BY JONATHAN SINGER
Establishment economic analysts and media commentators are concerned that the federal government's 2000-01 budget surplus, projected three years ago to be $10.7 billion, was only $500 million in November.
Some economists have suggested the government budget is in "structural deficit". They argue that, in order to balance budgets in the long term, the budget surplus in a "boom" ought to be much higher because there will be deficit budgets during recessions that follow.
The federal Coalition government's problem is not a failure in clever accountancy. In the days before the budget speech, treasurer Peter Costello was suggesting a somewhat higher surplus was probable.
The May 4 Sydney Daily Telegraph reported that the proposed "Timor tax" (0.5% of income for those with an annual income between $50,001 and $100,000; 1% for those on more than $100,000) would not be implemented, with the revenue instead to be generated by the sale of mobile telephone spectrum licenses.
Today, even more so than in the post-war years when pro-business economists thought budget surpluses and deficits could counteract the capitalist boom-bust economic cycle, a government budget is a political, not an economic, document.
Most people understand that betterment in the material conditions of their lives is a sign of economic improvement. The government seems to have a similar understanding — "economic reform is about satisfying human needs", Prime Minister John Howard assured the April national Liberal Party convention.
Yet, the opposite is taking place. Economic "reform" has involved the withdrawal of public services and growing social inequality. The living standards of the majority of people have been forced down, in order to increase profits.
The 2000 budget will reinforce the government's social policies. "Mutual obligation" for social security recipients will be extended and a drive launched to convince people to stay in marriages, through counselling, regardless of the extent of the difficulties.
Tax changes and outlays will favour big business and the rich, such as the goods and services tax (GST), the halving of the capital gains tax, cutting the company tax rate from 36% to 30% and subsidies for various projects.
A recent report researched and compiled for Greens Senator Bob Brown by Lauren Van Dyke calculated direct government assistance to business, through subsidies and tax concessions, to be worth $14 billion. Around $8 billion of this is allocated through the federal budget.
Even so, business is complaining. A pre-budget submission by the Business Council of Australia (BCA), the body that represents most of the largest corporations, accused the government of "fiscal drift". According to the May 1 Australian Financial Review, the ANZ bank's chief economist, Saul Eslake, pointed out that government spending has been rising more quickly than at any time since the 1991 recession.
Eslake said this was "vote buying". The BCA, rather more kindly, said that income tax cuts accompanying the GST had ensured "a satisfactory reception for tax reform".
The Coalition government has, in general, not been able to carry out significant further rounds of cuts after those initiated in its first budget in 1996. Further success in convincing the Australian people of the ideas of "user-pays", "welfare dependency" and the superiority of private over public service provision are needed for this.
While the most politically vulnerable, such as the unemployed and refugees, have suffered, concessions have also been made since 1996. These concessions favoured the rich but also benefited others. The latest budget's programs for regional and rural Australia will be the latest example of this.
Big business and the rich fear a new recession, which may hurt profits or even throw some out of business. While economic growth to the end of last year continued at a relatively high rate, this was driven mainly by private consumption, which now appears to be falling. Investment by business, especially in mining, was already stagnant or falling. Inflation as well as interest rates are rising and the stock market is increasingly unstable. Profits, despite the hype of "10 years of boom", are still too low for the capitalists to readily invest in new productive capacity. Gross profits as a share of national income are only at the level they were in 1993.
Therefore, wrote Alan Mitchell, economics editor for the Australian Financial Review, on May 3, the government "should have cut harder — which of course is true". The lack of a large budget surplus itself becomes a justification for further cuts to social services and perhaps the privatisation of the government's remaining share in Telstra. In this way, the "big end of town" hopes to shift even more of the burden for the economic crisis onto working people.