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Issue #1594      May 22, 2013

Editorial

Robbing Peter to pay Paul

The ratings agencies are thrilled. The stockmarket is satisfied. The financial institutions and Big End of town have no complaints. Even the Murdoch media had kind words to say about Labor’s 2013-14 Budget. Little attempt has been made to make mileage out of the failure to reach a budget surplus. Even the Coalition found it hard to disagree with its contents. All of that should ring alarm bells. A quick look beyond the two “big ticket” items – NDIS and Gonski – explains why.

Treasurer Wayne Swan defends billions of dollars in cuts – cuts that target the most needy and vulnerable – arguing that they are needed because circumstances have changed dramatically. “They started to change at the end of last year and they changed more dramatically this year and we’re looking at a $17 billion revenue write down in 12/13 and we had a clear choice,” Swan told Leigh Sales when interviewed on the ABC 7.30 program (14-05-2013).

This question of choice is also taken up in Swan’s budget speech, “We face a clear choice. Radical cuts to the bone that would risk jobs and our economy. Or a sensible, calm and responsible approach that puts jobs first. We have always put the interests of working Australians first. In this budget, we do so again. Just because the global economy took an axe to our budget, does not mean we should take an axe to our economy,” Swan proudly proclaims, stretching the truth.

Firstly, no axe was taken to government income. Its income has continued to flow in at a similar rate to recent years but fell $17 billion short of an over-optimistic forecast. (See “Budget 2013-14 Mean, cruel and dishonest” article this issue.) Its economic strategy was centred around the resources sector and still is. The government’s bloated estimates of taxation revenue were never realistic. The economic crisis in Europe and the US, their potential impact on China, the high Australian dollar and the inevitability that commodity prices would fall should have suggested a little caution in forecasting economic outcomes. Although commodity prices have fallen, they are still at relatively high levels. With the exception of mining and finance sectors, most of the economy is stagnating or even recessed. One of the main reasons is insufficient demand.

The tragedy is that Australia is being de-industrialised, deskilled and job creation is left to the environmentally destructive mining sector with heavy reliance on exports and Asian growth, in particular China and India. Australia requires an expansionary budget that will increase demand for goods and services and create jobs for workers in Australia. This budget is not expansionary. Failure to increase unemployment benefits, the punitive reduction in single parent payments, privatisation, public service sackings, higher medical costs, massive investments in the military and the rise in casual and part-time employment all result in less income to spend on goods and services.

“Since mid-2009 we have fully offset all new spending with savings measures and that continues tonight,” Swan says. These offsets mean that any new spending is funded out of cuts to some other area. For example, funding schools by cutting university funding and student assistance. In fact some offsets are larger than new spending and will ultimately have a contractionary impact on the economy. The budget surplus still remains paramount in government thinking, it has just been deferred in a pre-election budget.

Wait for Abbott if he gets in! The government has been forced to put on hold corporate tax cuts for a few years but the cuts to social spending pave the way for further corporate tax cuts. The budget is neo-liberal through and through. No wonder Abbott is having trouble attacking it. Again the government is assuming there will be no downturn in the economy.

Returning to the choices offered by the Treasurer – putting jobs first or cutting to the bone, Labor has not chosen jobs first. For workers, pensioners, the unemployed, students and the most disadvantaged, this budget cuts to the bone, following on from cuts in previous budgets. Job creation is largely left to the resource sector and luck. The economy and people of Australia need an expansionary budget based on planning for balanced and diversified development of manufacturing and other sectors with well thought through job creation.

Next article – AMWU supports rally call to preserve fruit industry

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