By Claire Lehmann
Friday, June 19, 2026
Fifteen years ago, I worked for a woman, a Deputy
Secretary in the federal Department of Health, who told me something that I
have never forgotten. She said that "the federal government just throws
money down the toilet."
I've remembered that statement for fifteen years. It
bothered me at the time, because I knew she was being honest. But after the
Budget that was delivered on May 12 of this year, it bothers even more. Taxes
on Australian workers keep rising through bracket
creep. More taxes have been added to this burden with the scrapping
of negative gearing and the scrapping of 50 percent discount to capital gains
tax (CGT). Meanwhile the federal government keeps flushing money down the
toilet.
I understand why many Australians are fed up and are
turning towards parties that promise to disrupt the status quo.
The title of this talk is "From Waitress, to Public
Servant, to Business Owner." I've had all three of these jobs, in that
order. Tonight I want to use them to make an argument about where the real
fault line in this country lies.
For most of this country's political history, the major
fault line has been between labour and capital—between workers and the bosses
who employ them. That's the fault line that shaped the union movement, and the
party that grew out of it. The Australian Labor Party.
But that fault line isn’t as clear anymore. I believe
that the major political conflict we have isn’t between workers and bosses. And
it isn't between the public versus private sector either. The real fault line
is between those whose work lifts productivity and those whose work puts a drag
on it. Those who lift productivity include the surgeon, the teacher, the
tradie, and the founder: anyone whose work makes someone else more likely to
produce. One doesn’t even have to be in paid work to be productive. Stay at home
mums are some of the most productive people in our society, raising the future
human capital of the nation.
On the other side of the fault line sits work that exists
to administer, monitor, or process the people who are actually doing the
producing, often with no clear link back to any outcome at all. Every
organisation carries some of that second kind of work. But it’s in government
that it's growing the fastest, and where it has the least accountability.
Because government is the only part of the economy that gets to write its own
cheque and send someone else the bill.
Now credit where credit is due. I am not an anti-Labor
ideologue. I actually come from Labor family. My grandmother used to cheer on Paul
Keating during question time, and when I was at university I gave out
how-to-vote cards for Penny Wong
in my hometown of Adelaide. I've been the beneficiary of medicare, and our
higher education system, all supported by our taxes. And I actually agree with
the government's decision to scrap negative gearing and to lift the CGT
discount on unproductive assets, namely housing.
That being said, the decision to scrap the 50 percent CGT
discount on company founders, and implement a minimum tax rate of 30 percent
for anyone with a capital gain, no matter how much they earn, strikes me as
mad. To compound this, our income tax rates remain some of the highest
in the world.
All this has led me to conclude that somewhere along the
way, something has changed. The Labor Party has gone from being a party of the
worker to being the party of the bureaucrat. The same party that purports to
defend workers has overseen the highest amount of tax revenue generated from
labour in Australia's history. The government collected $349
billion in personal income tax last financial year.
The same party that says it wants to promote “equity”
hasn't raised the income tax–free threshold, which has been in place since
2012. The same party that purports to stand for the fair go now wants to punish
people for trying.
I learned what work was from the hospitality industry. My
first job was at Hungry Jacks, when I was 14 years old. I was paid $4.62 per
hour, and my feet would have blisters by the end of the shift. By nineteen, I
was working full-time in one of Adelaide's most popular restaurants, a
steakhouse on Gouger Street. I made $500 a week.
I loved it. But it was physically demanding work. The
pace meant every minute counted—slacking off could have a cascading effect. You
were also never separated from the person who owned the place. I used to work
alongside my bosses. I wouldn’t have been able to tell you what a profit margin
was, but I understood that my bosses were not rich. The whole thing only worked
because people were grinding to keep the doors open.
I also saw the painful side of business ownership. My
last job before I finished my degree was at a small Italian restaurant, run by
a French immigrant. He worked so hard keeping that restaurant going. But I
learned shortly after I had left, that a person I had worked alongside for
years had been quietly stealing from the till. By the time anyone noticed,
$100,000 was gone. Not long after that, my old boss closed the restaurant.
By the time I learned that this little Italian restaurant
had closed, I had moved on from the hospitality industry. By the age of
twenty-five, I'd
finished my degree, and moved to Canberra. I embarked upon what I thought
would be a long career as a public servant. I began work at the Federal Department
of Health and Ageing.
A quick bit of context, for anyone who's never worked in
Canberra: not all departments are the same. Some are leaner than others. And
some are genuinely well run.
And some of the public servants I worked alongside in
Canberra were dedicated, capable people. But the Department of Health has a
reputation, even among public servants, as one of the more bloated workforces
in Canberra. When I was there it had a staff of 4-5000, today it has a staff of
over
7000.
