Budget 2013: An Analysis of Labor's Budget, and of Abbott's reply

 

above: Treasurer Wayne Swan has delivered a Budget that could have been worse; but also could have been better. 

In the following article Tristan Ewins examines the pros and cons of Labor's 2013 Federal Budget. Labor's timidity in key areas of reform (eg: superannuation concessions) is confusing given its willingness to withdraw benefits from some low and middle income demographics.  But there are some very good policies here as well - even though Gonski has been 'watered down'. Nonetheless, there are clear divisons between Labor and the Conservatives; and hopefully these will be cast into greate relief as the election draws nearer.

Tristan Ewins

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 certainly didn’t help either; though Labor was too timid or too pragmatic to restructure and revivify either. 

Labor had options – which we will discuss later – to bypass austerity entirely while actually better containing the deficit. But they chose not to go down that path for fear of ‘getting on the wrong side’ of vested interests.  On the good side, Labor did decide to limit austerity.  Cuts have not been so severe as to lead to a European style scenario of negative growth and mass unemployment.  For this (parts of) ‘the business community’ are happy: as increased consumption power is in their interests (or at least for those focusing on domestic consumer markets), even though business tends to oppose social welfare as a rule.   (in order to ‘make room’ for further tax cuts that add to their bottom line)  The overall dimensions of this Budget include cuts of $6 billion over four years and increased revenue of $29 billion of the same period.

First we will summarise Labor’s cuts in more detail.   

Decreases in Medicare coverage will hurt some on low incomes and represent a step in the wrong direction.  And while changes to superannuation will reduce concessions for the richest of all and bring in $800 million over four years – this is not anywhere near what was necessary – or what was possible if the government had targeted a broader base of genuinely wealthy Australians.

Higher Education cuts are in the vicinity of $2.3 billion.  The worrisome truth, here,  is that having locked itself in to a policy of small government and low taxes the Government  decided to reprioritise rather than provide new money in order to fund something anything like what the Gonski review had recommended.  The result of 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’ will put pressure on the wages of academics and other education professionals, while perhaps resulting in more course closures.  There are already predictions that Sydney University will be required to slash $44-$55 million, while Wollongong University has predicted $14 million in cuts and foreshadowed further staff reductions.

Not just middle class welfare, but middle income welfare (as Tim Colebatch argues) 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.   Here it is interesting that Labor has chosen to crack down on welfare  for those on average incomes, but shied away from reducing superannuation concessions for the top 5% or 10% income demographic – which alone could have taken care of the deficit – bringing in between $10 billion and $20 billion.

So Labor has not quarantined ‘middle income Australia’ from its cuts.  But by some analyses  middle income is not the same as middle class.  Surely more reforms aimed at recouping revenue from the top 10% income demographic would have been fairer – 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.

Family Tax Benefit A – intended to assist in child rearing - has been also targeted.  The Costello-erea ‘baby bonus’ has been wound back.  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.  (a more regressive decision) This is disappointing because regardless of the fact of a falling carbon price with moves to a ‘market carbon trading system’, progressive changes to the tax mix would have been of great benefit to workers and the poor in any case.  

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.

Now for a range of other policy initiatives – some of them quite welcome.  Although many of them have not been taken far enough.

An increase to the amount of money that those deemed unemployed can earn in casual labour before their benefits are effected has risen by about $20 a week. This is a good initiative: but not going far enough; and not lifting the unemployed out of dire poverty.  (which in principle is supported not only by welfare organisations, but even by elements of the business community.)  A $50/week increase in Newstart remains an urgent priority.

There have also been boosts for cancer research and treatment, and a scheme to assist seniors to ‘downsize’ their home  - moving into smaller and more “manageable’ residences is very welcome.   This is 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 is likely to have  a regressive distributive effect.

Though hopefully  the decision to invest $4.6 million in “an institute for ageing” could lead to more robust and fair aged care policies into the future.

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.

According to ‘The Age’ (May 15^th 2013)  - when fully implemented by 2019-20 disability insurance will have  a price-tag of about $22 billion – covering over 450,000 disabled Australians.   In order to provide funding there will be a 0.5% increase in the Medicare Levy – though arguably more robust action is necessary on the tax reform front to fund  the program over the long term.   These increases to the Medicare Levy are welcome, though further progressive tax mechanisms to provide funding would have been more welcome.

