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.

Albanese needs to ‘Step up to the Plate’ and not avoid debate on Aged Care, Health and Welfare Reform

 

Dr Tristan Ewins

Labor Opposition Leader Anthony Albanese has come under fire from the Conservative Coalition Government for suggesting on the ABC’s ‘Insiders’ program that extra funding may be made available for Aged Care, Health, and perhaps welfare reform. This in a context where billions of subsidies have been provided to businesses due to Covid, and yet many businesses who managed to remain profitable regardless of Covid have simply kept these subsidies provided for them in the form of pure profit.  While the Federal Government ruthlessly pursues welfare recipients over any debts incurred (and even some that have turned out to be unreal), corporations enjoy public money without accountability.

The simple fact is that public spending commitments in social services and infrastructure are not necessarily ‘irresponsible’ or ‘wasteful’.  Often Government needs to invest in the health and happiness of the people to ensure the best outcomes.  What needs to be understood is that social spending is a form of ‘collective consumption’ where we gain a better deal in areas like health by purchasing crucial services more efficiently and collectively as taxpayers, rather than being isolated and fleeced as private consumers.  Medicare and the Pharmaceutical Benefits Scheme are important examples of collective consumption.

Albanese has spoken of the “habitual buck passing” of the Morrison Government on Aged Care.  Failure to attract new workers into the field with fair wages and conditions, and respect for workers ; and failure to ensure necessary staffing levels including the presence of Registered Nurses – remain sore points even after the Conservatives’ response to the Aged Care Royal Commission.  The training, wages and conditions of Personal Care workers who help many elderly remain in the community are also in need of further funding ; and packages must be available to all with the need upon demand ; and without cruel waiting queues.

The reality also is that Aged Care reform needs to go beyond the bare essentials to address broader quality of life issues ; so that in the future Aged Australians with have access to social engagement ; and where those in residential care will enjoy privacy, access to information technology, access to gardens and pleasant surrounds.  They must not just be locked in their rooms or sat down in front of TVs in common rooms all day.  Our vulnerable elderly need social engagement.  Everything from discussing their lives to enjoying games, listening to music, or discussing the issues of the day.  Dementia training is also essential to ensure the best quality of life to those affected ; and those around them.  Quality of food also needs to be monitored closely ; and without meeting staff quota targets, Aged Care workers will remain rushed in the business of helping to dress and shower residents daily ; or may not be able to respond in a timely manner to situations such as where sheets are soiled.  The consequences of under-resourcing have been trauma and suffering for vulnerable aged Australians. 

Yes this will cost billions on top of those limited initiatives already announced.  But most of us will grow elderly and frail one day ; and even if ourselves we do not experience this, surely we will have family who are affected by a neglected Aged Care sector.  Rather than backing down, Albanese needs to ‘step up to the plate’ and confidently put the case for progressive collective consumption of Aged Care ; and a much better deal for both ‘consumers’ and for workers in the broader Health sector.

There will also be a significant backlog in waiting lists for supposedly ‘elective’ hospital procedures thanks to the pressure Covid has placed the health system under.  This was already a crisis ; but has been significantly magnified with Covid.  Medicare needs to be extended into dental, optical and prosthetics ; but the broader health system needs to be expanded to ensure timely care, breadth of coverage and quality of care.

Australian of the Year, tennis star Dylan Alcott has also highlighted the high unemployment levels (over 50 per cent) for disabled Australians.  The focus here was mainly on those with physical disability ; but exclusion from the labour market also applies to those with psycho-social disabilities.  Exclusion is a vicious circle which needs to be broken.  Sometimes it goes on for years. Often it is permanent.  Government needs to intervene directly to provide opportunity for all ; and employment needs to be made more viable by lessening means tests for Pensioners in the workforce.  Also there need to be viable career paths, and not merely ‘dead end jobs’.

