One dismal legacy of the right wing Coalition’s nine years in office in Australia is the greatest disparity in income between workers and corporations in Australia’s recorded history.
Last week’s national accounts from the Australian Bureau of Statistics (ABS) reveal that the share of the nation’s income going to employees fell in this year’s June quarter from 51.0 per cent in June last year to an all-time low 48.5 per cent.
Correspondingly, the share of national income going to corporate profits increased to a new record high 32.9 per cent. See blue chart, above.
Much more loot for the corporate sector
We can measure in dollars the shift in income from workers to corporate profits as a result of the policies which have suppressed wages and boosted profits.
Total factor income – the measure the ABS uses in this series – was A$2,098.5 billion (US$1,413 billion) in the year to June. When the Coalition took office in 2013, workers received 53.1 per cent of this. That would have been $1,113.9 billion (US$750.4 billion). Now workers only collect 48.5 per cent, which is just A$1,017.0 billion (US$686.3 billion), a difference of A$96.9 billion (US$65.4 billion).
With 11,407,300 Australians employed, that’s an average of A$8,495 (US$5,725) per worker. That is the extra annual salary workers would be receiving now, on average, had the distribution of income remained unchanged over the last nine years.
Profits pocketed in Australia or sent abroad are now correspondingly higher in dollars by A$112.5 billion each year.
Future trajectories
The red line in the graph at the top shows a steady decline in workers’ remuneration over the last six years, with just one significant reversal. The green line shows a corresponding rise in profits. This suggests the entire economy is now structurally geared to keep shifting income in this direction.
The next national accounts, due in early December, will therefore be illuminating. Will they show a continuation of this baked-in transfer of income, or will the incoming Albanese Labor Government’s early policies effect a reversal? We shall see.
It will, of course, take some years before the full impacts of any substantial policy shifts are observed.
Tax reform essential
The stark reality is that the dramatic shift in wealth and income from working families to corporate profits is largely the result of the tax regime. Income tax and company tax rates combined with the various indirect taxes have served over recent decades, and particularly the last six years, to enrich the top end at the expense of low income citizens. Company tax evasion, as shown by the Australian Tax Office’s annual tax transparency reports, further advantages corporations, particularly those with head offices in offshore tax havens.
The force of the argument for Treasurer Jim Chalmers to break his election promise and scrap the stage three tax cuts is increasing. Those now urging this include Professor Steven Hamilton, The Guardian, The Monthly, the ACTU, the Greens, independent senator David Pocock and nine of the 18 parliamentary cross benchers.
Most of these are pretty adamant. The Guardian headed its analysis: “The stage three tax cuts are a pile of garbage, and everybody knows it”. The Monthly went with: “A terrible, horrible, no good, very bad policy”.
Lateral thinking
One creative alternative is to proceed with the stage three tax cuts, as solemnly promised, but before doing so, impose a temporary tax surcharge on the top brackets of income earners and also on company tax.
Chalmers is now working on an October budget which will set out the Government’s economic program in detail. Its taxation components will be critical. Especially for the eleven million workers dudded by A$8,495 a year.
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This is an edited version of an article published today in Michael West Media. The original article is available here in full for free:
https://michaelwest.com.au/workers-share-of-the-national-income-pie-falls-to-all-time-low/