Scott Morrison’s 2017-18 Federal Budget: Some Good Measures Amidst the Typical Austerity

Admist the Usual Austerity there are some Welcome Surprises in this 2017 Morrison Federal Budget. Though the monopoly mass media is tending to overstate any perceived 'leftward shift' ; inappropriately using terms like 'Labor lite' , where in reality there are very significant assaults on the rights of students and job seekers.

by Dr Tristan Ewins, 10/5/2017

Many media commentators are responding to the 2107-18 Morrison Federal Budget by branding it as ‘Labor Lite’ or ‘worse’.  But how much of that actually stands up to scrutiny? 

Yes the Government is attempting to appear ‘fair’.   And many media figures are throwing around terms like “cash splash” which are commonly reserved to use against Labor governments.  There are pressures in the right-wing monopoly mass media for a ‘right-turn’ in response to any moderation of economic policy under Turnbull.   Bernardi’s ‘Australian Conservatives’ and the libertarian ‘Liberal Democrats’ stand to gain most from this.  But despite years of conditioning from the monopoly mass media Australians may resist these trends given the remnants of our ‘egalitarian spirit’.   The point of all this appears to be stigmatisation of social investments and expenditure ; ultimately leading to a US-style political culture.  Which in turn would support a US style class system based on the absolute destitution of many , and the blatant exploitation of a class of working poor. To the extent Turnbull and Morrison resist pressures for an ‘economic hard right turn’ then that is welcome.

Some Budget changes do appear at the least superficially ‘Labor-esque’.  Many of the billions in cuts and savings originally proposed in the nightmare 2014 Hockey Federal Budget are laid to rest permanently here. The increase to the Medicare Levy will be welcomed by many, and will help provide for the NDIS. (National Disability Insurance Scheme)  The Government claims a ‘$56 billion shortfall’ for the NDIS ; though most of that could have been made up for immediately by jettisoning the Government’s $50 billion in planned corporate tax cuts over 10 years.  (much more over time) $8.2 billion will be taken via the Medicare Levy increase over the first four years.  

A so-called ‘Google tax’ targeting corporate tax evasion is also expected to net more than $3 billion over four years.   (though it is quite insignificant compared with corporate tax  cuts elsewhere)

Further, the ‘big banks’ (including CBA, ANZ, Westpac, NAB) will be hit for $6 billion over 4 years ; apparently including an effective payment in return for the ‘government guarantee’ for the sector. (which began with Rudd’s response to the Global Financial Crisis)   In response there is the question : will the banks hit customers or will they hit shareholders?  If somehow larger shareholders could be targeted that would ensure the most equitable outcomes.  A payment by the big banks in return for an effective government insurance policy makes sense.  Without it ultimately there could be impositions on workers, citizens, tax-payers.  So on this front at least the Government is doing the right thing.  And if the Banks respond by upping fees and charges arguably the co-operative and mutualist sector could ‘step into the breach’.   Were the Commonwealth Bank still in public hands then assuming a ‘competitive charter’ it could have held the rest of the sector accountable , countering tendencies to pass costs onto consumers.  That’s also a good reason for Labor to consider restoring a public-sector bank – perhaps taking advantage of existing Australia-Post infrastructure.

Meanwhile, foreign home owners who leave properties vacant six months or more will be taxed – a measure apparently borrowed from the Andrews Labor State Government in Victoria.  As well as raising some revenue, this measure should also influence investor behaviour ; and effectively increase available housing supply ; with downwards pressure on housing and rental affordability. 

The ‘Gonski 2.0’ measures, meanwhile, are a significant improvement on past Liberal policy, and include needs-based funding.  David Gonski is due to present another report by the end of the year.  The Catholic sector appears to be in the firing line.   More broadly, Shorten points out that despite the gains, here, (including some cuts to some of the richest private schools) the proposals nonetheless still involve an overall $22 billion cut to the sector over ten years compared with the deals previously negotiated by Labor. 

Other constructive policies include significant tax breaks for ‘empty nesters’ to ‘downshift’ to smaller, lower-maintenance accommodation.  That could also increase effective housing supply.  The housing bubble will eventually deflate (or ‘burst’ disastrously). But government could step into the economic breach with public housing.  There is still the need to expand supply to meet underlying human need.  Planned Negative Gearing and Capital Gains Tax reforms from the Government are welcome, but do not go anywhere near far enough, saving just $1.6 billion over 4 years . Stronger action on Negative Gearing is necessary to lessen competition between first home buyers and investors , correcting the Housing Bubble over time.

Also there’s $10 billion for rail as part of a suite of infrastructure commitments. (though these are not as significant as some think when compared relative to infrastructure investment under a ‘traditional’ Labor Government)    

A once-off payment of $75 for singles, $125 for couples – to assist with energy costs – is very insignificant when you consider the rising cost of living.  The Liberals point to renewable energy as the alleged ‘culprit’ here ; but what of privatisation? 

Finally ;  Annual TV Licenses are scrapped in favour of a much lower ‘spectrum fee’ – which makes sense given the changing media landscape – which is hurting traditional media. Arguably the licenses aren’t worth as much anymore.  But diluting media ownership laws will still enable the likes of Murdoch to dominate traditional media.

The Down-Side

But there’s a very significant ‘down-side’ to this Budget as well ; including ‘traditionally Liberal’ attacks on vulnerable groups ; and treating tertiary students like ‘cash-cows’.