The government is set to provide 50% of the funding for the NDIS (renamed Disability Care Australia) – though when combined with the education reforms it is doubtful that the states can afford this without further federal grants – or further state-level ‘reforms’ – with user pays infrastructure, or increased state taxes.  Disability insurance is a massive and overdue reform – providing support, amenities and services to some of those who are in the most need.  But even the Liberal states had been arguing for tax reform in order to consolidate their fiscal position. (though of course they were Ideologically driven to demand a regressive increase in the scope and coverage of the GST, rather than fair reforms elsewhere in the tax mix)

The Gonski reforms have also been dramatically watered down.  Though nonetheless they remain substantial.  While originally the Gonski Review called for an increase in funding of $6 billion a year, the government is promising only $9.8 billion over six years.  Some money will be redirected from other schemes, and again there is the expectation that the states will ‘come to the party’.  When combined with projected State funding the Commonwealth expects total funding of $14.9 billion over six years – compared with the initial vision to expand education funding by more than twice that amount.  The changes to the funding mix are apparently more progressive, however, with loadings  targeting the inclusion of students from disadvantaged backgrounds –whether the consequence of poverty or disability.

The Abbott response

In response to the Labor Budget Abbott talked of a “Budget Crisis’ created by ‘Labor mismanagement.’  This might go down well with some people who don’t want to scratch far beneath the surface.  But the reality is that the high dollar has been central to the Budget’s deteriorating position.  And for Abbott’s part he shared the position of not intervening to lower the dollar in order to mitigate poor terms of trade, and the disaster for manufacturing.  Arguably intervention is warranted in exceptional circumstances.  And furthermore, Abbott’s opposition to a more robust mining tax deprived the government of the funds that may have been employed to effectively subsidise affected industries in manufacturing and tourism especially – keeping them viable until the end of the mining boom, and a drop in the dollar.  This was important to prevent skills and capacities being lost over the long term.

Abbott and the Conservatives have also been complaining about Labor’s ‘out of control spending’.   And they are talking about a ‘simpler’ tax system – which almost certainly translates into more regressive flat taxes –(eg: an expansion of the GST, and its extension to food) with a redistribution of wealth from the real ‘battlers’ to the affluent.  Here, the Australian Conservatives are taking a leaf out of the extreme US Tea Party’s book.   And for Abbott it is a betrayal of his Democratic Labor Party past.   While the DLP sabotaged Labor for years, and were not a friend of Labor,  they were not neo-liberals and believed in social welfare. But Abbott will say and do anything to get the ‘top job’.  The Americanisation of Australian politics is a real threat:  and the Liberals seem to see the US ‘ideal’ of harsh social stratification as something to aspire to and emulate.

Also, Abbott’s rhetoric proves to be hollow when subjected to scrutiny. As Tim Colebatch points out (The Age, May 15^th 2013) “Revenue this year is forecast to be 23 per cent of GDP, compared with the Howard Government’s post-GST average of25.4 per cent. And spending levels are pretty much identical.  And amazingly - in Melbourne’s ‘Herald Sun’ Jessica Irvine was allowed to make the observation that Labor “inherited a structurally flabby Budget from the Howard Government, with too many cash handouts and unsustainable tax cuts.”   And:  “The Budget would be in surplus today if personal income tax rates had not been cut [under the Howard Government) eight years in a row.”  (Herald-Sun, May 15^th, 2013) 

Why is Costello’s record therefore not examined more rigorously?   On the Howard/Costello watch the housing bubble rendered home ownership an impossible dream for many.  The privatisation of Telstra left subsequent Labor governments in a position of having to ‘pick up the pieces’ and pay a high price for access to Telstra infrastructure for the NBN. The benefits of the mining boom were squandered with unnecessary middle class welfare and unsustainable tax cuts.

Abbott has also attempted to rationalise his Parental Leave for the wealthy scheme by comparing it to annual leave.  There is a significant difference, however.  While many Australians only get 2 weeks annual leave, Abbott’s scheme will provide SIX MONTHS leave on FULL PAY for professionals earning $150,000/year.  True, Abbott is sourcing the funds from a levy on big business – But the money could be prioritised for areas of greater need.  The ultimate effect is a redistribution from more vulnerable groups to the wealthy – as Abbott’s largesse with Parental Leave will be mirrored by austerity elsewhere.

Other projected Abbott policies include more punitive welfare in the form of Work for the Dole, and the removal of the Newstart  (threadbare) ‘safety net’ entirely for under 30s.  A layer of desperately unemployed – a ’reserve army of labour’ – will undermine workers’ organisation and bargaining power.  And perhaps for the Conservatives that is the point!

We can also expect an inferior version of the National Broadband Network; as well as assaults on the rights of labour including organisational rights; cuts to welfare; and the rescission of superannuation co-contributions for low income workers. 

Abbott is still maintaining a 'small target' strategy; and most of the media is providing precious little scrutiny.  Should he attain government, the austerity could well extend further than even this author supposes!

Lessons for Labor

There are several areas in which Labor could have taken a proactive stance – minimising the deficit, preventing austerity and actually expanding the social wage.