Importantly, Labor needs to pitch to ‘average’ workers as well.  Labor needs to pitch to the majority to enjoy electoral success ; and provision for equity groups alone will not win government.  Delivering wage gains and improving the bargaining position of average workers in the labour market is important here.  As is a restructuring of the broader tax system: delivering distributive justice outcomes not only for the most vulnerable, but also the majority of workers.  Further ; improvement of the Aged Pension could act as a ‘bridge’ which enhances the case for reform of other pensions. Labor needs to build a ‘bloc’ based on solidarity and mutual recognition rather than allowing the Coalition to ‘Divide and Rule’ – which so often has been the case.

So come on Albo, ‘step up to the plate’.  A ‘small target’ can take us so far ; but as the campaign progresses voters will want a clearer sense of what Labor is going to do.  Labor will need to have answers.  And it must not ‘back itself into a corner’ where it cannot deliver significantly to its constituents.  Early signs suggest some hope.

Things to Think About as the Federal Budget Approaches

 

above:  Joe Hockey and Tony Abbott will claim Australia 'is living beyond its means' - but behind this rhetoric there is simply an Ideology of small government - regardless of the human cost.

Tristan Ewins

As the Federal Budget approaches for 2014-2015 there has been speculation to the effect that the Government may resort to PAYE income tax bracket creep or a GST hike in order to fund its spending.   The ALP is rightly critical of any GST option that is not part of a broader progressive package. (perhaps Shorten may not even support a GST increase in any form or context) Increasing the GST base - either generally, or by ‘broadening its base’ to apply to food and health -  could be highly regressive.  But the bracket creep option is also potentially regressive – as low income earners could see themselves pushed upward into higher brackets without any real increase in their disposable income. (Again: it depends on the ‘overall package’ of the tax/welfare mix)

Further, the Government is considering raising the age of retirement, or cutting back Aged Pension eligibility.  Some are also agitating for a cut back in the Disability Support Pension rate – and possibly also eligibility.  That includes the Treasurer himself, Joe Hockey.

The ‘pension option’ is deemed by some to be ‘inescapable’ because of the ageing population, and the ‘incentive’ for people to claim the DSP as opposed to NewStart. 

We are living longer, it is true – but it is not true for all of us.  And indeed – while some are living longer – they are also living with loneliness, frailty, and sometimes indignity.   This begs the question why higher Aged Care expenditure is not on the agenda – as opposed to pension austerity.  

There is also the question of what matters most in life: the chronic capitalist commitment to endless economic growth regardless of the social cost – or the opportunity for older Australians to enjoy a retirement in comfort and dignity; enjoying opportunities for personal development not possible beforehand during their working life.

Finally – we need to maintain perspective. 

‘Deloitte Access Economics’ claimed the Government could save $2.4 billion over four years by limiting increases in the disability pension to inflation.  But when placed into perspective this is pittance to the Government when compared to the effects on the comfort, dignity and relative independence of the disabled.   And even if this amount would grow as the aged population increases,  according to ‘Wikipedia’: “the economy of Australia is one of the largest capitalist economies in the world with a GDP of US$1.57 trillion.”  Despite an ageing population – caring for those people will still be ‘well within our means’.

So while the Disability Support Pension costs “$15 billion a year” and the Aged Pension currently costs $38 billion  – probably rising to $55 billion in 2050  – that needs to be considered in the context of a (current) GDP of approximately $1.6 TRILLION. (Aus dollars; and a much larger GDP by 2050 also!) 

And while the Government claims it will not attack existing disability pensioners – the cost over the years might be high in the form of attrition against new disability pensioners.

Indeed, there is even the danger that the National Disability Insurance Scheme itself may come under threat; or that only those with the most profound physical disabilities will be considered worthy of support by a government trying to ‘wriggle out’ of previous (pre-election) disability commitments.

So while the Government could save some money through attacks on the living standards, dignity and relative independence on the disabled (linking the pension to inflation rather than wages growth), it should be honest that its real motive is not some ‘budget emergency’ – but an Ideological commitment to small government no matter the human cost.

‘Pension austerity’ needs to be considered in the context where all Australian families should benefit from the social insurance paid collectively by all of us – for the sake of our peace of mind – both for ourselves and our loved ones.  And also hopefully because we care about each other as a society.This must include a robust disability pension alongside robust disability insurance.

