Malcolm Turnbull should put 'inclusive growth' at centre of budget, say unions

The Turnbull government should explicitly adopt the goal of “inclusive growth” in its 2017 budget to fight growing inequality, unions have argued.

The Australian Council of Trade Unions makes the call in its pre-budget submission that challenges the government to raise more revenue to invest in infrastructure, education and industry assistance.

The submission, seen by Guardian Australia, complains that wages have been stagnant for several years and the government has failed to implement a plan to transition from the mining boom.

The ACTU called for inclusive growth citing statements by the World Bank, International Monetary Fund and OECD that reducing inequality drives jobs and growth.

The ACTU president, Ged Kearney, told Guardian Australia the government should consider a range of factors including wealth inequality, whether wages were rising in line with productivity and the unemployment level.

Inclusive growth has been part of the Labor agenda for several years, pushed by some including the former treasurer Wayne Swan and in the social services portfolio by the senior frontbencher Jenny Macklin.

The prime minister, Malcolm Turnbull, has said his government is focused on “inclusive growth” on several occasions without providing a specific definition for the goal.

In his last speech to the lower house in 2016 he linked it to the concepts of “fairness and inclusion” and suggested the government’s economic plan achieved these aims.

Kearney accused Turnbull of “paying lip service” to the concepts while driving up inequality through welfare cuts and cuts to education.

The ACTU warned that despite employees working “longer, harder and more productively … the fruits of that labour have gone to profits rather than wages”.

Average weekly ordinary time earnings have grown at 1.5% a year over the past 20 years, less than half the rate of GDP growth of 3.2% per cent, it said.

Unions said wage growth at a “record low … has blown a hole in budget revenue” as the government receives less in personal income tax revenues. It warned the government had adopted “overly optimistic” wage forecasts, predicting strong growth of 3.25% in 2018-19.

“Given the governments agenda to drive down job security and wages it is not clear where the pick-up in wage growth will come from unless we have a higher minimum wage, stronger public sector bargaining and other industrial reforms that will drive up wages,” the ACTU said in its submission.

The ACTU argued that Australia’s growth was propped up by population growth, and GDP per capita had only increased 1.1% in the past year. In December figures showed the economy suffered a “significant contraction” of 0.5% in the last quarter.

It warned although unemployment had been revised down from 6.25% in the 2016 budget to 5.5% in the midyear update, it remained at 5.8%. “This alone should raise concerns about the loss of tax revenue in the event of a higher unemployment rate than forecast.”

Unions also said a growing number of people were underemployed – 8.3% of the labour force or 1.06m people were not working full-time and wanted additional work.

The ACTU called for increased investment in research, development and education. The government should draw up “a comprehensive industry plan”, including “targeted assistance to industries, workers and regions undergoing significant change”.

The ACTU said the government needed to increase infrastructure spending, including major investments in schools, hospitals, roads, rail, the electricity network, renewable energy and the national broadband network.

The submission said the government had to acknowledge “inadequate revenue is a far more significant challenge to the long-term sustainability of public finances than spending”.

The ACTU said Australia’s tax revenue as a proportion of GDP is 33.6%, “well below” the OECD average of 42.9%.

The unions said the system was too regressive, with people on high incomes paying a smaller share of tax over time and accessing generous concessions for capital gains, negative gearing, superannuation and trusts.

The ACTU said the government should conduct “meaningful tax reform” including tackling negative gearing, capital gains and resource tax discounts. It called on the government to ditch its $51bn in planned corporate tax cuts.

Kearney said the tax cut package amounted to “trickle down economics” that would not promote equality and said even conservative institutions such as the Productivity Commission questioned the extent of benefits from free trade deals, another key plan of the government’s economic policy.