A more rigorous mining tax could have brought in perhaps $6 billion. Reversion to 75% Dividend Imputation could have recouped perhaps another $6 billion – or perhaps $12 billion if reverting to 50% as once advocated by renowned Australian economist John Quiggin.  Restructuring income tax should also be an option; as should a tax on inheritances over $2 million.  Cutting superannuation concessions for the wealthy and the upper middle class could have captured between $10 billion and $20 billion.  Talk of ‘taking pressure off public pensions’, here, is a furphy – as superannuation concessions alone are now costing more than the entire Aged Pension Budget.  Again: we have a policy redistributing money from ‘battlers’ to the wealthy.

Arguably Labor’s timidity was unnecessary.  The government is withdrawing payments from low to middle income groups – but somehow thinks it could not have raised further revenue from the top 5% to 10% income and wealth demographics.  Why back away from such reforms when they would target only a wealthy minority; and when they would provide the scope for massive expansion of Australia’s social wage and infrastructure – the benefits of which should be plain to voters?

Also importantly – Labor could have mimicked Abbott on one crucial point: his 1.5% levy on big business.  Abbott could hardly have complained given his own policy, and Labor could have directed the money into areas of much more acute human need – for instance, aged care.  It is still not too late to develop just such a policy and seek a mandate for it at the coming election.  Such a policy could well be very popular!

With perhaps over $30 billion from such initiatives-  that is, were they all implemented to the fullest extent – a surplus may even have been achieved for the coming year.  Though that would be a political objective; as in reality the precariousness of the world economy demands a more fiscally expansionist stance.   Gonski could have been implemented in full.  And comprehensive Aged Care insurance could have been rolled out on similar principles to Disability Care Australia.  Finally, resources could have been provided for the States – maintaining health funding; maintaining equity in provision of health services; providing further resources for public transport and other infrastructure without regressive user pays mechanisms or even privatisation of roads…

Policies of ‘small government’ will only lead to more Public Private Partnerships, and perhaps outright infrastructure privatisation for which consumers will pay the price. 

Instead, Labor should go to the election heralding further action on the social insurance front.  And while following through with its education and disability reforms, Labor must promise a multi-billion dollar annual investment (new money) for Aged Care services.

Indeed it is not too late for Labor to further re-emphasise social insurance as a central theme for the election.  If Abbott could be pressed to accept disability social insurance, the right kind of articulatory strategies by Labor could drive him to accept Aged Care insurance as well.  If Labor loses the election – but manages to dictate the policy agenda in such a manner – then even in electoral defeat it would comprise a kind of victory. The suffering of our aged citizens – especially those in high dependency care – is an obscenity to the extent it could be ameliorated – but is not – because of ‘other priorities’.   I have argued for such action in previous articles here – and for any who have not read this material yet I urge them to read the following:

http://leftfocus.blogspot.com.au/2009/02/another-look-at-aged-care-crisis-call.html

Again: There is relief that (in Julia Gillard’s words) Labor “has not cut to the bone”.  But the Budget is not all that is could have been, nor what it should have been.   Failing to extensively reform superannuation concessions was the key capitulation in the face of vested interests..  Hopefully, though, Labor will press the themes of tax reform , social insurance and social wage expansion further in the following months, and seek a mandate for progressive change.

Responding to Andrew Bolt: Is Social Insurance ‘Class Warfare’?

 

above:  Julia Gillard, Wayne Swan and the Federal Cabinet have the task ahead of themselves for the May Budget - hopefully extending Social Insurance into Aged Care and Disability support and services; as well as implementing the Gonski education reforms.  But funding these signature programs must not come at the cost of austerity affecting working class families, and vulnerable Australians.

nb: Readers sympathetic to the ideas expressed in this article are welcome to join the 'ALP Socialist Left Forum' facebook group as well;  see:  http://www.facebook.com/#!/groups/102658893193637/

 

Tristan Ewins

In the ‘Herald-Sun’ March 25 Herald-Sun propagandist-in-chief Andrew Bolt gave us a sense of the probable Conservative strategy come September.  Bolt accused Julia Gillard of a “politics of hate”, and of a “divide and conquer” strategy.  Some on the Left are suggesting a return to some kind of Accord (as attempted by Labor in the 1980s) -  partly in order to counter this kind of rhetoric.

The principle of social unity and comprehensive social peace under the aegis of “national reconciliation” by Hawke was a powerful discourse – but was also always problematic.  It was seen as the unions’ responsibility to compromise; to consent to wage restraint and labour market deregulation for relatively little in return.  All the while the very principle of industrial militancy – whether in defence of political rights or in the form of collective bargaining – was delegitimised.  Labor governed during these years. But despite a formal partnership in the Accord process, in reality the  labour movement was on the defensive. Wage restraint was accepted to ‘buy time’ and ensure short-term organisational survival. Over the long term the movement continued to demobilise.

