The coalition government’s bankrupt economic policies

The Coalition Government is perhaps at its most deceptive when it compares the Howard Governments' budget surpluses with Labor's deficits. While the Coalition was receiving billions of dollars in unexpected tax revenue during the mining boom, the recent Labor Governments had to cope with first, the GFC and later, the end of the mining boom.

How to reinstate the budget cuts

In the coming May budget the Government has the opportunity not only to reinstate the many unfair and economy-damaging spending cuts in last year's budget but also to begin phasing out the deficit and reducing government debt. If the Coalition Government axed the Howard Government's tax concessions on superannuation payments, which go predominantly to higher income earners, this would increase revenue by an estimated $30 to $40 billion this year. They were introduced at the height of the mining boom which greatly boosted revenue.

This additional revenue would permit restoration of the projected 20% funding cuts to universities and cancelling the cuts to science research, the ABC and SBS, Medicare, public housing and many other social services. And the Government could restore the $80 million funding of Youth Connections' support programs for the educationally deprived, Labor's preventative health programs and the Coalition's $8 billion annual cuts to the States' health and education budgets. Moreover it would permit the Government to fund the entire Gonski schools' program rather than the Coalition's highly truncated version. It would also allow financing, not only the projected improvements to pre-school education and child care but their considerable expansion and improvement incorporating research findings that the quality of intellectual and emotional input in the child's early years provides the optimal foundation for future intellectual and personal development.

In an ABC 7.30 interview on February 9 Treasurer Hockey claimed cuts to services are inevitable stating "we just can't continue to spend more than our revenue". But his argument becomes nonsense by ignoring the revenue loss from unfair superannuation tax concessions, tax avoidance (see below) and negative gearing (costing revenue an estimated $5 billion this year).

Counter-productive policies

Many of the Coalition Government's policies in this year's budget (2014-15) are counter-productive and likely to entrench a substantial further increase in the deficit or, if that is unacceptable to this Government, lead to greater cuts in government services.

Perhaps the most counter-productive policy is the elimination of 3,000 jobs in the Australian Taxation Office - with another 1,700 to come. This will enormously reduce the ATO's capacity to fight tax evasion by wealthy individuals and national and multi-national corporations. Among the employees to accept redundancies are some of the most experienced in areas where tax avoidance is an art form. Those who have accepted private sector offers will be able to provide their professional knowledge and experience to the very organisations that deprive the Australian economy of huge tax revenue at the cost of essential government services. A recent report by the Tax Justice Network estimated current tax avoidance by the top 200 companies at over $8.4 billion annually. This figure would be significantly increased if more companies and wealthy individuals were included.

Another counter-productive policy with enormous potential for harming the economy is the $151 million cut to science funding which includes $115 million cut to the CSIRO. While this is critical to Australia's science budget it's a minuscule part of the Government's $415 billion budget. And it comes at the very time that new high-tech developments in industry (rural, manufacturing and tertiary) are required to help compensate for both the decline of the mining industry and the forthcoming demise of the motor vehicle industry. The latter will have a serious impact on employment since, with component manufacturers and taking account of multiplier effects, this could displace over 100,000 workers.

The CSIRO reports that, by June 30 this year, funding cuts will have led to the loss of 1391 workers or 21.5% of its work force including 500 science and research staff. They claim this will lead to the cancellation of vital research and that staff morale has reached record lows inducing many future science graduates to lose confidence in our science future and seek jobs overseas. This could deprive Australia of future transformative scientific developments placing us outside the league of the most highly advanced nations. However, the Government saw fit to provide $90 million to search for MH 370, the Malaysian plane believed to have crashed in the Indian Ocean, and it has now promised additional funding.

A third critical counter-productive policy is the Coalition's decision to cease funding the Labor Government's renewable energy agency (Arena). The decision is currently blocked in the Senate by Labor and the crossbenchers. Industry concern over this policy is held to be the likely reason for the 88% decline in renewable energy investment between 2013 and 2014-- from $1.3 billion to $240 million. Apart from impacting on greenhouse gas emissions this will reduce both employment and tax revenue.

Fourth, the Government has scrapped Labor's modest $368 million four-year States Agreement on Preventative Health and a $201 million Agreement with the States on improving public hospital services. This appears to conflict with the Government's concern over increased health spending. Health authorities have long regarded preventative measures designed to improve public health as the most effective way of arresting the escalating health budget-leaving aside improving the quality of life.