A Few Words on that Federal Budget

Lumbering through the inner city at 2:30am, on still streets peopled only by stragglers walking off the evening’s drink and dance, I was stopped by an old man. He was bent before his time and unkempt, a lanyard swinging to and fro from his neck.  Pale hazel eyes, caught by the dim streetlights, found my own. Earnest words abruptly tumbled from his lips in a quivering high register. They came readily, as if stewing for minutes or hours beneath the surface, awaiting the barest excuse for articulation:

“Tony Abbott,” he murmured. “I tell you what I’d like to do with Tony Abbott. You see what he’s doing to the pensioners, the students, the unemployed, the families? It’s not right. I’d like to give him a right kick. I’d like to take him by the pants and put him on that flag pole. It’s not right.” And even as we parted ways minutes later, sharing frustrations and platitudes, metres away he rejoined in trembling voice, “It’s not right!”

The Coalition government may not fear the punishments devised by old men, but they cannot fail to see the groundswell. Placards have been raised and copious ink spilled; the states are in revolt and the Opposition has at last arisen from its slumber. Threatened with a double dissolution, the arrayed opponents of the government answer to a man: “Bring it on.”

It is a staggering display of anger for a single budget. But of course the announcement by Joe Hockey last Tuesday night was more than a fiscal plan – it finally made explicit the intentions of the Abbott Government, drawing up the lines of a burgeoning ideological battleground. Citizens at last knew where they stood; and many were shocked to find themselves on the wrong side of the line.

Most will be familiar with the broad strokes at this point:

  • Co-payments for GP visits ($7) and prescription fees ($5);
  • Stricter eligibility and cut offs for family tax benefits, with welfare payment rates frozen;
  • Six month on-again/off-again cycle for unemployment benefits for under 30s;
  • Rise of pension age to 70 by 2035;
  • Temporary deficit levy for high income-earners (over $180,000 p.a.);
  • Reduced hospital and education funding ($80 billion over 10 years);
  • Petrol excise rising with inflation;
  • Deregulation of university fees;
  • Foreign aid cuts of $7.9 billion over 5 years;
  • Higher interest rates and lower thresholds for students paying back loans; and
  • Broad cuts for government program and agencies, with reduced funding sectors including the arts and Aboriginal affairs.

Some of these measures would go into force in July – others are held over to 2016. The much vaunted ‘signature policy’ of the Paid Parental Leave Scheme still has yet to be announced or costed in full. Funding was significantly increased for Defence, roads and medical research.

It is important to note that, for all the talk of responsibility and austerity, this 2014-15 budget does not immediately dent overall spending – many of the savings are smaller and long-term, and thus will only be nailed to the Government’s balance sheet in subsequent years, and are matched by spending increases. Accordingly, this is not a budget that returns Australia to surplus in 2014 – in fact, that moment is delayed until after the 2017-2018 budget.

Whilst this alone has driven some to conclude that the Coalition’s clarion cry of a need to change Australia’s spending habits is bunk, we cannot ignore that Australia does have long-term fiscal problems that must be reckoned with. That Australia also has the second-lowest debt of any OECD nation is not necessarily a note of recommendation, given the precarious state of finances across Europe and North America. It does, however, suggest that talk of an “emergency” is rash and irresponsible; the problem is structural, not simply the result of “Labor spending like a drunken sailor” as Tony Abbott has alleged.

The maths is simple; the Federal Government annually collects revenue that is equal to 23% of Australia’s GDP. It spends equal to 26%. This leaves a 3% shortfall, which untended threatens only to increase, particularly with the tapering off of the mining boom. The Aged Pension is one of the most significant sources of long-term spending growth – Australia, like many first world countries, boasts an aging population that continues to live longer than ever before. A greater proportion of citizens are therefore likely to be eligible for state-drawn pensions, and drawing them for longer, making a pension that begins at 65 more untenable with every passing year. It does us no good to wave away these realities, as Americans of all political persuasions do, fearful of touching a 3rd rail.

Financial analysts are largely of two minds about how to address Australia’s shortfall – is the tax base too small, or does the government spend too much? Despite all the proponents of ‘small government’ in today’s conservative movement, even former PM John Howard argues for a broader GST to increase the tax base, a view shared by World Vision head Tim Costello. The present Prime Minster may also see this as a necessity – but has foisted the responsibility onto the States by strangling their funding, rather than arguing for it at an election (Howard at least did the electorate that service).  The loudest voice on the other side of the fence pre-budget was the Commission of Audit with its incendiary set of recommendations: more severe than, and no doubt readying the way for, Joe Hockey’s announcement.