While it is not the inevitable consequence, there is often the danger in corporatist arrangements that those groups so co-opted – for instance unionised workers – will have their interests subordinated to those of the state, and of the more powerful partner in any agreement – the capitalist class.  Quite likely Bolt would respond to such a suggestion – that there is a capitalist class, and that it promotes its own interests ahead of the interests of workers - as ‘class war rhetoric’.   But sadly it is simply a social fact – a fact almost considered ‘unspeakable’.  That is – that classes exist, and that at certain levels they have distinct and sometimes antagonistic interests.

And so today Bolt hides behind rhetoric of social peace – all the while the Conservatives he backs play their own ‘divide and rule game’.  They pit workers against environmentalists on the basis of lies about the impact of the carbon tax on cost-of-living pressures.  They seek to divide workers against job-seekers on the basis of distortions regarding the numbers of long-term-unemployed, and the assumption that welfare must be ‘punitive’.  On such a basis – resentment against the welfare dependent - they hope even to win the support of the low-paid. Yet they do not support wage justice for those very people whose support they court.  They speak the language of ‘social peace’ while working to remove industrial rights; worsen punitive welfare or even remove welfare entirely; exacerbate user-pays mechanisms in higher education; raise effective taxes for low income Australians; and abolish the low-income superannuation contribution introduced by Labor to assist disadvantaged workers.  

Meanwhile – regardless of whether it was his intention, Martin Ferguson’s stated aversion to “class war rhetoric” was a gift to the Conservatives.  This is a statement that must be viewed in the context of a monopoly mass media campaign which portrays all distributive justice initiatives as ‘class warfare’.  Any hint of progressively structured taxation - or progressive means-testing of benefits like the Private Health Insurance Rebate - has been consistently labelled as such. As most likely would be the removal of superannuation concessions for the top 5% income demographic.  (notably not the same thing as a new tax; or indeed a tax at all!)  It is a deliberate strategy. 

By contrast, attempts to stigmatise, vilify and criminalise trade unions and trade union activity do not attract the same label of ‘class warfare’.  And neither did the mining industry’s abuse of its enormous economic clout and pool of resources to launch a relentless campaign of fear against the original Resource Super Profits Tax – in defence of its own sectoral class interests – and against the interests of the country-at-large.   

That said - ‘democratic class struggle’ – so-dubbed by Swedish sociologist Walter Korpi – involves ‘historic compromises’ depending on the balance of class forces.  The problem, though, is that for decades Swedish workers negotiated from a position of organisational and electoral strength – whereas Labor faces a weakened union movement and a united front on the part of Australia’s monopoly mass media and mining establishment.  Labor needs to construct its own ‘historic compromise’ for modern times.  But the labour movement cannot afford the kind of compromise which would see it further weakened and demobilised.

So if Labor is to revive the idea of an ‘Accord’ – it needs also to learn from the mistakes of the past.  The labour movement cannot afford further strategic retreats.  Though some ‘common ground’ with the liberal bourgeoisie may be possible on education and training, Newstart,, infrastructure, the price on carbon and other issues.  (for example, note the positions of former Australian Industry Group Chief Executive, Heather Ridout)

What should Labor do?   Further austerity and imposition of regressive user charges for everything from aged care to transport infrastructure are certainly not the answer. Yet somehow Labor needs to bring together diverse constituencies – white collar professionals, unionised industrial workers, students, low income workers, and ‘post-materialist’ elements concerned more with work-life balance, as well as environmental and liberal rights.

Gonski and NDIS are powerful weapons in Labor’s policy armoury; as is the frightening prospect of an Abbott government which would slash and burn welfare and services on an unprecedented scale.  Labor’s subsidisation of the wages and career paths of child care, aged care and other community sector workers – comprises a real step forward – and an advancement for women who are disproportionately represented in these fields.  More action is necessary, but hopefully Labor should be able to count on their active support, now, as the September election approaches. But Labor’s Sole Parents decision is a ‘running sore’ that must be rectified come the May Budget.  Another callous decision was  the policy of unfairly tightening disability pension eligibility, with some of our more vulnerable Australians relegated to a highly-deficient Newstart payment.

But if Labor does need to project a ‘historic compromise’ what should it look like?  I am suggesting the following positions as a basic policy framework for September, capable of mobilising broad support in the electorate without damaging industrial concessions:

Firstly: Equal opportunity in education – both in the sense of meritocracy, as well as in the sense of labour market requirements, and high quality education (including extensive liberal/civics education) as a social right.

Secondly: Social Insurance.  Progressively financed protections for all Australian suffering a disability, and for the Aged Care requirements of all elderly Australians; provided on the basis of need, and excluding regressive user pays mechanisms for low income and working class Australian families.

Thirdly: Maintained commitment to a price on carbon emissions, and to direct public investment in renewable energy; as well as subsidies for low income Australians especially to invest in renewables, and so to lessen cost-of-living pressures.

Fourthly:  Maintain the bulk of the Fair Work Commission’s industrial relations regime; except revisit the theme of modernised Awards; Intervene directly to raise minimum wages in real terms, and deliver on the previous promise that no worker be left worse off.  Defend pattern bargaining.

