This piece appeared in The Guardian on 23 August 2013 (links in original):
The bush does something funny to people. First there is the peculiar idea that things are somehow realer or more “authentic” outside capital cities. As noted previously in New Matilda, settler Australian society has also always been a bit odd about the continent’s northern regions, which are still often viewed as a “frontier”.
It is perhaps unsurprising, then, that Kevin Rudd has promised to “unlock” the Northern Territory, including by expanding stage three of the Ord River irrigation scheme. More surprising, and problematic, is his announcement that under a re-elected Labor government the Territory would become a special economic zone with a 20% company tax rate (10% lower than that applicable elsewhere) and foreign investment and environmental regimes which are to be “streamlined” in some non-specific way.
The proposal – seemingly a watered-down version of that proposed by both Gina Rinehart’s Australians for Northern Development organisation and the Coalition – has met with considerable criticism. WA premier Colin Barnett has accused Rudd of “discriminating” against the Kimberley and northern Queensland; Rudd has however raised the possibility of including these areas in concessional tax rates in the future.
Special economic zones have been tried in several countries, including the United Kingdom – another nation with a north-south divide. Their effectiveness has however been contested. In his excellent book Urban Regeneration in the UK, Andrew Tallon noted that “enterprise zones” were a key Thatcher government policy which reflected the idea that only a “free market solution” could uplift underperforming local economies. Zones enjoyed 100% tax allowances for capital expenditure on commercial or industrial buildings; exemption from business rates for industrial and commercial premises; simplified planning procedures; and exemption from industrial training levies.
The zones did create new jobs (an estimated 8,000 between 1981 and 1984 in the original 11 enterprise zones) and 700 firms were established during this period. However, given over £130,000,000 was spent on the zones between 1981 and 1983, these jobs were expensive. There were other negative aspects: some companies simply relocated to take advantage of the conditions without creating any extra jobs; some investment took place that would have occurred in any event; and “boundary” effects were created around zones as surrounding areas became less attractive investment locations.
Low-tax zones are also ripe for manipulation: Greg Jericho asks rhetorically whether anyone believes that “every major organisation who can employ a decent tax lawyer won’t set up a HQ in Darwin that does just enough to ensure its business operations qualify for the lower tax rate”.
It is odd, as Stephen Long commented, that a special tax regime is deemed necessary in an area whose unemployment rate is “well below the national average”. There is also, as Bernard Keane noted, a disconnect in ALP’s rhetoric: Rudd went quickly from “complaining about the Coalition’s plans for a corporate tax cut at the expense of Australian families” to concluding that “cutting corporate taxes is a great way to stimulate investment oop norf”.
The bigger question, of course, is why a Labor government is embracing policies seemingly predicated on the assumptions that low company tax is a panacea and environmental regulations are a menace. Why is an administration whose Keynesian approach steered Australia through the global financial crisis now implicitly cleaving to the right-wing mantra that cutting tax creates prosperity? How, other than via Rinehart’s protestations, has the idea become entrenched that rural Australia needs less government rather than more?
The ALP’s embrace of economic rationalism isn’t anything new, and it was apparent during last week’s episode of Q&A, where in an otherwise thoughtful performance finance minister Penny Wong used the where’s-the-money-coming-from, live-within-your-means arguments the Coalition has traditionally deployed against her own party to undermine the Greens’ Adam Bandt. Wong positioned herself in the centre, stating: “I always like being in the Labor Party between these two, because he [Christopher Pyne] says we’re too low taxing and he [Bandt] says we’re too high taxing … it’s probably about right then”.
This notion of a “sensible centre” is superficially appealing but vague: on almost any issue it is possible to point to someone on each “side” with whom we disagree, cast them as “extremes” and pose as the epitome of sweet reason.
It is harder, of course, to argue one’s own case, and it would be most interesting to see the ALP explain how cribbing from a neoliberal playbook in the north sits with its “Labor values”.