Let me give you a glimpse of what life is like for a
graduate in the department. On my first rotation, I was reprimanded for writing
a ministerial letter too quickly. Two hours was sufficient time to write a
letter I thought—one that mostly consisted of copy and pasting boilerplate from
other letters—but according to the director of the team, I needed to take a
day.
Why? Because they had nothing else for me to do. There
were no meetings, no policies being drafted, and no conference papers for us to
work on. So we had morning tea instead. And afternoon tea. We took long
lunches. We did crossword puzzles to keep our brains active, and daily
"quizzes" to alleviate the boredom. The Director of the section once
sent a ministerial letter back to me asking me to delete a comma. I was
excited. Because deleting a comma meant that I had something to do.
Sometimes there would be a meeting, or a conference,
which meant that it was all hands on deck preparing briefing notes for the
Minister, and arranging pens on desks for delegates. But most of the
interesting work in the department was done by consultants. I wondered why
graduates had been hired in the first place, to work as glorified secretaries
if all the substantial work was just being farmed out to private industry. Even
with a staff of 7000, most of whom from my observation were massively underemployed,
the department still outsourced work.
I wasn't the only one who suffered from this situation in
the department. Other graduates would confide in me about their despair. One
friend of mine used to cry in the bathroom.
At the same time however, there were people in the
department actively campaigning for less. I was shocked to find a flyer from
the union sitting on my desk one morning, advocating for even better
conditions—even though we had flex time, we couldn't be fired, and were having
morning teas almost every day. I looked at the flyers and thought: how much
more comfortable could this possibly get?
I should clarify here: it is technically possible to get
fired in the federal public service. But the process can take about 12 months,
and there is very little incentive to initiate such action. It is much easier
to just redeploy an underperformer into another team. And that is what happens
over and over again.
One woman I worked with on one of my rotations was
functionally incapable. She had been at the level of APS 5 for thirty years (as
a graduate I was on APS4). She was unable to do a Google search for work
purposes, and unable to file documents in alphabetical order. She sat at her
desk researching properties online all day. She was paid, in 2011, $65,000 per
year. ($94,000 today).
For someone who had come from my work background, in busy
restaurants, this all felt like a slap in the face. If this is what white
collar work is like then this whole thing is a scam, I thought.
The budgeting was its own kind of madness. There was an
open, acknowledged habit of overspending on purpose—spend the whole allocation
every year, whether you needed to or not, because if you didn't spend it, you'd
lose it the following year. It's the opposite of every incentive that exists in
the private sector, where underspending is the whole point.
That's the context for the sentence I opened with
tonight. That Deputy Secretary—one of the most senior people in the department
told me, matter of factly, that the federal government just throws money down
the toilet. It wasn’t a secret. We all knew we were wasting time, and wasting
money. So I quit. I felt ashamed participating in what I considered an abuse of
the Australian taxpayer.
At the time I didn't have the words to describe what I
had seen at the Department of Health in economic terms. But it does have a
name. Economists call it the free-rider
problem.
Picture a sharehouse where shared cleaning
responsibilities are never enforced. There's always someone who does the
dishes, and always someone who just "forgets." If a shared
responsibility is never enforced, then the person who is forgetting never bears
any cost. The kitchen still gets cleaned, because someone else always ends up
doing it for them.
Now extrapolate that idea out to an entire department,
where nobody can be fired, where overspending is rewarded, and where the people
footing the bill—you and I, the Australian taxpayers—have no choice about
whether to pay, and no say in how the money is spent.
That was one department, fifteen years ago. Multiply it
across the whole of government, and you get the budget that was handed down a
few weeks ago. Everything I've described to you tonight is about to get a whole
lot worse, from both directions: the unproductive side getting bigger, and the
productive side getting taxed harder for trying.
Since 2022, the APS has grown
by 26 per cent. The cost of running it has blown out by 42 per cent—to
$114.6 billion, or roughly $8,200 for every taxpayer in this country, every
year. Budget papers show that figure being revised up by a further $19.6
billion over the next four years—on its own, enough to wipe out any savings
from cutting the NDIS. Government spending overall now sits at 28
per cent of GDP—the highest it's been in my lifetime.
But here's what I find most telling: of all the things
this budget reformed, the government's own spending wasn't one of them. There
was no plan to shrink the size of government, no serious attempt to ask why the
APS needs to keep growing so fast. Every other part of the economy was asked to
adjust. The one part of the economy that gets to write its own cheque was not.
A few weeks ago, the Secretary of the Treasury, Jenny
Wilkinson, gave the post-Budget
address to the Australian Business Economists. It's worth paying attention
to what she chose to talk about, because it tells you something about how this
budget was actually built. Her speech was thorough, and serious, and almost
entirely about one thing: who has more wealth, and who should have less. Page
after page of analysis on lifetime income distribution, effective tax rates by
income bracket, who benefits from negative gearing and trusts and by how much.