Fifth: Deliver a diverse Australian media, not only seeking to wind back virtual monopolism; but also encouraging new entrants into the sector for the sake of pluralism; and maintaining funding for a public ABC and SBS – with charters to deliver on diverse local content, and promoting political balance to deliver meaningfully on that policy of inclusive and authentic pluralism.

Sixth: Deliver further on effective cost of living relief for those who really need it; Achieve this through tax restructure and welfare reform (including raising Newstart) as well as increased minimum wages.  To that same end seek to contain further cost-of-living pressures by ruling out infrastructure privatisation and regressive user-pays charges for existing and future infrastructure; and by publicly funding future communications, energy and water infrastructure. (reducing borrowing costs; and including the National Broadband Network)  Commit that if user charges do apply for state-owned transport infrastructure that they will be progressively structured (excluding low income groups), spread fairly, and will not effectively discriminate against Australian families and workers – often in new, infrastructure poor suburbs -  who lack access to sufficient public transport.

Seventh and Finally:  Fund all these policies progressively. No more austerity for vulnerable groups.  An absolute Minimum policy of withdrawing superannuation concessions (not the same as a new tax!) for the top 5% income demographic, and reverting to 75% dividend imputation – drawing in $15 billion in new revenue.  Furthermore consider reform of the Minerals Resource Rent Tax, and implement a progressively scaled levy to assist in funding NDIS and Aged Care Social Insurance, cementing the principle of ‘Social Insurance’ in the public’s imagination and vocabulary.

Labor is seeking to follow in the footsteps of the Obama presidential campaign – mobilising ‘on the ground’ on an unprecedented scale.  But the social forces Labor is hoping to marshal will demand more than rhetoric; with “one step forward, two steps back”, or ‘robbing Peter to pay Paul’. Already teachers, aged care workers, child care workers and community sector workers have good reason to support Labor in 2013.  A revisitation of the MRRT, with some revenue being deployed to support industries impacted by the high Australian dollar – could also get some employers ‘in Labor’s corner’. 

At this point the possibility of ‘Bob Katter’s Australia Party’ holding the balance of power should not be dismissed either.  Some on the Left support ‘free trade internationalism’, but if an accommodation with agrarian interests is what it takes to spare Australia an Abbott government, dealing with Katter should not be ruled out.  Indeed, it was just such a manoeuvre that preceded decades of social democratic hegemony in Sweden beginning in the 1930s.  Katter is also sympathetic when it comes to industrial rights.  Though if it comes to that Labor should bargain hard in the search for common ground, and not relent on matters of social conservatism or environmental sustainability. 

Labor has a long and difficult task ahead of itself, fostering party unity and mobilisation in the wake of recent events.  But we should not give in on the struggle before it even really begins.  The May Budget will be crucial. Labor must be in a position to fund Gonski, the NDIS and Aged Care Insurance without austerity elsewhere.  For Gonski and the NDIS alone it has to raise over $20 billion in the context of a $1.4 trillion economy. (more to include Aged Care Social Insurance) 

Australia is one of the lowest taxing nations in the OECD.  Specifically, Australia’s federal tax intake (excluding state taxation)  is about 30% of GDP compared with 48.5% in Sweden.  So there is certainly scope for tax reform to provide for disability and aged care social insurance, as well as reform of education and welfare. This is what Wayne Swan and Cabinet need to keep in mind as the May Federal Budget is developed.  It will be the best chance Labor has to turn the debate around, and win credibility on funding its crucial signature policies.

Labor needs to “Take the High Ground” on the Economy

above: Australian Labor Treasurer Wayne Swan made the right call on the surplus

The Federal Labor Government's reversal on the Federal Budget Surplus was considered a failure by some, but grassroots Labor activist, Tristan Ewins argues that Wayne Swan has made the right call on this one: Although unfair attacks on sole parents, the disabled and others need to be re-thought in the new context.  Labor needs a bold social wage reform package, fundeded broadly by progressively extracting a fairer contribution from the top 15 per cent.

nb: our Facebook group can be found here:  http://www.facebook.com/#!/groups/102658893193637/

 

Tristan Ewins

December 27th 2012

The headlines of the Melbourne Herald-Sun on December 21^st proclaimed “Julia Clean Bowled – Third Broken Promise as $1 billion surplus axed.”  Other headlines further into the paper announced: “Swan comes clean on deficit” and  “Budget blows credibility of Gillard, Swan.” 

To be fair, within the pages of the Herald-Sun there was some deeper and more balanced analysis – admitting the objective necessity of abandoning the surplus at this particular conjuncture.  But clearly the editors of the publication were aiming to influence via first impressions: via the power of headlines; and the likelihood that many readers would not actually read through all the material.

So what of the reality, then? 

