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Issue #1547      16 May 2012


Budget 2012-13

Surplus on the backs of the poor

The Sydney Daily Telegraph fed its working class readers just the sort of message the government wanted to convey: “Treasurer slips out of the red, but finds $5 billion for battlers.” But a more accurate portrayal of the budget was the “Budget leaves baked beans for Struggle Street”, from John Falzon, chief executive of the St Vincent de Paul Society National Council. The budget is long on deception and short on working class values and social justice.

“Tonight’s Budget confirms one thing that both sides of politics agree on. And that’s their belief in the existence of an undeserving poor. Their message is that if you’re poor it’s because you’re just not trying hard enough. So the unemployed are left below the poverty line. Newstart has not received its much-needed boost of $50 a week. And a $700 million chunk of the surplus has been skimmed from the pockets of sole parents and their children,” Falzon said.

“And you don’t build a surplus on the backs of those doing it tough.” But that is what the budget does, despite the carefully targeted and much publicised handouts and social programs. The austerity measures are glossed over.

But it is an austerity budget. Not as severe as that being imposed in Greece or Spain, but no different in its pro-business ideological underpinning and neo-liberal economic direction. As Falzon says, “The forgotten and excluded have not been heard. They’ve been answered, not with hope, but with a bucket-full of austerity.”

Pre-election sweeteners

The government’s sales pitch and media reportage are misleading to say the least. For example, the government’s National Disability Insurance Scheme website says, “The Australian government has committed $1 billion in this year’s Budget to support the first stage of a National Disability Insurance Scheme.” But “this year’s Budget” is not a reference to the financial year 2012-13. The $1 billion is over four years. The fine print reveals that only $84 million has been allocated for the budget year of 2012-13.

Spending on the aged and dental care programs also fall short on what is required. The government overlooks giving the Greens credit due for the dental scheme getting underway.

Recipients of the NewStart allowance (unemployed), the youth allowance, and parenting payments will receive $210 (singles) or $350 (for couples) in two instalments over four years, the first payment in March 2013. Better than nothing, but still an insultingly low amount. (See page 3 for details)

Other pre-election “sweeteners” include small payments to those on family tax benefit part A (lowest incomes) and the “school kids bonus” which replaces an existing tax deduction for education expenses. At the same time many sole parents will lose their parenting payment.

Indigenous Australians are not seen as election winners, funding in this area is disgraceful. Education and health are also short-changed. The government will continue to subsidise the private hospital system with over $5 billion per annum on the private health insurance rebate. Private schools will receive more than twice as much as public schools.

There is little “spreading of the boom” to welfare recipients, retirees and others on low incomes. Small business is offered a carrot with a reverse tax scheme. In years when they make a loss they will be able to get refunds of previous taxes paid at the rate of 30 percent of their losses up to $300,000 in any one year. They will also be able to write off immediately capital expenditure up to $6,500 per annum.

The government had previously promised to reduce the taxation of small business profits from 30 to 29 cents in the dollar in 2012-13, with a similar increase for big business in 2013-14. The Coalition opposed the corporate tax cuts. The Greens indicated support for a cut for small business, but not for big business. The government opportunistically blamed the Coalition and Greens for postponing the tax cuts, conveniently overlooking the Greens support for small business cuts, to use the savings for pre-election sweeteners.

Ironically, the outcome – no tax cuts for the corporate sector – is one of the few positive measures in the budget. For more than two decades successive governments have been winding back both corporate and personal income taxes. Corporate taxes have fallen from 46 cents in the dollar to 30 cents and are headed for 25 cents. There has been a similar lowering of marginal rates on personal income.

Neo-liberal to the core

The net result has been the loss of hundreds of billions of dollars in income. Governments have used the shortfall in income as an excuse to cut social spending, to introduce the regressive flat taxing GST and to raise revenue through privatisation.

The 2012-13 Budget does nothing to halt or reverse this neo-liberal policy of winding back the welfare state and attacking welfare recipients and the public sector. Means testing is being extended into the Medicare safety net and the funding of a whole range of key services is cut or frozen – in effect a reduction in real income.

A number of programs have been deferred, including the automatic tax deduction for work expenses, changes to superannuation for older workers, measures to reduce taxation of interest income. Foreign aid is being cut.

Public sector slashed

Excluding the military and reserves with an extra 1,150 positions, federal departments and agencies are set to lose 4,413 jobs in 2012-13. Similar job cuts are set for the following three years. Last year’s job cuts have already left a number of services understaffed, including Medicare and Centrelink.