For those who care about distributive justice, and compassion for the poor and vulnerable, surely there must be better solutions than what is apparently being considered by Hockey and the Liberal Cabinet. 

And indeed there ARE better solutions.  Superannuation Concessions could be wound back – and income tax increased on the basis of a progressive restructuring. Tens of billions could be saved here alone.

To elaborate: It is true that tax cuts delivered overwhelmingly to upper and middle income Australians during the Howard years were recently estimated as costing the Budget around $40 billion a year alone.  And as Richard Denniss has argued on several occasions – superannuation concessions have been of benefit largely to the top 5 per cent income demographic (millionaires basically), a well as the ‘upper middle class’; and more broadly are estimated by the Treasury as costing “$45 billion a year by 2015.”

To summarise: The Government has several potential alternatives on the table they could consider – and the Shorten Opposition should be pursuing these progressive options also.

First: Wind back superannuation concessions for the wealthy and the upper middle class, saving tens of billions.

Second:  Restructure personal income tax.  Perhaps allow bracket creep in the higher brackets – but INDEX the lower two brackets. And perhaps add a bracket for the highest income earners.

Third:  Increase the GST – but only as part of a ‘total package’ which includes increased welfare, tax credits or other tax cuts for lower income Australians, maintenance of exemptions on food and health, and extension of GST exemptions to funerals as well.  Calibrate the overall ‘tax mix’, here, to deliver more progressive outcomes.

Fourth:  Embrace the necessity of ‘larger government’ if ‘the Australian way of life’ is to be preserved – including a fair age of retirement and protection of the most vulnerable from grinding poverty. In this acknowledge that ‘the size of government’ in Australia is already low by international standards.

Fifth:  If the Government is concerned there is an ‘incentive’ for pensioners to apply for the Disability Pension because of the extraordinarily low Newstart unemployment benefit – then INCREASE NEWSTART to respectable and socially sustainable levels – and acknowledge that while the Disability and Aged Pensions are higher – disability and aged pensioners are still living in poverty!

Sixth:  Reconsider spending priorities with ‘upper middle class welfare’. Specifically, reconsider the structure of ‘Paid Parental Leave’, and impose tighter means tests of Private Health Insurance Rebate payments.

Budget pressures also need to be considered in the context of a growing infrastructure crisis.

Federal and State Liberal Governments are at odds with construction unions – not only because of  alleged criminality – but more crucially because there IS an infrastructure deficit – which when combined with robust conditions for workers in the Construction industry make it harder to maintain ‘small government’ alongside basic transport, communications and education infrastructure demands.  And construction workers should not have to pay the price for a right-wing Ideological fixation on reducing the size of government.

Regrettably, there is also an Ideological opposition to public housing at the same time as the dream of home ownership has drifted out of the reach of so many young Australian families since the Howard-era housing boom.

Some Liberals had  considered the GST option perhaps because they realise the infrastructure deficit will have consequences that ‘flow on’ to the private sector. (though in Victoria Napthine now rejects the GST option)   

We need to consider both the impact upon our competitiveness from the ‘infrastructure deficit’– but also the social cost to poorer families in emerging suburbs which lack transport infrastructure and schools. 

Finally, today’s Conservatives could do worse than to consider the example of the German Christian Democrats from the 1950s – who embraced a “social market” model.  As Eric Aarons has explained, this approach suggested “a social vision couched in moral as well as economic terms…”, and “recognition of the fundamentally social nature of organised production”. Further, it implied a “moral community” “required to legitimate the social order…” , and the“[prevention] of the emergence of a ‘two-tier’ society” including a layer of permanently poor.  (Aarons pp 33-34)

Christian, ‘compassionate conservatives’ in the Liberal Party do not have to follow the austere, heartless path of economic neo-liberalism. While this writer is a proud liberal democratic socialist as well as a Christian, sometimes it is necessary to promote lines of communication when so much is at stake.  We cannot support this kind of ‘neo-liberal class war’ against the vulnerable and disadvantaged: a budget which hits the poor and the vulnerable in order to redistribute wealth towards the wealthy and the upper middle class.

Aarons, Eric; Hayek versus Marx And Today’s