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Issue #1652      August 20, 2014

What will happen to the federal budget?

Last week federal Treasurer Joe Hockey defended his budget’s proposed new fuel excise on the grounds that poor people either don’t have a car, or don’t drive very much if they do own one.

Treasurer Joe Hockey: The government knows it would suffer a landslide defeat if an election was held in the current circumstances.

Welfare groups, motorist associations and many individual taxpayers reacted angrily, protesting that poor people tend to spend a high proportion of their income on fuel, and that people on low incomes in regional and rural Australia and the outer suburbs of major cities often have little access to public transport, and are highly dependent on their cars.

Hockey initially reacted by sneering at such “hysteria”, but then made a grovelling apology, in which he claimed he had always tried to help the most disadvantaged members of the community.

That didn’t work. The public is well aware that the budget would be highly damaging for ordinary Australians, including students who would incur terrible HECS debts, families who would lose the school kids’ bonus, young unemployed people who would not get the dole for six months after they applied for it and patients who would face co-payment fees for visiting their GP.

Trying to shift the blame, Hockey then accused business leaders of being too slow to back the government over the budget, but they nervously replied that it’s not their job to speak for the government.

Abbott tried to distance himself from Hockey’s statements – “Well, I wouldn’t have said that” – but despite the fractures beginning to appear in the conservatives’ ranks over the budget proposals, the government is still determined to get it passed.

The big budget scam

According to Treasury figures, proposed welfare cuts would cost low-income families $842 per annum, but high income families would lose just $71 each year. The government has stressed that the levy on high incomes would be used to provide relief for low-income families.

However, lower income families would still pay $327 more per annum than higher income earners, and the levy would be temporary, lasting only a few years, whereas the welfare cuts would be permanent.

Under the budget constraints federal funding for transport concessions would be withdrawn, pharmaceutical subsidies reduced, and childcare benefit conditions made tougher.

The government is defending the $2 billion fringe benefit tax concession for the private use of executive cars – and, of course, Abbott’s paid parental leave scheme, at around $20 billion, would reward the most wealthy parents and provide least benefit to the poorest.

The government also wants to introduce an “asset recycling” fund, under which the federal government would pay state governments an incentive fee to sell off government assets. The scheme’s estimated $5.9 billion cost would be funded by raiding the Building Australia Fund and the Education Infrastructure Fund.

The Treasurer claims that pensioners would be better off under the new budget arrangements because they would receive pension increases according to the rise in the cost of living (CPI), rather than increases in average male earnings (AME).

But pensioners are currently entitled to receive pension increases according to rises in either the CPI or average male earnings, whichever is greater. Under the budget that entitlement, for which pensioner organisations fought a terribly long and difficult campaign, would be stripped away and pensioners would only get CPI rises.

Confining rises in pensions to either the CPI or AME increases would inevitably disadvantage pensioners. But choosing the CPI as the base for increases the government has compounded the injury.

The CPI rise is currently higher than the rise in average male earnings. However, over recent decades the AME rise has been greater than the CPI increases. Unless the economy slides into deep, prolonged depression confinement of pension increases to the CPI would definitely result in a greater long-term disadvantage to pensioners than confining increases to average male earnings.

Politicians long ago awarded themselves the “whichever is greater” entitlement for their superannuation payments, but neither of the two major parties has granted retired public servants that entitlement, even though their case was upheld by several official inquiries.

Breaking the budget impasse

Professor Warwick McKibbin, former Board member of the Reserve Bank, has said: “I would like to see a new election and a Senate truly representative of the Australian people”, but the government knows it would suffer a landslide defeat if an election was held in the current circumstances.

The government has threatened to cut expenditure by introducing a “Queensland style austerity budget” if the current budget is not passed. However, Hockey is negotiating with cross-benchers to get their budget assent.

Palmer United Party Senator Jacqui Lambie says she would oppose any deliberate delay in providing assistance to dole applicants. But Hockey is due to meet PUP leader Clive Palmer this week, and in previous negotiations the government made a considerable number of concessions to him, after which the tax on Australia’s biggest polluters was removed.

And if the government’s negotiations succeed, and the co-payment and the other imposts are modified but still get passed into law, Labor may not remove them if they regain power after the next elections.

That has happened many times in the past. The Howard government introduced the goods and services tax, but Labor did not removed it. The Howard government introduced the Northern Territory Intervention policy, and Labor left it in place. The Howard government introduced the infamous “Pacific solution” in dealing with asylum seekers, and Labor eventually replaced it with an even more cruel version of the policy.

The official unemployment rate has now reached 6.4 percent, its highest point in 12 years, and if the budget measures are passed the unemployment rate will skyrocket.

Once again it seems it’s up to the public to pressure Labor and the independents to stick to their guns and reject the inhumane budget initiatives, forcing the odious Abbott government to an early election, and then out of office.

Next article – Rant sparks claim

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