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Issue #1677      March 18, 2015

Intergenerational Report

Plan for a failed system

The Coalition government’s 2015 Intergenerational Report is yet another attempt by Treasurer Hockey to sell their 2014 budget cuts and privatisation. It uses an ageing population as a political pawn to try to get across policies that are strongly opposed by the Australian people. The media ran with warnings of budget deficits for 40 years to come and no future for today’s youth.

Treasurer Joe Hockey.

The report, produced by Treasury, is unashamedly pro-big business and political. In part it is yet another regurgitation of the all-too-familiar “we are living beyond our means”.

A closer study reveals that the real agenda behind the budget cuts is the reduction of business costs and making investment in Australia more internationally competitive.

It is an attempt to coax a boom out of the profound bust the system is in.

The government’s intent is clear. Its projections of major budget items over the coming 40 years reveal that military spending will rise to almost double the total of that for education which will not increase in real terms.

Aged and service pensions, family tax benefit, New Start Allowance (unemployed), Youth Allowance and Austudy will all be cut in real terms. (page 100) The amount on schools will be halved and tertiary education subjected to a 40 percent cut (schools and tertiary, training, etc).

It takes a swipe at Labor, forecasting huge budget deficits and mounting debt if the government had not got some of its cuts through Parliament. It argues the remainder of the budget cuts need to be implemented if the budget is to be balanced and surpluses produced.

The report signals an overhaul of superannuation – the subject of an inquiry. There are strong divisions within Coalition ranks over whether workers should be able to draw on their superannuation savings to purchase a home, education or fund other big items.

Eyes on Asia

“It is projected that by 2030, there could be around 3.2 billion middle class people in the Asia Pacific region. Asia’s continued rise will bring great economic opportunities closer to Australia’s doorstep. Australia needs to be in position to take full advantage of these opportunities,” the report says.

It aims for businesses to be “flexible, competitive and robust in the face of dynamic global conditions.” Towards these ends it advocates further deregulation and reforms to competition policy and further trade and investment liberalisation such as through free trade agreements. It is looking at life after the resources boom and has latched onto the IT sector at the same time as proposing cuts to science, research and innovation funding!

The report devotes considerable space to increasing productivity such as higher output per worker and cutting wages and conditions. It also trots out the old capitalist myth that private sector is more efficient and privatisation can result in increased productivity.

It refers to a forthcoming White Paper on Federalism in which the government is seeking to “enhance governments’ autonomy, flexibility and political accountability”. This is a reference to states and territories assuming many of the functions of the federal government, including setting their own labour laws and competing with each other for domestic and foreign investment in a race to the bottom for workers.

Tax cuts

The report reviews the past 40 years and attempts to make economic forecasts for the next 40 years during which time it estimates that the population is set to almost double.

The tax base will shrink as a larger percentage of the population (the older generation) pays less or no tax creating a budget deficit. So, how does it solve that “problem”? It adopts a two-prong approach:

The first prong is to cut the taxation of companies and the rich! That of course, only exacerbates the situation.

So the second prong is to cut spending in selective areas to fund the initial deficit and the tax cuts. In addition, it has set a cap on government revenue at 23.9 percent, limiting the potential to make surpluses, pay off government debt or put away some savings during a boom for bad times. This implies regular tax cuts in line with inflation – for corporations.

When it comes to the budget deficit, the government fails to look beyond cuts to working people and the most vulnerable. There are other options for balancing the books or paying off debt. These include:

  • Increasing company taxation – not just the rate but ending the rorts
  • Abolishing negative gearing
  • Phasing out the government rebate on private health insurance
  • Slashing military spending by at least 10 percent
  • Abolishing the fossil fuel rebate for mining companies
  • Higher wages for workers, resulting in higher tax income.

The government’s focus on cuts and its victims reveal its class position. As far as it is concerned retirees can fend for themselves as their labour can no longer be exploited by the capitalist class: Hockey’s “the age of entitlement is over”.

Next article – Editorial – The science is undeniable

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