In short, the present and widening gap between government revenue and expenditure may not have constituted an emergency, but it is also not sustainable. Hence there is some truth in the Coalition’s argument in favour of measures that inflicted “pain with a purpose”. The operative question is not whether Australia has a long-term budget problem – it does. It is who, indeed, should be shouldering the advertised pain.

And on Tuesday evening, a huge proportion of Australians discovered they were the ones looking down the barrel. Joe Hockey unveiled a new vision of the future, where the brunt of the responsibility is to be borne by those who can least afford it. Within the crosshairs stand students, pensioners, the unemployed, the sick, the disabled and low-income and single-parent families.

There is no question that the hit is disproportionate; the National Centre for Social and Economic Modelling found that the new measures saw an average 5% reduction in disposable incomes for the bottom 20% of earners, whilst just a 0.3% hit for those in the top 20%. Members of the Government have behaved as though the ferocity of the outrage comes as a surprise, but it shouldn’t have; the Budget at last made their priorities maddeningly clear. It reveals an attempt to shift the onus of supporting the less fortunate from the state to families. And it fails to recognise that many of the less fortunate do not have supportive families waiting in the wings.

That very vision may yet alienate even the Coalition’s core supporters – the Baby Boomers, seemingly destined to lead more prosperous lives than their parents or their children. They are threatened not by the negligible deficit levy on high earners; a temporary measure, one should note, just like the freeze on government pay rises, whilst the cuts to services are permanent. Rather, they too recognise the new onus demands they work until they are over 70, support their children (and their mounting education expenses) until they reach 30, and shoulder even more of the burden for parents and disabled relatives in need of care.

The government has refrained from many sweeping cuts, relying largely on freezes and levies to boost overall savings. The slashes made at government bodies amount to pocket change compared to the cost of an F-35 Joint Strike Fighter – but at the respective agencies the effects may be catastrophic. I cast an anxious gaze at Screen Australia, pivotal to supporting local filmmaking, and the Australia Council, a major source of funding to arts programs, authors and theatre companies. These are bodies that are never liable to give the government a return on its investment – but can we allow that ethos to be all that drives the workhouses of a nation’s culture?

Lost within the din of outrage has been the most odious measure of the Budget – a cut which opposition parties have not sworn to heroically wrestle with the Senate floor. The Budget’s largest ‘savings’ come not from culling domestic initiatives, but eviscerating Australia’s foreign aid budget, to the tune of up to $7.9 Billion over the next five years. For all the vulnerabilities of Australia’s poorest and most disadvantaged, they often pale to those faced by billions living in poverty around the world – and it is these people we are most willing to sacrifice in search of a surplus, and whose pain we are least likely to feel. The same ethos has spurred the government’s morally diseased asylum seeker policy; “Anyone but us.” The definition of “us” seems to grow narrower and narrower.

There are other ways. Commentators have suggested a raft of measures that do not require a single cut; ending superannuation concessions for the wealthy (more expensive per person than if the government had simply granted each high earner an old age pension), abolishing fossil fuel subsidies and closing the negative gearing tax loophole. The resistance to a mining tax is fiscally nonsensical even if the notion raises corporate ire; Norway’s extensive taxes on its oil reserves have allowed it to amass over US$830 Billion in its sovereign wealth fund, while Australian citizens are destined to be left with little to show for decades of zealous harvesting of our finite resources. But all these measures would curtail of the earnings of Australia’s wealthiest – and the Coalition willing to scour its public bodies for stray millions refuses to put them on the table.

The Budget does not go as far as it could have – the ABC still stands, welfare payments have not been curtailed or cut altogether, and the Medicare co-payment is well below the original $15 proposal. The danger is not of an immediate blow, but a change in the political landscape. The vision it puts forward is more potent than any once individual measure, however tone-deaf or callous. Marches, debates and opinion polls suggest that the public is not letting it slide. Bill Shorten and Christine Milne are stringent in their opposition, but are yet to articulate policies of corresponding force and purpose. In this tumult even populist wildcard Clive Palmer is sounding reasonable – the man whose eccentric schemes like relaunching the Titanic earned him a weekly “What Would Clive Palmer Do?” segment on the Gruen Transfer.

Amidst the rage and noise, it is important to affirm what, in opposing the budget, Australians are fighting for. To deny that Australia is facing long-term financial challenges, or to heap focus on Tony Abbott’s pre-election promises, is to pick the wrong battles, and ignore what is really at stake. We are looking at nothing less than a reappraisal of our society’s values, and a radically different vision of our future.

The Coalition has made its pitch. It is now on us not only to reject it, but to offer something better.

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