Australian workers have been hard done by and tax reforms in the budget only begin to return some fairness | Greg Jericho
Wages are growing at a much slower pace than inflation, according to the latest data,This fits the story of the budget: that those earning a living off wages have been left behind by those who make their money through investments and tax minimisation schemes such as discretionary trusts,So I have some good news for the governor of the Reserve Bank, Michele Bullock,She can relax,Because, as has been the case for roughly 35 years, there is no evidence of a wage-price spiral.
In the March quarter, wage growth for the private sector was the slowest it had been since the end of 2024,Private sector wages grew just 0,76% in the quarter,If that kept up for the next three quarters, annual growth would barely be above 3% – i,e.
the top of the inflation target,If the graph does not display click hereIn annual terms, in the year to March, private sector wage growth dropped to 3,2% – the slowest since the middle of 2022:If the graph does not display click hereAt this point, I wish to refer to Bullock’s comments last week where she said she worries we “will end up with higher wage increases and that will feed through into businesses and businesses think, ‘well, that’s now the norm’,That’s the inflation expectations worry that I have”,One week later and we get the lowest annual wage growth for nearly four years.
Cripes.Importantly, that 3.2% growth is rather well below the inflation figure of 4.6%.That means the real value of wages has fallen, which is a problem even at the best of times, and terrible given the past falls since 2021:If the graph does not display click hereThe lack of wage growth and the need to increase the incomes of wage earners is pertinent given the policies in Tuesday’s budget.
The only new tax cut was the working Australia tax offset (which shall be known as the Wato).It is only $250, but importantly only applies to wages and salary earners – not incomes generated through investments.This intention was also behind the changes to capital gains tax and negative gearing.While the CGT 50% discount ruined housing affordability, it also made income inequality worse.Within the budget papers is some quite brilliant research by the Treasury department about who benefits from capital gains and negative gearing and also discretionary trusts.
Normally we can use the tax data to look at who benefits from such things in any single year.The Treasury has rather cleverly realised that over the course of a life people move from renters to homeowner, share owner and perhaps also to investment property owners.It found that an Australian on median lifetime earnings (i.e.in the 50th percentile) gets around $12,356 benefit from the CGT discount, negative gearing and discretionary trusts.
By contrast someone in the richest 1% gets $732,253 benefit (or nearly 60 times more):If the graph does not display click hereWhen focusing on capital gains alone, the richest 1% get 36% of all the benefits,The richest 10% get 56% – i,e,more than the other 90% of AustraliansIf the graph does not display click hereNow that would not matter so much were it not for the way the tax system was very much weighted to benefit those who don’t earn wages or salaries,Again, Treasury has done some brilliant research to look at what this does to the average tax rate of wage earners compared to those who get a significant amount of income from other things (like capital gains, trusts or shares).
They found for example that someone who earns $150,000 through wages pays an average tax rate of 29% while someone who earns the same amount but gets a significant amount from non-wages pays just 27.5% because of all the discounts and ability to minimise tax – in effect paying $2,250 less in tax just because they were able to game the system:If the graph does not display click hereReducing the CGT discount and putting a 30% floor on the tax rate of discretionary trusts was a move to address this and make those who earn money from investments and trusts pay a more similar tax rate to those of us who get most of our income through wages.Treasury also found that the CGT discount was overwhelmingly favourable to investing in housing rather than in shares:If the graph does not display click hereThis meant the 1999 introduction of the CGT discount not only increased the benefit to non-wage earners, it did so in a way that incentivised investing in rental properties rather than shares.That in turn drove up house prices over the past 26 years such that for the first time since the second world war fewer than half of people in their early 30s own a home.At a time when real wages are falling and the RBA seems determined to prevent any decent wage rises, it is good that the government has finally acknowledged that wage earners have been hard done by in the tax system and have begun to return some fairness into the system.
Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
Did breakthrough in US fentanyl crisis start in China?