With a world economy in crisis, even affecting Chinese growth – Australia has been hit; and so too have Australian tax revenues – including the GST and Company tax.   Notably business is actually supporting Labor with regard postponing the surplus – well aware of the “multiplier effect” stimulus has upon the economy, and thus upon consumer and investor confidence.  Tony Abbott is decrying Labor as “spending like a drunken sailor” – but this is nothing more than a play upon people’s misassumptions and prejudices.  In reality Labor has held tax revenues down as a proportion of GDP, and has ‘robbed Peter to pay Paul’ – hitting Single mothers and many disability pensioners to provide some ‘fiscal room’ for Gonski and the National Disability Insurance Scheme. (NDIS)   

For his part, also, Abbott has to explain how he will deliver his Paid Parental Leave for the upper middle class, while withdrawing  the minerals resource rent tax, as well as the carbon tax, and restoring upper middle-class welfare in the form of a broad-based Private Health Insurance Rebate.  And Liberal support for the NDIS is compromised by hysterical and deceptive panic-mongering about its price-tag; projecting into the future – without explaining the context of inflation – to provide a distorted impression of its ultimate cost. Lastly: Abbott’s agenda of cutting expenditure at this particular conjuncture would be deflationary and contractionary – a criticism of him which Labor and the corporates seem to have in common.

 At the same time Liberal State governments are imposing austerity in their irrational drive for a ‘surplus at any cost’.  Again, this is about retaining the political advantage on “perceived economic competence”.   Having consistently distorted the question of economic management as approximating the management of a household budget, at all levels the Conservatives cannot confess the truth without undermining their political position.   Thus in Victoria Ballieu has gutted TAFE expenditure to achieve a surplus: when in fact stimulus is required; as is investment on infrastructure, education and training to overcome capacity constraints.  User pays mechanisms – for instance increased public transport charges and increased costs for license renewal – are also being imposed to bridge ‘the fiscal gap’ from falling GST revenue.   While the Liberals like to avoid the word ‘tax’ – the effect of these measures approximate regressive, flat taxation.

But what should be done? 

Budgets need to be balanced – but not always: only over the course of the economic cycle. And this need not imply ‘small government’ during periods of growth either: so long as the ‘inflation genie’ is contained some way or another – preferably progressively via taxation on the wealthy and upon conspicuous consumption.  (also inflation shouldn't be raised as an excuse for distributive injustice and exploitation) During times of relative stagnation (ie: right now!)  – and in some parts of the world outright Depression – the time is still right to bring forward big infrastructure programs for quality of life and to overcome capacity constraints.  Again: this has a ‘multiplier effect’ on growth and confidence. 

At a state level the Liberal State Governments also need to face reality.  Without investment in education, health and infrastructure the economy will wither – and human beings will suffer.  The Conservative State Governments have argued meekly for an increased GST to overcome the ‘fiscal gap’ – but surely they perceive the bind Labor is in: restrained by the same ‘small government and surplus at any cost’ mentality which the Conservatives themselves have nurtured.  If the State Governments are to acquire the funds they need it is imperative that they come out consistently, openly, clearly and loudly in favour of increased taxes, and against the lie that surpluses are always appropriate.  No matter how politically unpalatable it may seem, a bipartisan consensus is necessary right now, here - in the national interest. 

And in other words the Conservative State Governments need to publicly refute the position taken so far on this theme by the Abbott Federal Opposition.  Only by doing can they provide Federal Labor the “political breathing room” to do what is necessary to restore State Government finances.  To avoid embarrassment, Abbott himself could finally be responsible: taking the lead in conceding that we still live in precarious economic times; and hence action on the tax/stimulus/services/infrastructure front is necessary.

Finally: both Labor and the States need agree to progressive taxation reform – which is fair both to most working class families and to the disadvantaged.  Increasing a flat, regressive GST is not acceptable.   Yet if these conditions are met – then ‘the ball will be in Federal Labor’s court’ – to reform tax, maintain and expand infrastructure and services, and provide economic stimulus in uncertain times.

But even this compromise should not be enough for a reforming Labor Government.  Gonski and the NDIS need to be “locked in” (with a price tag of about $14 billion) – and without ‘robbing Peter to Pay Paul’ again with regards critical social programs – or else reducing ourselves to empty, token and distant promises. To ‘deliver the goods’ for 2013 there is a need to raise tax as a proportion of GDP.  

As against the popular assumption any tax reform would comprise ‘electoral poison’ there is the contrary argument that improved infrastructure and services – paid for via the progressive targeting of the top 15% wealth and income demographic – could appeal to a broad class base of support.   Such an emphasis would be electorally viable on the basis of the economic interests of most Australians; but broad-based enough to bring in meaningful revenue.

