Labor's 'reforms' are a hard act to swallow

<em>Illustration: Rocco Fazzari</em>
Illustration: Rocco Fazzari

Lately the Gillard government has been going on about productivity and even the carbon tax has been bundled up into what it calls economic reforms.

Such as?

It could count its spending on education and infrastructure, but it pretty well ends there.

The carbon tax isn't a reform as such but an economic solution to an environmental problem and is never going to boost productivity. In fact, it's a tax on growth. I know it paid for a few tax goodies, but then even more has been lavished on costly and productivity-reducing renewable energy schemes.

The tripling, as the government calls it, of the income tax-free threshold to $18,200 would count as a real reform, if only it were so.

The trouble is the low-income tax offset has also been slashed, so with what's left of it the threshold becomes $20,542 which is 25 per cent more all up, but not a tripling.

The government also argues all taxpayers benefit rather than just those getting the offset.

But that's not the full story, either: the tax rates in the two bottom brackets were increased. So that sure narrows the field of those who won't be paying tax any more.

Which brings me to the mining tax, its gold-plated economic reform.

Even in its original form it was too much too late. But for all intents and purposes it may as well have been decommissioned, except for the reams of red tape left behind, because as commodity prices fall it could be the first tax never to raise a cent.

It was to have funded a halving of the tax on interest from savings and a lower company tax, two welcome reforms that featured in successive budgets but nowhere else. Yet a lower company tax would have been just the thing to help industry adapt to the upheaval of the mining boom and an overvalued dollar.

Still, one of the last remnants of the mining tax is the increase in the levy on employer contributions to super, which is just as well because the other ways of getting into it have got harder.

And never mind that the government has ignored every recommendation of its economic reform blueprint, the Henry review, not counting the mangled mining tax.

Its showpiece is the National Broadband Network, which had all the promise of an economic reform until the fine print came out.

The glaring flaw, apart from its cost not being counted in the budget, is that competition will be snuffed out because NBN will fix the wholesale price after shutting down rival cable networks. Swapping Telstra for a government monopoly has an awful sense of deja vu to it.

But it's the workplace changes, sold as being fairer, that really undermine the government's productivity push. They're more retardation than reform. Reverting to enterprise bargaining, without arbitration, gives more power to the unions for no economic benefit.

It might buy votes, but it won't create jobs.

Twitter @moneypotts

This story Labor's 'reforms' are a hard act to swallow first appeared on The Sydney Morning Herald.