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2012 Federal Budget: better late than never

By Tristan Ewins - posted Monday, 28 May 2012


Recently I suggested policies for the 2012 Federal Budget. A few weeks after I ask the question: Was this a 'battler's budget'? And have there been missed opportunities?

The following features were notable:

Firstly there was a threadbare surplus of $1.5 billion – with over $30 billion of savings – but nonetheless a surplus. Whether a surplus was actually necessary or desirable at this point is open to question. On the southeast coast there appears more of a need for stimulus rather than austerity. Bringing forward infrastructure projects there would therefore seem advisable. Certainly achieving a surplus has loomed as a political imperative for Labor, and despite recent (and rare) questioning of this in the media, past coverage had consolidated the misimpression that consistent and continuous surpluses were equal to "sound economic management".

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On the other hand a balanced budget over the course of the economic cycle is generally desirable; but with debt servicing also weighed against growth, improved capacity and productivity stemming from social investments. These can all contribute to the real sustainability of temporary deficits and need to be taken into account.

Some of the largest savings were made from Defence – "Cut by $5.5 billion over four years"; with $1 billion saved through cutting superannuation tax concessions for income earners on over $300,000/year. The superannuation measure was welcome, but arguably did not go far enough.

Indeed the Australia Institute has argued that the cost of superannuation concessions has blown out to about $30 billion a year; and Richard Denniss specifically has claimed that $10 billion of this goes to the top 5% of income earners. Setting the 'high income benchmark' at $300,000/year is being far too generous for many who are on ridiculously high incomes: and yet single parents are singled out to be pushed on to the Newstart Allowance if they do not find work – with the welfare of their children cast into serious doubt. The rationale is not to upset so-called 'aspirationals' – but arguably there is more to gain electorally by consistently and visibly assisting low to middle income groups.

(See: http://www.abc.net.au/news/2012-05-08/swan-scrapping-company-tax-cut/3998784 ; http://www.tai.org.au/?q=node/277 ; and http://www.abc.net.au/pm/content/2012/s3499255.htm )

A key theme for Swan was 'spreading the benefits of the boom'; and yet the mining tax was not expanded in scope or degree. Previously the Greens had been on record claiming that the cost to the Budget bottom line, here, was in the vicinity of $100 billion over ten years. This begs the question:What kind of social and infrastructure investments could have been gained through a revision of this policy? And what kind of effective cross-subsidies could have been provided for manufacturing, retail, tourism, education – all sectors struggling in the wake of the high dollar driven by the mining boom? (See: http://greens.org.au/content/mining-tax-needs-review-ensure-revenue-australias-future )

The projected cut in Company Tax has been deferred – but should have been shelved entirely. Again: by 'trumping' Abbott with a similar 1.5% levy on big business as planned with his own Paid Parental Leave scheme, Labor could redirect that money to further initiatives in Aged Care, mental health or additional cost of living relief for low and middle income Australians. This would 'back Abbott into a corner', making it hard for him to justify his priorities; and making it difficult for him to impose a further Company Tax levy on top of Labor's levy.

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Resources could also be committed to achieve future social finance and ownership of transport, energy and other infrastructure – with the savings from lower borrowing costs, productivity agreements with unions, and a non-profit footing – delivering very significant savings for consumers.

Other crucial policy areas included $1 billion over four years "to kickstart the National Disability Insurance Scheme (NDIS)" ; "$577 million over five years to help aged Australians remain at home" and additional payments "of up to $210 a year for unemployment and similar benefits." ('The Age', May 8 and 9 2012)

The Federal Budget also "includes a $515.3 million dentistry package" with "$345.9 million…used to treat patients on long waiting lists and providing other vital services to adults." See: http://theconversation.edu.au/what-the-budget-means-for-dental-care-in-australia-6792

Meanwhile, providing tangible results for the NDIS ahead of the next election could be crucial in establishing the credentials of the government as being based on more than just 'distant commitments'. Though more financial support is still needed for Carers; with additional funding for residental care for those who choose it – and for those who require high level care and do not have a choice. Sustainable quotas are also necessary for aged care workers and nurses; and resources to improve quality of life for all kinds of aged Australians suffering social isolation, financial stress, difficulty with day-to-day living, and the indignities that come from an under-resourced, sometimes profit-driven and under-regulated residential care sector.


However the flagship initiative of Labor's 2012 Budget was definitely its swathe of Cost-of-Living initiatives. The Labor website proudly proclaimed the following initiatives on May 8th" aimed squarely at "low and middle income families":

  • An expansion in FamilyTax Benefit A with an increase of the benefit to low and middle income families with two children to $600/year, and $300/year for families with a single child.
  • A "Schoolkids Bonus" to help 1.3 million low and middle income families meet the costs of schooling: $410 for each primary school child, and $820/year for each child in high school.
  • Support for "the most vulnerable Australians"; Cost of Living Assistance for a million Australians: "$210 a year for singles or $350 a year for couples"; with "lump sum payments will be paid twice yearly"
  • "tax cuts will be delivered in 2015‑16 for all taxpayers with incomes up to $80,000" through an increase in the tax-free threshold"

These new initatives were given a price tag of about $5 billion – So they are definintely very significant.

