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Issue #1685      May 20, 2015

Budget 2015-16

Election/Recession Budget

If the 2014-15 budget was a wolf in wolf’s clothing then the 2015-16 budget could be described as the same wolf in sheep’s clothing. Gone are references to a “budget crisis” and the former Labor government’s “tsunami of government spending” which needed “repairing”. Instead, Treasurer Joe Hockey attempts to create an air of optimism, that “Australia is getting better” and that the budget is about “fairness”.

Treasurer Joe Hockey.

The language is mostly softer and the impression is given that the harsh austerity measures have been replaced by positive measures such as childcare. The government is now on the way to “restoring Australia to a sustainable fiscal position” (read “budget surplus”). “This budget is focused on building jobs, growth and opportunity,” Treasurer Joe Hockey claims.

The government emphasises how “fair” the budget is. For example, the cruel and electorally unpopular six-month wait for jobseekers under 30 to get the dole has gone. The wait without income will now be four weeks and apply to under 25s!

The last thing the government wants is a repeat of the large, national anti-budget protest actions that took place following the 2014-15 budget. Hence, this is a budget in preparation for the next election and the looming recession.

Agenda not changed

The spin-doctors have been hard at work. References to “leaners” (people on the dole, single parents on benefits, etc) and “heavy lifters” have been replaced by such terms as “strengthen the integrity of welfare payments” and “improve the integrity of social security income test arrangements.” Integrity being spin for “cut as many people off as possible”.

The Treasurer’s statement and the media kit focus on new items in this year’s budget. The savage cuts in last year’s budget such as the $80 billion to education and public hospitals over the next ten years are buried in the hundreds of pages of budget documents. The deregulation of university fees and the increase in payments for medications under the Pharmaceutical Benefits Scheme (PBS) are amongst other items still blocked by the Senate.

The soft spin was not applied to “rorting” new mothers who “double dip” with parental leave. Social Security Minister Scott Morrison went as far as agreeing they were fraudsters. They seem to have joined the ranks of “dole bludgers”, “rorters” or to use last year’s language, “leaners”. (More details “Budget 2015-16 – Assault on Australia’s battlers”)

Small business hoax

The centrepiece of the government’s promises of economic growth and job creation is the $5.5 billion Jobs and Small Business Package. This includes upfront tax deductions for non-consumable purchases of up to $20,000 each for incorporated small businesses and a reduction in the tax rate from 30 cents in the dollar to 28.5 cents.

Contrary to some media reports, the government does not refund the full amount of the purchase. The expenditure is a tax deduction which can be claimed upfront instead of being depreciated (deductions broken up) over years to come.

So, someone spending the full $20,000 would have their taxable income reduced immediately by $20,000. That would reduce their tax bill by 28.5 percent of $20,000 which is a refund of $5,700. This could be claimed before the end of the tax year. There is no limit to how often they did this.

Hence the maximum saving per purchase would be $5,700 after July 1 when the new tax rate is set to come in.

Hockey, who had previously overturned Labor’s assistance to small business recognises the importance of winning this group over if the Coalition are to win the elections. He makes specific reference to “tradies”. The message is rush out and spend, spend, spend and then vote for the government.

What job creation?

How the purchase of a new computer (imported), a new car (imported), new tools (imported), new coffee making machine (imported) or electronic equipment (imported) will create jobs is not made clear.

Maybe some in the retail sector? The government’s predictions of rising unemployment over coming years, suggests it does not believe its own pre-election spiel.

The budget fails on all counts when it comes to job creation. There is no new money for infrastructure. Our new free trade agreements with China, Korea and Japan will result in a $6 billion hit to the budget over the next four years because of the abolition of tariffs on cars, clothes, footwear, textiles and other imported goods. But these agreements and a new one with India are being promoted as “the big new drivers of wealth creation and job creation over the next decade.” The Trans Pacific Partnership could be a killer when it comes to services, agriculture and other sectors of the economy. Don’t hold your breath, as the saying goes.

The government’s predictions regarding economic growth appear to be based more on prayer than economic reality. Last year’s “forecasts” came in way off mark and this year’s look set to do likewise. The government failed to recognise that wage rises were low, GDP growth was sluggish, rising unemployment would reduce the tax take and the potential impact of poor terms of trade and falling commodity prices on profits in the resources sector.