As Donald Trump travels to Beijing this week, fentanyl – and China’s role in its supply chain – remains an enduring point of acrimony in bilateral relations.At a UN meeting in March, the US again accused China of failing to stop its chemical industry selling the precursors required to make the potent synthetic opioid, while China suggested the US was shifting the blame for its domestic drug problem.Yet there are growing signs that the US fentanyl crisis has turned a corner – and some experts believe that interventions made in China have played a key role.“There was a supply shock: the purity of fentanyl fell,” said Keith Humphreys, a professor at Stanford University. “The question is why was there a supply shock
Older people risk mental decline if they do long hours of caring, UK study shows
The stresses and strains of caring for someone for 50 hours or more a week leads to “accelerated cognitive decline” in middle-aged and older people, research shows.However, providing care for only five to nine hours a week has the opposite effect, boosting brain health so much that the benefits last until older age.Carers UK called the findings “extremely worrying” and said they highlight how long hours spent providing care raises the risk of social isolation and burnout.Dr Baowen Xue, an academic at University College London and the lead author of the paper, said: “Our study shows that the caring responsibilities many people take on in later life can be a double-edged sword.“On the one hand, lighter caring responsibilities can be good for you by providing mental stimulation from interacting with loved ones or others you’re helping and a sense of purpose and usefulness
Steve Lismore obituary
My partner, Steve Lismore, who has died aged 71 in a climbing accident in Italy, was a civil servant and local politician with twin passions for giving children a good start in life and establishing equality of access to employment. Steve’s energy and commitment to action has had a lasting impact across north Derbyshire.Born in Toronto, Canada, to Violet (nee Greaves), a secretary, and Basil Lismore, a toolmaker, Steve loved reading and excelled at Bayview Heights school, Ontario, skipping a grade and winning awards at science fairs.His approach to life was formed in his teens. He combined adventure, practicality and ingenuity as he coaxed cheap motorbikes to ever improved performance
Renters’ Rights Act could worsen court delays without proper funding | Letters
The new Renters’ Rights Act is a step forward in ensuring that both tenants and landlords can access justice, but without proper investment it risks creating new court delays and injustices for both parties (The Guardian view on the Renters’ Rights Act: finally, protections fit for the modern housing market, 5 May).The end of “no fault” evictions in England is expected to lead to an increase in the number of contested repossession cases. If courts do not have the funding to handle the increase, delays will grow and leave many people in limbo, as we have recently seen with the closure of the Hillingdon Law Centre.This investment must include further funding for housing legal aid. While last year the UK government pledged to increase the fees paid to housing legal aid firms, those changes are yet to be fully implemented
‘Everyone was in tears’: the tenants given eviction notices just before ban in England
It was 2pm on 30 April when Carl Kansinde Middleton received a “no fault” eviction from his landlord in Brighton – just 10 hours before section 21 notices were officially banned under the Renters’ Right Act.“As we were getting closer, I really thought I was safe,” he said. “It just never occurred to me that it would just come right on the last day – I truly felt blindsided.“I lost my job in November and it’s been a struggle for me financially as I have no support system. I was just about treading water but this has swept me under
Ash scattering is a risky business | Brief letters
I had a similar experience to Zoe Williams (The day had come to scatter my mum’s ashes. What could possibly go wrong?, 5 May) when I scattered my dad’s ashes near the first tee at his golf club. After reaching into the urn and grabbing a large handful of his ashes, I threw them into the air only to have them all blown back at me by a sudden gust of wind. Friends always said I looked very much like him and I felt a tremendous sense of pride as parts of him went into every orifice.Bob DawsonGreenmount, Greater Manchester Glad to read about the campaign to save the mother of Bramley apples tree (Report, 5 May)
The Spin | ‘We have a hoot on the field’: Oswestry CC boasts 10 mother-daughter pairs
From the Pocket: Voss coached the way he played and his brutal football failed Carlton
Cleary to finish up as Panthers coach and end greatest modern-day NRL dynasty
Billy Knight obituary
Rory McIlroy claims he knew LIV was in trouble and breakaway tour was always a ‘risk’
Jake Paul admits broken jaw from Anthony Joshua fight may have ended boxing career