Swan's reforms truly are music to the ears of working class

The Treasurer has quietly put income equality on the agenda.

The Treasurer has quietly put income equality on the agenda.

WAYNE Swan tells us his source of inspiration is Bruce Springsteen, and his anthems for the working-class battlers of America. It's a new way to try to persuade us that Labor's goal is to make Australia a more equal place and the Liberals' goal to make it a more unequal one.

It might work, because this is an issue on which Labor has a good story to tell. While John Howard in his first eight years as PM was sensitive to the needs of the "battlers", he lost office largely because he lost that focus as he went on. Swan as Treasurer has done nothing dramatic to make Australians more equal. But he has persistently pushed his "Labor values" into virtually every reform, every fiscal package, to nudge the outcomes in that direction.

It's gone surprisingly unnoticed, except by those on high incomes, who have found themselves excluded from virtually every initiative Labor has taken to "ease the burden on struggling Australian families". That has fuelled the perception among some of them that Swan is a class warrior, and his bid to recruit Springsteen to the cause only intensifies that.

To take a few examples:

All of Labor's handouts to families were targeted to lower and middle-class households, and left out those on incomes above $150,000. High-income earners have lost their tax rebates for private health insurance, and those on more than $300,000 have had their superannuation tax breaks pruned.

Making employers lift their superannuation contributions from 9 per cent to 12 per cent could make workers better off, unless employers recoup the cost from lower wage rises.

Pensioners, including the disabled, won big pension rises in 2009 from the Harmer review although, typically, the unemployed were excluded.

The big bipartisan tax cuts from the 2007 election went everywhere, but Labor's tax cuts since have gone to the lower half of income earners. The latest lot cut tax by $10 a week for workers on $25,000 a year, but just 5? a week for those earning $80,000 or more.

No economist has tried to piece it all together, so we don't know how much of a difference it has made. The latest income distribution data from the Bureau of Statistics is for 2009-10, and won't be updated for another year. And in any case, so many other factors affect income distribution that its data can't tell us what impact government policies have had.

For example, the distribution of wages and salaries has become far more unequal as we have moved away from national wage fixing and industry awards to enterprise bargaining and individual contracts. That was what was meant to happen, but the size of the shift is startling.

Bureau of Statistics figures show that in the three years to August 2011, average wages for full-time workers at the bottom fell by $4 a week, or 0.6 per cent. Those in the middle had an average wage rise of $36 a week or 3.4 per cent, while those at the top had an average rise of $206 a week, or 10.3 per cent. These changes swamp anything the government has done.

The wage share of national income has fallen and the profit share has risen, so that returns to investors now account for a far bigger share of income. This boosted the share of income going to high-income earners in the boom years, and has shrunk it since the GFC bust.

Moreover, Swan's concern for working families specifically excludes the unemployed. Even in opposition, when he wrote a book, Postcodes, on the inequity of Australia's income distribution, he ignored the ugly fact that we pay the unemployed a benefit below the poverty line. Now in office, this Springsteen fan ignores them still, expecting them to live on $35 a day.

But Labor has kept intervening in small ways to favour working battlers, and it is false to pretend otherwise as The Australian did last Thursday when it ran across its front page a supposed expose.

"Inequality has grown on working-class warrior's watch", its headline ran. "Income inequality has increased slightly on Wayne Swan's watch", its story began. Yet the figures it cited showed the opposite.

It reported that inequality had increased over a 10-year period (which 10 years was not clear). Yes, the bureau data shows inequality did rise between 1995-96 and 2007-08, but that was under the Howard government. Swan became Treasurer only at the end of 2007. His first budget took effect in 2008-09. The Australian chose to blame Swan for the growth of inequality under Howard.

Its story eventually quoted the data for what happened under Swan's watch. The share of income going to the top 20 per cent of earners "rose to 47.6 per cent in 2007-08 before easing back to 46.7 per cent in 2009-10". Inequality in fact fell on Swan's watch.

But that wasn't primarily due to him. The GFC cost investors a heap of money, and investors tend to be in the top 20 per cent of income earners. Let's get real.

What is remarkable in all this is that, in small ways, Swan has quietly put income equality back on Australia's political agenda. It's nothing dramatic. Probably all Labor has done has been to moderate the growing inequality of wage and investment income.

But if you believe in equality of opportunity, it is a step forward. Those doing well in the markets don't need more help from government. It should focus on helping those who need it.

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