Specific measures could include removing superannuation concessions for the top 5 per cent income demographic – bringing in over $10 billion.  Meanwhile reverting to 75% dividend imputation (tax concessions of investments) could bring in over $5 billion while affecting mainly the wealthy: and with other (small) investors compensated via tax and social wage reform elsewhere.  Should an incremental approach work, here, Dividend Imputation could later be reduced to 50% - bringing in over $10 billion. (in today’s terms) Company Tax cuts could – and should – be put on hold indefinitely (business needs to contribute to the training and infrastructure it benefits from); and income tax reform could also target the top 15% income demographic.   A minimum Company Tax rate could be imposed; land tax imposed on properties valued over $1 million; and further  taxes imposed upon economic rent in oligopolistic sectors such as mining and banking.  Finally the Medicare Levy could be reformed to broaden its scope, apply a more progressive and graduated structure, and provide a desperately-needed boost to Aged Care – caring for the most vulnerable, and removing regressive user-pays charges that hit working class families hard. 

The aim would be to free about $25 billion of new money for socially necessary programs – including desperately-necessary funding for the States - while at the same time providing economic stimulus.  To put this in perspective, this would comprise about 1.5 per cent of a $1.6 Trillion economy)  Further funds could be freed via even better targeting of programs such as the Private Health Insurance Rebate.

The programs that would emerge from such measures there must strike a balance between providing for the most vulnerable (the aged, the disabled, single parents, the poor); and in providing broad-based improvements of  infrastructure, welfare and services that favour the “mainstream” – ie: the great majority of citizens, workers, families.

But time is running out for Labor. Vague and unrealized promises for the future will not be sufficient for the revival of Labor’s fortunes in 2013.   Labor needs to ‘deliver the goods’ with infrastructure, services and social welfare programs well before the approaching 2013 election.  And in doing so it could also do worse than to nail down the Conservatives’ economic irresponsibility in opposing stimulus and crucial social investment with their deceptive ploys on the theme of economic responsibility. 

 

A Labor government which remains authentically on-message; succinctly explaining such themes as stimulus, economic multiplier effects, capacity constraints, and the economic role of infrastructure, education and training – could outflank the Conservatives with their claims to economic responsibility and competence.  They could break the myth of Conservative economic credentials and competence.

 

Julia Gillard herself proclaimed at one point that Labor is a cause: and not a ‘brand’. Yet if the Labor cause is authentic, constantly “robbing Peter to pay Paul’, with “one step forward, two steps back” should not be acceptable. And neither should incessant mutual attacks upon character be considered a substitute for policy substance.

 Labor needs to reconsider its recent attacks on single parents and disability pensioners. It needs new initiatives provided without unfair austerity elsewhere. We need to overcome infrastructure backlogs progressively; without inefficient, Ideological and perhaps even corrupt Public Private Partnerships.  A public fast-rail line along the east coast could revolutionize transport logistics for business, and provide opportunities for citizens. And we need to implement the NDIS and Gonski; but also provide for other crucial yet less-politically convenient causes such as reform of Newstart.  We need big new initiatives in Aged Care and mental health – because the most vulnerable of all cannot afford to wait.

Crucial to these initiatives could be the concept of ‘collective consumption’.  That is: If we do not pay for health, aged care, infrastructure and education progressively (and relatively cheaply) as taxpayers – we will instead pay more for these regressively as private consumers.

Swan and Gillard have done the right thing – and the responsible thing - in abandoning the surplus for the time being. While it may have seemed politically prudential at one point, to follow through now would undermine the economy, and also Labor’s credentials.  Now Labor needs to turn the economic debate around – so it is possible to conduct that debate on its own terms.  Yet even if Labor does all this, victory in 2013 is not assured.  Best, then, to lock a big reform agenda in: reforms in tax, social services, infrastructure and welfare that will put the Conservatives on the defensive; reforms they will not dare to wind back.

$25 billion in new social expenditure – and more accommodated through socially progressive savings elsewhere – could provide the vital ‘Labor war-chest’ – to provide much ahead of the 2013 election – and to promise even more in its wake.  Yet even this is relatively modest in the big picture of a $1.6 Trillion economy. That sense of perspective is so often missing in Conservative critiques of Labor programs which (just like Conservative initiatives) necessarily go into the hundreds of millions or even billions.  Even on the Labor Left - which is largely acquiescent on the issue of 'small government' these days - learning to think on this scale is necessary in coming to grips with a genuine reform agenda.

The bottom line is that an end be put to Labor’s decades-long retreat: that by appealing to and providing for both the disadvantaged and vulnerable – and to the ‘mainstream’ of working Australia – we can consolidate an electoral bloc, and begin anew ‘the steady march forward of Labor’.

Responding to the 2012-13 Federal Budget – Better Late than Never!

The following article by rank and file Labor activist and freelance writer, Tristan Ewins examines the highs and lows of the 2012-13 Labor Federal Budget; the ways in which Labor has delivered to its core constituency; and the ways in which it could have and should have done better.  He also considers the ways in which the performance of Tony Abbott continues to provoke fears for the future.

