Monday, September 27, 2004

Spending like you stole something

Unpacking just two of PM Howard’s campaign spending promises announced yesterday makes the “drunken sailors” metaphor look a bit soft. Such wastrels traditionally could be put in the longboat until they were sober – in the present case, though, the hangover will last decades, not hours.

First, there is the comparatively cheap – at a cost only of cost "hundreds of millions of dollars" – plan to build a national network of 24 specialist technical colleges for senior secondary students. Leaving aside how, constitutionally, there could be no role for state governments, and how, under international human rights law, unions “or any of that malarky” could be permanently forbidden from such worksites, there is the plain mismatch between the diagnosed ailment, and this supposed cure:

Mr Howard said he believed the neglect of trade education and the promotion of the idea that "the only education worth having is a university education" was one of the reasons why 15 per cent of Australian men in the prime working age group of 25 to 54 were not working, one of the highest rates in the developed world. (same URL)

Err, it is gratifying at long last for the PM to admit, albeit indirectly, that graduate unemployment is a big problem in this country, and one that is seriously understated in most stats (the official unemployment rate for Australian men age 25 to 54 is presumably around 5%, not 15%). As to how churning out a few thousand more chippies and sparkies from c. 2010 is going to do about this pressing problem, however, I’m mystified. Perhaps making boomers’ beach-house renovations cheaper as from 2010 is the limit of the PM’s economic foresight?

More expensive, and more likely to spectacularly implode, if I understand it correctly, is the $1.3 billion package giving small businesses (as defined by annual turnovers of up to $50,000) 25 per cent discount on their income tax liability. If this isn’t just a pea-and-thimble trick, as Labor finance spokesman Bob McMullan suggests (businesses, whether incorporated or not, effectively pay tax on their profits, not on their gross turnover), then I’d speculate that the arbitrage it sets up between middle-earning PAYE taxpayers and middle-earning businesses/“businesses” would instantly create the biggest mass tax rort since the 1970s. With no legal formalities required to become an unincorporated “business” other than obtaining an ABN, a powerful incentive would be created for many employees to exit the PAYE system by simply establishing sham “businesses”. The revenue and other social costs of such a mass migration would be huge.

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