Higher Education stands to lose almost $3 billion a year – with students hit hardest.  The Turnbull Federal Liberal Government claims that its fee increases – and its reduction in the minimum repayment threshold to $42,000 a year (down from $55,000) “better reflects the lifetime benefits reaped by higher education graduates”.  But these measures will start ‘kicking in’ affecting people on approximately half the average wage.  Hence in places the measures really bear no relation to any alleged private financial benefits for students. The logic behind these measures also neglects entirely the gains by business and society at large from a more highly educated populace.   There is some progressivity as those with much higher incomes will repay at a significantly higher rate.  But this does not excuse or make up for a 7.5% average increase in tuition fees.  In response Labor needs to raise the threshold somewhere much closer to the average wage ; and higher over time ; while entrenching a progressive scale in the rate of repayments.   Exceptional groups such as the disabled should probably be forgiven their debts, here : or at least have them frozen. The inevitable effect of this will be to deter many poorer students from study, reducing the nation’s pool of ‘human capital’ over time, and impacting on ‘equal educational opportunity’.  It is dubious at best to consider educational investments a ‘bad debt’.

The 0.5 per cent increase in the Medicare Levy is supposed to reassure voters that Labor’s warnings on health are only a ‘scare campaign’.  But while the Levy is re-indexed the forsaken increases to Medicare’s coverage in recent years are not made up for.  Medicare might still be eroded by stealth ; and that is ‘de-facto privatisation’ in the sense of intermittently eroding the coverage of ‘socialised’ public health proportionately.  This was always what Labor alluded to , but for some reasons ‘the waters were always muddied’ in the mass media, with throw away lines like ‘Mediscare’.

Also , while the Medicare Levy is rising, the 2 per cent Deficit Levy is gone – directly benefiting the wealthy in the final balance. There are ‘traditionally Liberal’ distributive  outcomes, here, despite claims of the Budget being ‘Labor Lite’.   (that is, the Budget favours the wealthy) 

Payroll tax on foreign workers will also be replaced with a levy of $1500 to $5000 per employee raising $1.2 billion over four years “to improve Australian workers’ skills”.  To an extent this will take some of the wind from Labor’s sails on related issues. 

Other measures include punitive attacks on the rights of the  unemployed, with the threat of payment suspension for those who miss a job interview or refuse a job offer they don’t want.  And reversion to a ‘cashless welfare card’ for anyone found to have illegal drugs in their system.  5000 people will by thus tested – and effectively humiliated – in order to create a ‘Trojan Horse’ for the introduction of cashless welfare.   Already Australia has one of the most negligent and punitive unemployment benefit regimes in the advanced capitalist world.  But ‘cashless welfare’ will see Australia revert to Depression era ‘Susso’ style ‘payments’.  The ‘Susso’ basically provided threadbare material subsistence (rations and vouchers) for the long-term unemployed.



Conclusions

Claims to the effect this Budget is ‘Labor Lite’ do not really stand up in the longer view historically when you consider pre-1980s relativities on the Economy ; and more recently with the ‘relative economic centrism’ of former Liberal leaders like John Hewson. The reality is ‘convergence’ on right-wing, economically Liberal policies ; though Shorten has begun to ‘break away’ to something more recognisably ‘left of centre’. Ironically,  the “Abbott Purists” will likely claim the austerity has not gone far enough. Though they may be upset by the attacks on Catholic education.  But it is THEY who have abandoned ‘traditional Catholic Centrism’ on welfare, labour and the economy.  (a tradition which interestingly had parallels with other ‘Christian Democratic’ parties in Europe)

This government is restrained by its own inflexible “small government no matter what” Ideology.  (spending is set at no more than 26 per cent of GDP ; well below the OECD average)  This drives various ‘cuts to the bone’ (as Gillard would have put it) , because it leaves no other option than harsh austerity.  Ultimately, Scott Morrison will have to make a choice: real people or Economically Liberal ‘small government’ Ideology.

Terry McCrann of the Herald-Sun calls the Budget ‘a disgrace’ for not sufficiently addressing government debt.  And Jeff Whalley (also of the Herald-Sun) argues that government debt amounts to “$375 billion” or “$15300 for each man, woman and child” .   But while government spending can have a positive ‘multiplier effect’ on economic activity,  austerity also has a negative multiplier effect ; dragging the broader economy down in sympathy.  

Also we must remember  that private household debt is the much bigger problem, and is connected with falling real wages.  (Why the cuts in Penalty Rates, therefore, we might ask! ; which will lead to lower tax revenue also)  And reducing investment in PUBLIC owned infrastructure presents its own associated problems of passing inferior cost-structures on the broader economy. Indeed, investments in some services (eg: Education) and infrastructure add to productivity – and the public sector (natural public monopolies) can often do the job more efficiently.  So Morrison’s ‘good debt’ and ‘bad debt’ has some substance. (a pity in the past they did not apply those principles to Labor governments!)

In conclusion ;  The Herald-Sun reports with an air of alarm that taxes will be up $23 billion over four years ; and spending up $15.7 billion over four years.   Indeed, Commentators are complaining that income tax is becoming more significant proportionately.  Though really, this need not be a problem if total income tax is progressively restructured, and also the rest of the taxation mix.   Also keep in mind the economy is worth approximately $1.6 trillion.  So in reality spending is up by less than a quarter of one per cent of GDP.  The revenue gap has at least been appreciably narrowed.

In some ways this Budget is better than we might have expected from the Liberals after the horror Hockey ‘Lifters and Leaners’ Budget from 2014. But a lot of that Ideology is still there.  And the cuts are still significant ; with the introduction of ‘cashless welfare’ setting a precedent for the further future humiliation of job-seekers.  And shutting many lower-income Australians out from Higher Education.  An Opposition with strong, traditional Labor policies on distributive justice can still ‘outflank’ a Liberal Government which cannot help but govern primarily in the interests of its core constituency: the unambiguously well-off.