Canberra fiddles with more than the accounts
BY JONATHAN SINGER
In the days before the federal budget was presented on May 9, media commentators expressed concern that the federal government's 2000-01 budget surplus projection of $500 million — made six months ago — was too low. On budget night, treasurer Peter Costello forecast a cash surplus of $2.8 billion for the year.
"Fiddles", responded ALP leaders Kim Beazley and Simon Crean. A fair enough response, as far as it went.
As a document and account of government revenue and expenditure, the 2000-01 budget conceals as much as it reveals:
asset and license sales are counted as current year income and a $1.65 billion goods and services tax (GST) grant to the states has become a loan;
tables outlining the history of spending for different programs have gone, so it cannot be seen at a glance what the trends — and where the cuts — are; and
the GST, the instrument of the government's much celebrated tax reform, was barely spoken of by the treasurer.
Other than complaints about budget deception, Beazley said in his May 11 reply speech: "We all now largely agree on the old agenda — the need for fiscal discipline". Beazley's main point is that Labor's agenda includes a higher priority for the education system, and scientific and technological research.
Crossed fingers
The whispering about the GST was particularly striking because the 2000-01 budget's role is to implement it. The government has run down the budget surplus below what it would like to ensure "a satisfactory reception for tax reform", as the pre-budget submission of the corporate Business Council of Australia put it.
The GST-driven increase in indirect taxes and income tax cuts, which benefit most those on higher incomes, mean that wealth will flow from the poor and the workers to big corporations and the rich. But the concessions the government made on the scope of the GST and its reduction of the largest income tax cuts bought the acquiescence of some, including the Australian Democrats.
In response to the growing rejection of the Coalition in regional and rural Australia, the government's principal measures were the introduction of a program to recruit doctors to work in country areas, an easing of the assets test for Youth Allowance payments to farming families, and further funding for agricultural modernisation. Aged care funding was also increased a little to try to counter the scandals over nursing home conditions.
Costello also projected future massive budget surpluses. In part, these will come from "bracket creep" — the increasing proportion of workers' income collected in income tax due to inflation pushing their wages beyond higher tax brackets thresholds. It was this process that provided a basis for offering tax cuts in the first place: in 1996-97 alone, pay-as-you-earn income tax collections grew by 8%, well above the growth in employment and wages.
The chief mainstay for both the present (and future) budget surplus forecasts, however, is an expectation of a booming world and, in particular, US economy.
In 2000-01, household consumption, which has underpinned economic growth in Australia in recent years, is expected to grow less rapidly. But growth is still predicted to be 3%, a small fall from 1999-2000, because business investment and exports are supposed to increase in response to growing opportunities for profit overseas.
This is a dangerous game. Even the budget papers slip in a hint of uncertainty. The US economy is subject to the same predicaments the Australian economy faces: rising interest rates and an unstable "bubble" stock market. Business confidence is not high.
Many commentators are fearful of a recession. The Age's Kenneth Davidson even thinks the budget deficit that would result could be a good thing to lessen the recession's impact.
The government claims to have raised the base line for economic growth through structural "reform", primarily in the labour market, and the resultant increases in productivity. It then employs this argument to deny there is a "structural deficit" — a surplus that is too low in an economic upturn to balance out a deficit incurred in the following cyclical downturn — as claimed by some economists. This suggests it sees the present situation as a low point, arising out of the economic collapses in Asia in 1997.
Yet the government's accounting contradicts this. If it wants to balance the budget over the economic cycle, and this is a low point, why not budget a deficit now, and spend funds on solving social problems?
No jobs policy
The government's policy of looking after the rich and relying on the world economy to sort out the rest is exemplified by the fact that the official unemployment rate is forecast to fall by only 0.5%, to 6.25% by June 2001. Around 600,000 people will still be actively seeking work. The day after presenting the budget, Costello was even talking down the prospect he had previously raised of a 5% unemployment rate in four years through continuing economic growth.
The government has no policy for increasing jobs. It is opposed to, for example, reducing working hours without loss of pay, as has been won by Victorian construction workers, even though it lauds the increasing productivity of workers.
"Mutual obligation" is also being extended to more unemployed people through three pilot programs, even before the government's welfare review is completed. Payments to the unemployed, which are less than pensions and keep the unemployed further below the poverty line, are not being increased.
Costello's budget speech also denied the possibility that government action on the rural crisis could have a broad impact. In particular, no new efforts are being made to assist economic development outside of agriculture, or to carry out needed public works, which would also increase employment.
Certain "pet" areas do see action. More refugee detention centres will be built. Funding for private schools will increase by 40% over the next four years (funding for government schools will rise by just 21% in the same period) and the tertiary education sector faces no real increase at all.
Despite the federal government's talk of preferring "practical reconciliation", there is practically nothing in the budget to improve the material situation of indigenous Australians — apart from funding for 1500 more places in the Community Development Employment Scheme, the original work for the dole scheme.
Inaction in these matters is to be expected from a government with a single-minded goal to make the rich ever wealthier. Howard and Costello's budget not only fiddles with the accounts, it fiddles with working people's lives.