The Climate Change Department will lose one third of its staff, indicative of the failure of the budget to address climate change. The planet is definitely one of the big losers in this budget due to government inaction. The Australian Taxation Office and Australian Bureau of Statistics are also hit hard.

Defence spending up

Military expenditure takes a pound­ing”, declares John Kerin (Financial Review 09/05/2012). This was typical of the media headlines reporting $5.5 billion in defence cuts as though the surplus came at the expense of military spending. “Defence has suffered its biggest budget cuts since the Korean War with spending slashed by $5.45 billion,” Kerin continued. What a load of codswallop!

The item called “defence spending”, in the detailed budget papers (as against those in the media kit) is set to rise from $21.656 billion in 2011-12 to $24.453 billion in 2015-16 – a total increase over four years is $2.797 billion! Not a $5.5 billion cut over four years! (Budget paper no 1, Statement 6)

The budget of the Defence Materiel Organisation which acquires and sustains equipment for the Australian Defence Force (ADF), one component of the defence budget, is set rise by $2.8 billion from $9.976 billion to $12.777 billion over the same period.

Looking further into the budget papers, when net capital expenditure as well as defence functions are included, defence spending is set to rise from $24.063 billion to $26.821 billion. These still only tell part of the story; other defence spending is tucked away in social security, Veterans Affairs, intelligence organisations, etc.

There will be some savings – a reduction of 1,000 in the number of civilian personnel; “operational efficiencies”; adjustments to the department’s capital equipment program and deferral of some acquisitions. The government estimates these at $5.5 billion over four years. These are swallowed up by other larger increases.

The government has not changed its aggressive, military strategy, has not weakened its military ties with the US or war preparations. The Future Submarine Project and purchase of Joint Strike Fighters are not being cancelled.

Budget surplus

The government aims to turn around a deficit of $44 billion in 2011-12 to a surplus of $1.5 billion in one year. It aims to do this by making $34 billion in “savings” from cuts to spending, spending brought forward to 2011-12, $7.69 billion from the carbon pricing mechanism, deferred spending and cancellation of what were to be new items and an increase in taxation revenue.

The neo-liberal fixation on a budget surplus is irresponsible economics. There is nothing wrong with a government running a deficit. The key questions are the use the money is put to and whether the debt is manageable. The budget surplus is another means by which government spending is restricted and excuses can be found to further cut back social welfare, slash the public sector and hand over government responsibilities for services and infrastructure to the private sector.

The government is more concerned with pleasing big business, the financial sector and private ratings agencies than protecting the interests of the Australian people.

Economically flawed

Government forecasts of a continuing mining boom and economic growth are extremely optimistic. Rio Tinto and BHP Billiton recently announced that they may curb planned investments because the mining boom is showing signs of ebbing. Developments in the US, Europe and China are of concern.

Yet the surplus is premised on growth in investment, jobs and in the economy. In the last budget the government forecast 500,000 new jobs over the next two years. One year on and the growth is 29,000. Its latest prediction of job growth of 0.5 percent is well below the expected population growth of 1.5 percent. The budget lacks job creation measures.

With a large section of the economy already recessed, the number of full-time jobs in decline and job growth largely part-time, forecasts for unemployment look very optimistic.

The Reserve Bank of Australia recognised the contractionary impact of a budget surplus and cut interest rates accordingly. The 0.5 percent cut will not be enough to counter the budget’s impact on the economy. Nor are the few handouts enough to counter the cuts.

The Australian economy needs stimulatory measures and job creation programs. The people of Australia need services, larger welfare payments and jobs. There is no contradiction in these demands.

Austerity does not bring prosperity.

Pursuit of battlers

Treasurer Wayne Swan’s constant references to “sharing the mining boom”, the handouts to various low income groups and promo around schemes for the aged, disability insurance and dental care are all part of the pretence that Labor serves the working class. But Swan, Gillard and Co cannot even bring themselves to use the term “working class”, instead opting for “working families”.

The commitments to these new schemes are minimal during 2012-13. There is no evidence to suggest they will ever be adequately funded. Labor is desperately trying to woo back its former electorate, restore faith and appear to be more caring than the Coalition parties.

The Opposition claims it is class warfare against business. Unfortunately it is not. Big business was hardly touched; their next tax cut has been deferred, not cancelled.

The electorate is looking for real change. Treasurer Swan’s “working families” will not be fooled by all the rhetoric and deception or declarations of a budget surplus. They will judge this budget and the government by reality – what is in their pockets, what is on the table, whether they can pay the electricity bills and the rent, whether they can see a doctor or find a hospital bed, the education their children receive. On all counts this is an austerity budget and the Labor government has failed dismally.

Next article – 9th of May – Victory Day

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