By Max Lane
According to an article in the September 2 Financial Review, many of the Keating government's budget back-downs were the result of pre-planned lobbying work by organisations such as the Australian Council of Social Services (ACOSS). The article quotes a Col Parks of the consultants firm Hill & Knowlton on the ins and outs of persuading a government to change its position. Important terms to use in this persuasion are, according to Parks, "phase in", "reduce" and "compensate".
In the overall impact on the standard of living of ordinary Australians, "phase in", "reduce" and "compensate" are also much more accurate terms than "back down" to describe the changes to the budget which the government agreed to on August 31. Nevertheless, these concessions to public criticism dealt a blow to Prime Minister Paul Keating's political authority.
The chief changes are: cutting the leaded fuel price increase from 10c to 7c between now and 1995; continued Medicare eligibility for eye tests; dropping the retrospective element of tax changes on accrued long service leave; and an increase in the low-income tax rebate from $100 to $150 per year. All these changes will reduce the impact on low-income earners of those measures.
But they will hardly impact at all on the general channelling of wealth from the poor to the rich.
Even according to estimates produced by the Treasury (released only when the WA Green senators said they were unhappy with the revised measures), the budget will still disproportionately help the wealthier section of the population.
For example, the richest 20% of single income households without children would gain $20.68 a week while the poorest 20% would lose 64 cents a week. The richest 20% of two income households with children would gain $19.94 a week while the poorest 20% in this category would gain only $4.02 a week.
The Treasury calculations understate the impact on the poor because they assume among other things that every car can use unleaded petrol. Their computer model, PRISMOD, also uses estimates of household expenditure that "markedly understate" expenditures on alcohol and tobacco, the Treasury admitted.
The "reductions" in the revised budget measures will be offset by the slower "phase-in" of the promised income tax cuts, which are being delayed from November 1 to November 15. Tobacco excise will be increased from 12% up to 20%, which will raise an extra $100 million per year by 1995-6. The projected deficit for 1996-7 is now estimated to have increased from 1.1% to 1.2% of GDP.
The budget's tax measures were estimated to raise $1.3 billion, rising to $3 billion in 1996-97. The "compensations" conceded by Keating will hardly make a dent in the overall collection of money from the ordinary Australian.
WA Green senators Christabel Chamarette and Dee Margetts rejected the revised budget and have called also for reducing tax cuts for higher and middle income earners. However, they are not making public details about their negotiations with the government.
While the Democrats are still committed to vote down the increase on tax on wine, they appear to be content with most of the changes announced by the government. Democrat leader Cheryl Kernot said on September 3 that there was a "limit to the change that can be responsibly achieved".
"We injected half a billion dollars of fairness into the Budget, and did it responsibly", she added. "We have now reached a point in time where the process is becoming drawn out, and I don't think we as a nation can afford for that to happen."