Interested parties are welcome to join our Facebook Group also at:  http://www.facebook.com/groups/102658893193637/

Tristan Ewins, May 24^th 2012

Recently at this blog we discussed what would be desirable for the 2012 Federal Budget.   A few weeks after we ask the question: Was this the ‘battler’s budget’ Swan and Gillard have claimed it to be?; and on the other hand – have there been missed opportunities?

Summarising the coverage in ‘The Age’ and elsewhere 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 ‘imperative’ in the media, past coverage had consolidated the impression that consistent and continuous surpluses were equal to “sound economic management”.  Liberal claims that Labor had not delivered a surplus since 1989-90 were hurting in the wake of that past, basically uncritical media discourse.  On the other hand a balanced budget over the course of the economic cycle is desirable; with debt servicing weighed against growth, improved capacity and productivity stemming from social investments.

Some of the largest savings were made from Defence – “Cut by $5.5 billion over four years”.  Certainly this was preferable to savings in social programs and welfare; although a growing Australian nation holds the prospect of more self-reliance in Defence over the long term.  This also could mean the prospect of greater foreign policy autonomy.

The Government has also saved approximately $1 billion, cutting by half Superannuation tax concessions for income earners on over $300,000/year: which surely 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. (!!!) This money could have provided a fair go for single parents; improved the shamefully regressive ‘Newstart’ unemployment allowance by $50/week, and radically improved the quality of Aged Care for those needing high intensity care; and those preferring low intensity care in a more social environment. It also could have been redirected into mental health services where the government has a record of “robbing Peter to pay Paul” rather than sufficiently expanding funding for all areas of real need.  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.  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 further 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. 

Money could also have been directed in 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.

Meanwhile – though Foreign Aid is rising by $300 million, Labor’s promises to more radically increase aid have been reneged upon – at least for the time being.  This will save an approximate $2.9 billion annually. But the question nonetheless looms: with more far-reaching tax reform could Labor have avoided having to make such “Hard Choices” on Budget priorities?   (See: http://www.smh.com.au/opinion/blogs/the-party-line/should-a-promised-boost-to-the-foreign-aid-budget-be-deferred-for-a-year-to-help-return-the-budget-to-surplus-20120510-1yei6.html )

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)  

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 ‘talk and distant commitments’.  So bringing forward the NDIS as much as possible is a very welcome development.  Though as this author has also argued in the past: the proposed Aged Care reforms while welcome do not go nearly far enough to provide for the basic needs of some of our most vulnerable aged Australians.  More financial support is needed for Carers; and more funding is necessary for residental care for those who choose it – and 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. 

Over at ‘The Conversation”, meanwhile, there has been the observation that the Federal Budget “includes $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    But the Greens were justifiably critical of Government plans to axe the Medicare Chronic Disease Dental Scheme,  and have argued for means-testing of the scheme instead. 

However the flagship programs of Labor’s 2012 Budget were definitely its Cost-of-Living initiatives.   The Labor website proudly proclaimed the following initiatives on May 8^th” 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”

In ‘The Age’ such new initatives were given a price tag of about $5 billion – So they are inarguably 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’; while attacks upon welfare and organised labour apparently do not!   Abbott and the monopoly mass media 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 in the media,  Abbott even begrudged the very basic social solidarity of the once-off flood tax – to assist those effected by the Queensland disasters. 

Meanwhile important social initiatives have been dismissed in the press with the loaded expression “cash splash” – the intent clearly being to infer economic irresponsibility in a blatant piece of popular-psychological manipulation.

Yet as against this cyncial and socially damaging political tactic this author remembers very clearly former PM John Howard supporting the principle of progressive taxation some time before being defeated by Kevin Rudd in 2007.

And 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”, while individuals should enjoy such circumstances that they are “empowered, as far as reasonably possible, to live the life that he or she thinks best” (p.xii).  (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.  Yet 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 and class interests in clearer relief.  The principle of class struggle is seen by many as being discredited even on the Left – which has reverted to a kind of modest social liberalism. 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 on the basis of class.  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. 

It warrants the question:  What problem does Tony Abbott and the Liberal Party have with workers and disadvantaged groups organising industrially and politically to pursue their legitimate interests; Indeed – to pursue justice, compassion, and  ‘the fair go’?  

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) this author had hoped (but not dared to believe) he may have been 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 )

For Abbott, though, this is ‘non-negotiable’ as the polls consitently inform him he ‘has as problem with women’…

Conclusion

Having to achieve more but 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 sometimes 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, social-justice, 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.  Firstly, 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 privatisation, and promoting 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. 

(*though for the record this author supports an outlook of sustained class struggle; even though it is notable that the kind of semi-corporatist structures such as have existed in Sweden provided channels of mediation of interest to citizens across class lines)