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Australian Political Internet News Review



If Australian society and the Australian economy has a problem which itself creates problems in related areas - permeating through society - it is the problem of unemployment. Workers are stressed, overworked and bullied because they are afraid of losing their job; small businesses and self-employed worked very long hours to stay viable because there are too many for the market but there is no better alternative(for example truck-drivers or taxi-drivers); unemployed people themselves can face depression, low self-esteem, social pressure, financial hardship and a feeling of hopelessness; school children and tertiary students are pressured more and more to achieve and do well in order chase jobs, but where there are still the same number of people chasing the same number of jobs, and there still aren*t enough jobs for the number of people; and governments give ridiculous and economically irrational subsidies and tariff protection to companies and industries, which costs the whole country in the end.

Then what is the solution? The Coalition and Peter Reith simply want to cut wages, and probably their main motive in this is to help employers. Although it is likely that lower wages could help to reduce unemployment, the main effect is simply a way of transferring wealth and income from the poor to the rich, and is very unfair for workers, many of whom earn fairly low wages already. The ALP - well what do they do or advocate doing to reduce unemployment? Unemployment rose to a very high level while Labor was in office. They instituted a job subsidy programme which either would have had to have been very expensive as to be ludicrous, or else would not have made much difference to the overall numbers or rate of employment. One possible reason for Labor*s failure is their loyalty to the unions, which while reasonable in itself, may have been at the expense of the unemployed (as the unemployed are not generally in unions.

What is needed is a balanced and wholistic solution. In other words, a way needs to be found to reduce unemployment without reducing the living standards of workers or reducing their take-home pay. How could this be done?

Firstly - payroll tax can be phased out. Payroll tax is a direct tax on employment, and really should have been abolished long ago, if governments had done their job properly. See "PAYROLL TAX"

Secondly - what happened to the ACCORD of the 1980*s and early 90*s? Why not resurrect this? I.E. the government could negotiate with the unions to hold back or restrain wage rises in return for increased family benefits or tax cuts (for people earning low wages). How could this be paid for? (1)when unemployed people get a job they (A) go off welfare (or get less), saving the government money, (B) pay tax and (C) there is a multiplier effect of more workers spending money and increasing economic growth, so if the government spends money to reduce the unemployment rate much of the money actually comes back to the government again. (2) The money initially to give to low-paid workers (as compensation for less or lower wage rises) could be obtained by not giving, or even withdrawing, tax cuts to the rich, namely capital gains tax, company tax, the family trust scheme and high-wealth tax avoidance (which costs $$$billions!).



If the top priority of Australian governments is to reduce unemployment then the best policy would be to DIRECTLY target the problem, rather than targeting it indirectly by trying to encourage economic growth and this in turn leading to lower unemployment. In other words the best way to reduce unemployment would be to target payroll tax, which directly relates to employment, rather than other taxes which only relate indirectly.

Unfortunately, it is probable that, while the federal government SAYS its policies aim to reduce unemployment in Australia; in reality they simply want to cut taxes to the wealthy and reduce wages and working conditions to increase corporate profits. In fact big business (i.e. the people who donate the most money to the Liberal Party and who the Liberal Party governs in the interests of) probably doesn't actually WANT unemployment reduced too much because high unemployent allows them to drive a harder bargain with their labour force (workers will accept lower wages and working conditions for fear of losing their jobs).

Also, if the government tries to deregulate the industrial relations system Labor and the unions oppose it because it is likely to lead to a reduction in the take-home pay of low income earners (whilst also being likely to lead to more employment). Thus, to gain the support of Labor and the unions, low income workers could be compensated with tax cuts. Where would the money come from? Tax cuts to people on low incomes are relatively cheap (as it involves low amounts per person). Also, the government would save money through having to pay less unemployment benefits (although this would occur only after the initial event).



The high number of people in Australia who rely on welfare should be blame on the leaders of society. It is they who allow the current economic structure which dictates the current rate of 6.7% unemployment (although the real figure is probably more than double that).

