Surplus obsession locks in cuts and failure on services

Labor’s obsession with a budget surplus has delivered more cuts and an on-going failure to fund services. Despite its talk there is only peanuts for spending on schools, dental and disability care in this budget.

Instead Treasurer Wayne Swan has opted for a series of cash handouts to calm concern over the carbon tax and the cost of living.

But this is not a budget for workers and the poor. While there have been some cuts to defence spending and some reduction in tax concessions for the rich, this is not a class war budget.

Shamefully, single parents have been targeted for cuts, losing the parenting payment when their youngest child turns eight. The cut will see them lose $120 a fortnight by forcing them onto Newstart and the job search queues. The Australian Council of Social Service (ACOSS) slammed the decision, saying: “The major blight on this year’s budget is the unnecessary attack on 100,000 single parents… leaving some of the most disadvantaged families and their children in deficit.”

Although the government expects unemployment to increase, the budget has done nothing for people living below the poverty line on the dole.

Public sector workers have again been hit, with more than 4200 jobs to go over the next year. The Commonwealth Ombudsman’s office will lose 23 staff. Worse still, spending over future years indicates plans for further cuts, with $164 million to be shaved from the government’s wages bill in 2013-14. This means either wage cuts or axing a further 5400 jobs.

Amazingly, while the weather bureau’s budget will be cut by $13 million and will lose 23 jobs, Labor is opening the web site to commercial advertising. The promise to increase foreign aid has also been broken.

But the budget cuts would be more savage if not for the rosy projections of economic growth and government income over the next year. Treasury is banking on a revenue increase of 11.8 per cent in 2012-13. If that doesn’t come off Labor’s fetish for a budget surplus will force it to wield the axe again next year.

The budget sums rest on the hope that growth in Australia’s economy will speed up to 3.25 per cent next year. But the economic crisis across the globe makes this doubtful. Growth is faltering in the US and China. Europe is spiralling downward to the point where the Economist says it is, “walking, eyes wide open, into depression”.

The Reserve Bank’s decision to cut interest rates by 0.5 per cent a week before the budget shows that the Australian economy is not so strong either. Labor’s push to create a surplus could easily backfire and end up helping drag the economy back into recession.

Class war?
Wayne Swan has been accused by the media and Tony Abbott of waging class warfare with the budget. We wish.

There are some cuts at the expense of big business and the rich. But the decision to postpone the reduction in corporate tax from 30 to 29 per cent was actually forced on the government by the refusal of The Greens and the Liberals to support it in the Senate. Gillard still says she is “very determined” to deliver the tax cut in the future.

This has given the government $4.75 billion, which it is spending on new cash handouts to families.
These payments are designed to send the message that the government is acting to relieve cost of living pressures. Wayne Swan hopes this will take some of the sting out of the carbon tax.

But the decision to deliver cash handouts comes at the expense of any serious spending on services. Wayne Swan says the budget is “Labor to its bootstraps” but there is nothing “Labor” about cutting payments to single parents and overseas aid. John Howard was also willing to hand out one-off cash payments to try and win votes.

Swan has done nothing to boost public services or deliver the kind of lasting changes that might signal that Labor stands for something. The call from the Gonski review for an immediate $3.8 billion boost to government schools spending has been ignored.

Labor has talked up funding for a National Disability Insurance Scheme. But it gets next to nothing—just $250 million a year over the next four years. That’s a long way short of the $8 billion a year needed for the full scheme.

There is some money for dental care—but it averages just $156 million a year over the next three years, and just $60 million a year is new money, with the rest redirected from another dental program. The government’s report on dental care said it needs $1.8 billion a year just to provide proper dental care for those who can’t afford it.

Tax the mining companies
If Labor had been prepared to take up The Greens’ call for restoring the mining tax to its original level, some real spending on services would be possible. The tax is now expected to raise only $3.5 billion in it second year, down from an original $9 billion. Andrew Forrest says Fortescue mines and other big companies will now pay almost nothing in the tax’s first five years.

Add in the $4 billion in annual subsidies that the Australia Institute calculates the government already gives the mining industry—which went untouched in the budget—and the timidity of Labor’s supposed attack on business becomes clear.

Ignore Tony Abbott and squeals from the big business. Labor is running a pro-business neo-liberal government. This budget is not a break from that.


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