All of it very carefully modelled.
But all of the modelling was based on the assumption that
wealth just naturally manifests itself.
The Treasury Secretary did not model how these tax
changes might affect the decision to start a business at all, to take the risk,
to build the very thing that gets redistributed in the first place. When she
did address the risk question directly, her answer was that the research didn’t
support the idea that capital gains tax impacts risk-taking, beyond
compensating for inflation. She mentioned one citation, and moved on. The
Treasury, by its own admission elsewhere, hasn't modelled the productivity impact
of these reforms at all. You can build a very rigorous case for redistribution.
It's a different exercise entirely to build a case for growth, and that is what
Treasury has not done.
Australia is already a hard place to take risks, and it's
getting harder. The
OECD's latest survey found that Australia has gone from being one of the
five easiest countries in the OECD to start a business in the late 1990s, to
below the OECD average today. The rate of creation of new companies has been
falling since the mid-2000s, and its slowing down. And the conversations I've
had, particularly with young people online, about the proposed changes have
told me something else: there's very little understanding in this country of
why entrepreneurship matters, or what risk actually does.
Risk is not just about business. An artist starting a new
body of work, a scientist researching a brand new theory, a couple deciding to
have their first baby—all of these are bets on a future that hasn't happened
yet, made by people who don't know how it'll turn out. A scientist doesn't know
in advance whether five years of work on an obscure problem will lead anywhere.
A film director doesn't know ahead of time if his film will find an audience or
flop. A new parent doesn’t know that their expected child will be healthy. They
take the risk anyway—and when it pays off, we're all better off because of it.
What we don't see is the risk not taken. The research not
pursued. The film not made. The business not started. The children that are
never born. When people don't take risks, we can't know what future we've
missed out on. Those losses are invisible—which is exactly why they're so easy
for the government to ignore them. You can't put a line item in a Budget for
the company that never existed.
So here's where this leaves me. I believe in the social
contract—the idea that we put something in, so that we all can get something
out that none of us could build alone. A hospital. A school. A road. What I
don't believe is that we're currently honouring this contract. As citizens we
are putting in more than ever. But we are getting back a public service that
refuses to constrain its own growth, and now a Budget that didn't even attempt
to try.
***
So how do we get out of all this? My suggestion for
government is this. Reform the Australian Public Service. Managers and
directors need the power to fire underperforming workers without a twelve-month
process standing in their way. Ask honestly how much of the public service
could be cut without affecting a single deliverable—I'd suggest the answer is
not trivial. And the incentive to overspend has to be re-assessed: no other
part of the economy works this way. If we want to restore some fairness to the
worker, we have to be far more responsible with how we spend their hard-earned
money.
On that note: I agree with Angus Taylor that income
tax needs to be indexed to inflation. The top bracket of $180,000
was introduced in 2008. Had it been indexed since then, it would sit closer
to $280,000 today. Instead our top tax bracket kicks in at $190,000. Every
working Australian would be better off if the brackets moved with inflation.
That successive governments have avoided this reform is a generational scandal.
And before we raise capital gains tax on business
owners—what the economist Richard
Holden has called "a productivity tax during a productivity
crisis"—there are other ways to deal with housing affordability that don't
require punishing risk. Reducing immigration. Taxing unproductive land. Plenty
of credible economists have already mapped out ways to increase housing supply.
None of it is exotic. All of it has been sitting on the shelf, waiting for a
government willing to do something harder than redistribute what already
exists.
***
Finally, tonight, I want to finish by speaking to the
risk-takers in this room.
I've noticed, in the past few weeks, a resurgence of
something pernicious that can sometimes characterise this country: tall poppy
syndrome.
I've seen ordinary Australians, who own a modest amount
of shares, likened to robber barons. I've seen small business owners described
as being "subsidised" by the current tax settings.
This is an inversion of the truth. Everyday Australians
investing in shares are doing the right thing, and should be rewarded for it,
not punished for their thrift. People who take the risk to start a business are
not subsidised by our tax settings—they pay income tax, company tax, payroll
tax, and GST. When a capital gain finally occurs, it's on money that has
already been taxed. This is no subsidy in the equation.
We should also remember something this country seems to
have forgotten: in a free market, a business only succeeds when it gives
customers something better, or cheaper, than the alternative. The value
captured by the business owner is only ever a small fraction of the value
created for everyone else.
The future is built by the saver who buys shares instead
of another holiday. The tradie who decides to start a business and hire
apprentices. The founder who pays himself $80,000 a year, the surgeon, the
teacher, the parent who took the risk of bringing a child into the world.
Long live every Australian still willing to build
something nobody asked them to build. They are not the burden this country
needs to manage. They are the only thing that has ever paid for everything
else.
No comments:
Post a Comment