With an early election on the books, to pre-empt an internal coup against Abbott and Hockey, the pre-election sales pitch runs roughshod over reality.

Smoke and mirrors

The government has responded to public pressure with $600 million for new cancer drugs to be covered by the PBS and another $700 million for other medications and vaccines over the next four years.

This is great news. But not everyone will be pleased by the removal of other medications from the PBS list.

The Medicare co-payment is off the table, or so the government says. It is true that it is not a budget item but the freezing of Medicare rebates paid to bulkbilling doctors will result in many of them being forced to abandon bulkbilling. The co-payment then will be much more than $5. (Guardian, 06-05-2015, #1684, “Medicare: privatisation agenda continues”)

Around 91,000 pensioners will have “a better retirement” with the loss of their age pension and a further 235,000 retirees will see their pension reduced. Others will have an increase.

Education Minister Christopher Pyne has funded one important research scheme by taking the money off another equally important one. The heading on page 168 of Budget Papers 2 reads, “Removing Double-Dipping from Parental Leave Pay”. The use of the term was no slip of the tongue by Morrison. Is it an expression of the attitude of this government towards women (see “Budget 2015-16 – Shelters axed as murder rate soars”).

Backward, pro-big business

“This government is presiding over a growth in unemployment and inequality. This Budget hurts people who wage a daily battle to survive as long as it refuses to make the big end of town pay its share through progressive tax reform,” John Falzon, CEO of the St Vincent de Paul Society National Council of Australia, said.

The grand sounding pursuit of multinationals who pay no tax in Australia is not expected to reap a cent in the coming years. That’s not surprising. Staff levels in the Australian Taxation Office have already been slashed by 2,593 jobs in the past year. The government plans to employ 43 staff to chase down 100 of these corporations.

This is nothing more than a transparent, pre-election stunt to appear to be doing something. It reveals clearly where the government’s loyalties lie.

The budget hits fly-in-fly-out (FIFO) workers by cutting their tax concessions. The government is relying on bracket creep (when wage increases take workers into higher tax brackets) for 80 percent of its increase in income over the next four years!

Workers and their families are also on the receiving end of all the cuts to education, health, social security, etc. Yet there is no shortage of money to splurge on military operations and so-called national security.

The government has failed to provide for public, affordable housing, has cut services and funding for women’s refuges, legal and other community services.

The Australian economy is descending into crisis and requires a stimulus, but there is not a single genuine measure to create jobs or stimulate the economy.

“With unemployment at or above six percent for the past 11 months, the Abbott government should have used this budget to invest in infrastructure, skills and training, and the public service to create jobs and boost the economy,” Ged Kearney, ACTU president said.

Superannuation rorts by the rich, tax dodging through dividend imputation or negative gearing, the $6 billion Private Health Insurance rebate, military spending and other corporate welfare remain in tact.

Climate change is ignored.

“Everything we spend in this budget is being paid for by prudent savings in other areas,” Hockey boasts. In fact the “savings” (read “cuts”) are often larger than the new spending, resulting in a surplus.

Hockey also warns of more cuts to come: “We must continue to look for sensible savings.”

If the Coalition gains control of both Houses in the next election then what we have seen so far will be nothing. The government has already cut 17,300 public sector jobs since its election in September 2013. More jobs are in the firing line as departments are shrunk, merged or shut down. These responsibilities and work are contracted out, mostly to the for-profit private sector.

Longer term agenda

As Hockey pointed out in last year’s budget, the government is changing the very role of government. This budget does not change the underlying fundamentals. The government is on a path of jettisoning its social responsibilities for the well-being of society. The for-profit private sector is lined up to grab the spoils. Agencies like St Vincent de Paul and Anglicare and community organisations are left to do what they can for the poor, the sick, the disabled, homeless, victims of domestic violence and others who the government has abandoned.

This is what Hockey referred to as “the end of the age of entitlement” or what in Britain is known as Big Society – as against representative government.

Next article – Editorial – Waterboarding minors?

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