in the future of Australian citizens and a well-functioning economy.

The decision to support the OECD’s 15 percent floor corporate tax on multinationals exporting funds is right. This floor is unlikely to have too great an impact in itself to meet the intention of making tax free havens attractive. At 15 percent, the practice will still be attractive. But imposing the tax will set a precedent, and it will make increases in the future.

The OECD proposed tax is not only about the percentage. It is a tax imposed according to the intended destination of the funds. We will see if this is implemented.

A tax on exporting money should not be limited to tax havens. Australia’s is an economy that is heavily dependent on foreign investors, and there should be a mechanism that ensure that they move their investment in ways that are in line with the interests of Australia.

Even if the OECD tax is applied, it will still not be enough. The downside of the OECD tax provides a new loophole by allowing greater scope to pay less tax on funds sent to the parent company. This requires attention.

Attention must be put to how taxes are collected in Australia. This side of the tax avoidance industry is also big. The promised tax cut on the highest incomes should be stopped. The precious government Corporate tax cut should be reversed, and the unreasonable loopholes provided by existing taxation law and not available to anyone else, must be closed.

Exemptions can be left to protect smaller businesses under threat.

These measures are necessary to enabling government to act to deal with the coming storm and to ensure that all contribute to the effort according to their capacity. Australia has the right to expect no less and pressure to make it come about.

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