Short term relief in Budget ; but No Long Term Plan

 

Dr Tristan Ewins

If Labor delivered a Budget like we’re seeing portrayed from the Coalition Government in Australia the media would proclaim they were ‘irresponsibly’ ‘spending like drunken sailors’.  But when the Conservatives are trying to revive their electoral fortunes the Melbourne Herald-Sun proclaimed “Hip Pocket Rocket” and “Millions Win”. In fact this is a Budget that effectively increases tax over the medium and long term, however. And much of the much-mooted  'generosity' is illusory. More on that later.

Fuel Excise will be cut with an anticipated 22c per litre drop in petrol prices.  Also interestingly the Government points to low unemployment ; which is largely because of stimulus created by Jobkeeper – albeit badly targeted stimulus. Does this mean they’ll admit they’re wrong on contractionary Budgets more broadly?  Probably not.  Wage subsidies, tax offsets and cash payments figure significantly (for instance a  once-off $250 payment for pensioners) ; but over the longer term this will not properly compensate stagnating wages ; and depressed pension and Jobseeker payments.  Indexation of pensions will continue, but this is merely ‘treading water’.   By default pensions increase as a proportion of average wages ; which means if inflation continues to grow it may continue to outstrip pension indexation.

Frydenberg believes low unemployment will drive wages.  This is possible because there is reduced supply relative to demand. But there are no guarantees: without strong labour organisation and leadership form Fair Work Australia stagnation could well continue.  And wage growth will probably not keep pace with inflation.  In any case the Coalition are luke-warm on wages ; and are just trying to weaken Labor’s narrative. There will also be a $10 billion investment in the Australian Signals Directorate over 10 years ; but there is little in the way of new initiatives in Aged Care, Education or child care for instance.  (except for some subsidies for initial study in aged care)  Previously announced improvements to Aged Care funding will continue ; but this is but a fraction of what was demanded by the Royal Commission.

The Conservatives have had their chance to respond to the Aged Care Royal Commission and are doing not nearly enough. We need to know that Labor will commit the necessary resources to implement quotas - which means more time on washing and dressing, more individual attention with feeding, and more time to interact and get to know residents; Also Labor needs to put a registered nurse in every home 24/7 ; improve wages and conditions for all workers (min $30/hour) ; and implement quality of life and happiness benchmarks that go beyond the basics to deliver happiness and quality of life as much as possible. All residents also need access to pleasant surrounds such as gardens ; and more to do than be sat in front of a television in a common room all day. Also prompt at home care for all who have the need and meet requirements with minimal waiting time. And phase out the user pays model by providing for high quality public, and subsidised not-for-profit and community based care. This will require several billions in new funding.

In the Budget there will be over $350 million in subsidies for apprentices and employers will be rewarded with $120 for every $100 spent training their workforce ; and other incentives for investment in technology.

Encouragingly Pensioners will gain on the medicine front ; with the number of scripts necessary before the ‘safety net’ kicks in reduced by twelve.  While a relatively small measure this is perhaps the most progressive announcement made by the government here.

Over $800 million will address “telecommunications blackspots”  ; while there will be a $480 public investment in NBN speed and reliability. This is necessary because the NBN was never done properly by the Conservatives in the first place.  $600 million will support growth in agriculture ; while $3.7 billion will fund faster regional rail.  Subsidies will also support regional manufacturing ; including the development of export markets.

Schemes will continue which enable 50,000 first home buyers to enter the market with a 5 per cent deposit.  But there is little for public, social or affordable housing – which could be crucial in any attempt to make housing more affordable by increasing affordable supply.  The government’s policies do not address the fact that increasing interest rates could provide a massive shock to personal and household budgets, sending mortgage repayments skyrocketing.  This could lead to another financial crisis and recession.

Importantly many of the cash payments benefiting low and middle income Australians will be a short term splurge ; designed to win an election. Improvements for low income earners and pensions will not be sustained over the long term.  Indeed while it will be increased for its final year, the Low and Middle Income Earner Tax Offset will be phased out in the following year and onwards; hitting low and middle income earners hard over the longer term. Long after the short term handouts fade into memory this could cost low income earners $700 a year.  Somehow most of the mainstream media didn't see fit to mention this.  So in fact this is a 'smoke and mirrors' Budget that tries to convince us of its generosity while hitting us hard into the future. It is no accident that low and middle income earners will be hit, while tax cuts for the wealthy will be pushed through. 

Overall this Budget provides a boost over the short term, but does little to address cost of living over the longer term ; and leaves wages ‘to the market’.  Structural improvements are necessary for Jobseeker and Pensions. And the tax system needs to be adjusted to benefit low and middle income earners relative to high income earners and the wealthy more generally.  Means tests could be eased, also, to make it more attractive for Disability Pensioners to enter the workforce ; and more could be done to help those people gain experience to ameliorate gaps in resumes.

Again, the Budget delivers some relief over the short term but does little long term about poverty, wages stagnation, and cost of living pressures.  Labor needs to do much better on Aged Care, Public and Social Housing, progressive tax system restructure, structural increases to pensions, and initiatives to get disabled Australians into fulfilling work –  with an easing of means tests for fairness. Medicare Dental could also feature ; and Labor could begin the process of winding back user pays in education by reducing student debts and significantly increasing debt repayment thresholds.  Victoria is also significantly short-changed on infrastructure ; and the government will have to find money from elsewhere to pay for transport infrastructure, especially roads.  Some problems never seem to go away ; such as state school class sizes and over-worked teachers.  But this seems to have ‘slipped off the radar’ in recent years.

Labor needs a long term plan ; with immediate reforms that are ‘locked in’ and hard to reverse.  This Budget will convince some ; but over the longer term so many questions remain unanswered.