The government also stood on its record of increasing pensions in past years, promising "a new Low Income Supplement of $300 per annum" for "Any low income households that do not receive enough assistance through tax cuts and increases to payments to cover their average expected price impact". (presumably in reference to the Carbon Tax) (See: http://www.alp.org.au/federal-government/news/helping-households-with-the-cost-of-living/ )

Imaginably this could be the beginning of an ideological offensive by Labor on the issue of distributive justice. For years now the monopoly mass media have reinforced the perception that redistribution equals 'class war'. Abbott and these media elements have directed salvo after salvo against the very principle of redistribution to correct injustices inherent in unregulated laissez faire capitalism. Facing very little criticism or scrutiny, Abbott even begrudged the very basic social solidarity of the once-off flood tax – to assist those effected by the Queensland disasters.

Yet as against this cyncial and socially damaging political tactic a very different Tony Abbott seemed to emerge from the Opposition Leader's book 'Battlelines'. The following observation was made at the 'Left Focus' blog in 2010:

Interestingly, Abbott raises the opposition between compassionate conservatism and the kind of ruthless neo-liberalism that cares nothing for the social consequences of austerity (pp.xii-xiii). Here the author juxtaposes the "[single-minded] cutting [of] public expenditure … striving to deliver smaller government" to "compassionate conservatism, stressing solidarity with those who are doing it tough" (pp.xii-xiii). By this reckoning the "social fabric … has to be respected and preserved"… (references from 'Battlelines' by Tony Abbott)

(see:http://leftfocus.blogspot.com.au/2010/04/battlelines-whats-tony-abbott-really.html )

The Conservatives need to decide whether to pursue a mix of economic conservatism and political liberalism; or whether to adopt a ruthless neo-liberalism which cares little for the poor and disadvantged; and for the political and civil liberties of citizens. It is important to observe, also, that 'economic conservatism' need not imply economic liberalism, but rather could accept Keynesian assumptions (in past accepted by Liberal governments) on the mixed economy and counter-cyclical demand management. Though Joe Hockey seemed to be quite clear recently on QandA that he cared little for the traditional Australian spirit of egalitarianism.

But for Labor stronger action is necessary to place class faultlines in clearer relief. The principle of class struggle is seen by many – even on the Left - as being discredited. But when we speak of class interests and class struggle this need not imply terroristic Stalinism; or to begrudge citizens their human and civil rights. Rather the purpose of democracy is at least in part to set free oppositions of interest and provide a framework for their peaceful resolution. Or where this does not work, to contain conflict to forms of civil disobedience which do not descend into an escalating cycle of violence.

And if he desires an agreed class peace, how does Abbott suppose this is possible on the basis of ruthless neo-liberalism – as opposed to the kind of Centrist Catholic Social Welfarism; or a 'Social Market' such as exisited under the Christian Democrats in post-war Germany? (though the author is politically Left, these are perspectives he hoped Abbott may have been more open to)

Further, if redistributive policies are nothing but a 'bribe' (as according to Abbott) what are we to make of the 'upper middle class welfare' of the Howard years: and of Abbott's own paid parental leave which offers leave with full pay to workers on as much as $150,000/year? (See: http://www.news.com.au/money/cost-of-living/paid-parental-leave-scheme-stays-abbott/story-fnagkbpv-1226286894077 )

Conclusion

Having to achieve more with less can drive efficiency – so there is some benefit in a government operating under tight fiscal circumstances. Indeed, a comrade in the Socialist Left of the ALP recently commented to me that rather than spending billions more in areas like Aged Care that we could achieve more 'electoral kudos' (my term) with well targeted and innovative initiatives.

But asssuming that policy outcomes matter more than narrow electoralism, often there is no getting around the need for an injection of greater resources. Much of this year's Federal Budget was just reprioritisation – with little new money. Again: In accepting this framework Labor will repeatedly find itself in the position of 'having to rob Peter to pay Paul'. In public education, aged care, mental health, welfare, public housing, disability support and services, and crucial transport and other infrastructure: 'trying to do more with less' can only take you so far. For instance: the Gonski recommendations for Education simply cannot be implemented without billions in new funding; nor can a sustained introduction of Medicare Dental.

By comparison – moving initially from 100% to 75% Dividend Imputation, further cutting superannuation concessions for the wealthy top 5% of income earners, reforming the Mining Tax, and applying an 'Abbott-esque' levy on business via Company Tax – along with other reforms – could have grown social expdeniture by 1.5% of GDP – or approximately $22 billion in new and improved initiatives.

And yet with $5 billion of largely redistributive, Cost-of-Living oriented policies - this is arguably a traditional Labor Budget. It puts many of Labor's core low to middle income constituencies first in way we haven't seen so much in quite some time.

Now, though, Labor needs to turn the to source of the Cost-of-Living crisis. This must include implementation of the Gonski recommendations – so low and middle income families can feel secure sending their children to State and poorer Independent schools – at peace in the knowledge they will not be disadvantaged, and that there is no need to 'go beyond their means' in providing a private school education. And reversing the trend to privatisation, and constructing public housing and infrastructure for emerging new suburbs also need to find themeselves to Labor's 'policy radar' with policies that attack Cost-of-Living pressures at their very root.

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About the Author

Tristan Ewins has a PhD and is a freelance writer, qualified teacher and social commentator based in Melbourne, Australia. He is also a long-time member of the Socialist Left of the Australian Labor Party (ALP). He blogs at Left Focus, ALP Socialist Left Forum and the Movement for a Democratic Mixed Economy.
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