Budget 2013 - lunge and riposte

The 2013 Federal Budget was neither what it could have been, nor what it should have been. Labor faced an unenviable task with a $60 billion revenue shortfall over four years- linked with the high dollar, declining terms of trade – and wavering business profits as a consequence. This impacted on Company Tax receipts especially. Reduced revenues from the mining and carbon taxes didn't help either; though Labor was too timid or too pragmatic to restructure and revivify either.

Labor had options to bypass austerity while actually better containing the deficit. But they chose not to go down that path for fear of 'getting on the wrong side' of relatively narrow vested interests. Yet Labor did decide tolimit austerity. Cuts have not been so severe as to lead to a European style scenario of negative growth and mass unemployment.

Higher Education cuts are in the vicinity of $2.3 billion. Having locked itself in to a policy of small government and low taxes the Government decided to reprioritise rather than provide new money for crucial programs. The result was the sacrifice of university scholarships valued at $2000 – which were transformed into 'loans', as well as the rescission of options to repay HECS (Higher Education Contribution Scheme) upfront at a 10 per cent discount. The latter will mainly affect reasonably secure families – as for the disadvantaged upfront payment could be unmanageable in any case. But the $900 million 'efficiency dividend' could put pressure on the wages of academics and other education professionals, while perhaps resulting in more course closures.

Not just middle class welfare, but middle income welfare is set to go. This is classic Labor policy–at least since the Hawke years: making do with less through extensive and narrow targeting of welfare. But some of the cuts are regressive. Low income groups who would have benefited from carbon tax compensation will also find that some of that compensation– in the form of tax cuts – has been withdrawn.

So Labor has not quarantined 'middle income Australia' from its cuts. But for some middle income is not the same as middle class. Surely further reforms aimed at recouping revenue from the top 10% income demographic would have been fairer – even though the reality is that we need a broad enough tax base to bring in the necessary revenue to maintain health, education, welfare, infrastructure etc.

Notably the policy of mandatory detention of asylum seekers – supported by both the major parties – has itself resulted in a blowout of over $3 billion. But so long as Abbott plays the fear card on refugees Labor can be expected to emulate Coalition policy in order to neutralise or minimise any political benefit.

The amount of money those deemed unemployed can earn via casual labour before their benefits are effected has risen by about $20 a week. But the initiative does not go far enough; and not. A $50/week increase in Newstart remains urgent to lift the unemployed out of dire poverty

There have also been boosts for cancer research and treatment. And a scheme to assist seniors to 'downsize' their home - moving into more "manageable' residences - is very welcome. But further progressive action could involve the removal of taxes such as stamp duty from low-income Australians also wanting to move in to cheaper accommodation. Stamp duty is a state tax; but the states could be encouraged to implement such a policy in return for compensation from the Commonwealth.

Labor is promising public money for transport infrastructure – but probably much of this will be in the form of Public Private Partnerships. It is likely, therefore, that some new projects will take the form of toll roads and the like. This would have a regressive distributive effect.

And importantly – Labor is recouping $4.2 billion over four years by closing business tax loopholes – certainly a more welcome initiative than further austerity.

But Labor's big policies remain disability insurance and the so-called Gonski reforms.

When fully implemented by 2019-20 disability insurance will have a price-tag of about $22 billion – covering over 450,000 disabled Australians and their carers. Therefore there will be a 0.5% increase in the Medicare Levy. ( 'The Age' (May 15^th 2013) Though more robust action is necessary on the tax reform front to fund the program over the long term.