Problem: there are more people looking for employment than there are vacancies for employment. If one unemploymed person tries really hard to get a job they may well do so, however that will mean that whichever job they get some other unemployed person will miss out on. So the number of unemployed people will stay the same. So by the situation of high unemployment being allowed to continue by the government (particulary the federal government) there will remain large proportion of the population being punished. It does not help anyone to say that it is their own fault, because whatever they do, there will still be a large number of unemployed people, it will just be DIFFERENT people.

For a constructive approach to the problem of unemployment, consider the effect of PAYROLL TAX on unemployment/employment. What is the the sense in taxing employment? Isn't it obvious that payroll tax will increase the cost to employers of employing people and result in them employing fewer people than if the tax did not exist? The fact that the tax "reform" agenda has not extended to the abolition of payroll tax demonstrates that unemployment is not a high priority of the major parties. In fact the federal Labor and Liberal Parties only recently spent gave up billions of dollars in federal revenue to cut capital gains tax and company tax.



Do governments actually care about unemployment? Do they just say they do? They don*t even say they do any more do they? The government (and opposition) are often heard to say (like a third-rate actor reading the same tired old script) that they want to increase economic growth which will lead to lower unemployment. This is not a very economically sound approach. The best way to reduce unemployment would be to directly target the problem of unemployment. A very simple and effective way to do that would be to phase out payroll tax, which is a direct tax on employment (and if you wanted to reduce unemployment then logic suggests that it would be wise to reduce that tax). (Also note that to abolish it suddenly would give a large windfall gain to employers whilst not immediately increasing employment very quickly anyway because it would take several years for businesses to adjust to a different tax regime). The money to pay for this, which would have to come from the federal government, as it collects most other taxes, could come from not having any more company and capital gains tax cuts, and from tightening the law and toughening up enforcement of high wealth individuals avoiding tax through family trusts, tax havens and other various schemes.

The federal government has the power to reduce or abolish payroll tax, even though the tax is directly collected by the states, because the federal government collects the bulk of tax revenue in Australia and distributes it to the states. That is why it is such a waste of opportunity that the GST package did not include the abolition or reduction of payroll tax. A possible reason the tax is overlooked by politicians is that most people do not directly pay the tax, even though they are indirectly affected by it. One possible way of reducing the tax would be to reduce the tax in return for an extra 1% wage rise when the national wage case is heard before the industrial relations commission. The other way to view that would be to see it as the amount employers have to pay towards a payrise for their employees being offset by a 1% cut in their payroll tax liability. The effect of this over several years (or even sooner) would be a fall in the rate of unemployment.

Reducing payroll tax would have multiple benefits, because first it would reduce unemployment, and there would be a multiplier effect in the economy, leading to more economic growth through employees spending more money than they would have if they were unemployed, and creating more jobs. The other effect af a decrease in unempoloyment would be to give more job security to the existing workforce, and reduce stress and pressure on workers and make it harder for bosses to opress their workers. (Maybe this is why the Liberals wouldn*t like to reduce payroll tax - high unemployment is food for employers - there is greater choice of workers and they can demand more from them through their employees fear of losing their job.



A recent Australian survey by a leading research organisation showed that the real rate of unemployment in Australia is 10.5%, which amounted to nearly a million people. Unemployment could be reduced by a reduction in the payroll tax rate, as payroll tax is a tax on employment. The federal and state government should put more effort into reducing payroll tax.

Last year Labor and the Coalition voted in federal parliament to reduce company tax from 36% to 30% and to cut capital gains tax in half. This was purportedly in order to increase business investment and economic growth. It costs several billion dollars in revenue every year.

Why wouldnˇ¦t they instead have used the money to cut payroll tax? This would still be a tax cut to business, but it would have the added advantage of reducing the number of unemployed persons by probably several hundred thousand!

Payroll tax directly inhibits employment, whereas other taxes only relate indirectly to employment; so if governments were really serious about tackling the problem of unemployment they would cut payroll tax first before cutting any other taxes. However, it might be that the majority of politicians do not really care about unemployment at all, but just pretend to occasionally, particularly prior to elections.


Australian Political Internet News Review