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After the Budget - debating our future

By Tristan Ewins - posted Tuesday, 2 June 2009

Recent polls suggest an increase of support for the conservatives in Australia under Malcolm Turnbull’s leadership. In particular, the conservative parties have been putting on the “hard sell”: that Labor is an irresponsible economic manager, and that deficits and debt finance are unsustainable.

Yet despite this, the conservatives have made little point of differentiation between their proposals and Rudd Labor’s 2009-2010 Federal Budget. Instead, there is an opportunist war of perception playing upon ingrained prejudices. Turnbull has decided to oppose progressive changes to the Private Health Insurance rebate which would see benefits cut for higher income earners with some of this redirected towards needy pensioners.

In place of these progressive reforms Turnbull has instead suggested a 12.5 per cent increase in tobacco taxation: enough to cover the $1.9 billion lost as a consequence of blocking Private Health Insurance Rebate reform.


Importantly, we are not talking about a substantial difference in policy here. Remember, the economy is now annually valued at more than $1 trillion.

In some senses Turnbull’s stance is weak. In other ways it is a clever piece of political footwork. By focusing on a relatively minor difference in policy, Turnbull makes it difficult for Rudd to justify a double dissolution. Without such a “trigger” there is a danger that Labor may go to the next Federal election with the economy still struggling with the impact of global recession. Further: “by getting his way” Turnbull appears to have had a victory: providing the appearance of credibility he craves.

Of course, in reality the only alternative currently to running a deficit is to submit to a “downward deflationary spiral” of falling tax receipts, economic recession, and unemployment. Here, Turnbull’s play on popular prejudices and fears is grossly irresponsible.

Furthermore, Turnbull’s condemnation of Rudd’s earlier stimulus package (comprised of cash handouts) neglects the fact that infrastructure investment will take some time to get underway from the original announcement and until the benefits flow through the economy in the form of employment. The so-called “cash splash” in-fact supported the economy - specifically retail - during the interim.

The strategy, therefore, makes sense. In fact there are some who suggest that Labor’s stimulus does not - in fact - go far enough: Ken Davidson has argued that “the expenditure is not sufficient to hold unemployment at 6 per cent or lower.”

To put the deficit in perspective: as Paul Kelly has noted that the 2009 budget deficit is:


… caused two-thirds by the revenue collapse (totalling $200 billion over four years) and one-third by the stimulus package.

Furthermore, the figure of $22 billion (on “nation-building” projects) doesn’t only refer to new spending, There is the $4.7 billion already set aside for the National Broadband Network, and also “projects from the last budget”.

Labor's stimulus spending is timely and necessary. By investing in infrastructure now, we support jobs through the course of the recession. Meanwhile, this provides the foundations for future prosperity and growth. Any debt incurred can be serviced later - especially so assuming investment now adds to productivity, capacity and growth in the future.

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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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