Only one solution
The federal government's mid-year budget review, released on January 28, will certainly be used to justify another savage budget in May.
The review projects a budget deficit for 1996-97 of $8.49 billion, $2.84 billion more than was predicted at the time of the August budget. As well, it forecasts an increase in official unemployment from 8.25% to 8.5% (ANZ Bank forecasts still predict a rate of at least 9% before the end of the financial year).
All of the pain inflicted on working people over the last six months of economic "reform" has, it appears, been in vain. With big business demanding a balanced budget by the next election (some are even calling for a surplus), this review can only mean even more pain to come.
The Financial Review of January 29, for example, pounced immediately. Its editorial pointed to a "pressing need for courageous policy ... and for a greater willingness by the Senate to permit the government to govern". Howard and Costello "must strive for hefty further savings in the lead-up to their second budget in May", it said.
Costello agrees: "Clearly, some additional spending tightening will be necessary". He hastened to add that the cuts will be "much milder" than in the last budget — "only" $2 billion more over the next two years!
The first of Costello's targets is the $1 billion of the $7.1 billion in August budget cuts that were blocked by the Senate. The government plans to resubmit these (which include reducing child-care assistance payments; increasing immigration fees; imposing a two-year wait for new migrants to receive social security payments; and tightening the eligibility criteria for Austudy and the activity test for people on unemployment benefits), to give the upper house a chance to "reconsider earlier obstruction".
The banks and big capitalists have been campaigning hard to ensure that the balance, too, is extracted from ordinary people rather than themselves — via a goods and services tax.
All of these efforts to justify austerity conceal the fact that there would be no "budget black hole" in the first place if Australian governments were prepared to tax their big business mates at even roughly the same level as they do the rest of us.
Under the former Labor federal government, the top marginal tax rate was reduced from 60% to 47% (a gift of around $4 billion a year to the wealthiest 5.6% of taxpayers). The introduction of dividend imputation in 1995 freed shareholders from paying tax on dividends, and the corporate tax rate was reduced from 49% to 33% (raised to 36% in 1995). The result was a real drop in revenue of $10 billion.
The Coalition is pursuing the same path. By its own admission, just in the last year the federal government has given up $17 billion in tax revenue through superannuation and business tax concessions, exemptions and rebates, and Treasury estimates that this will blow out to $19 billion in 1998-99.
The "unexpected" decline of $1.6 billion in projected company tax receipts this year that was revealed in the mid-year review is caused by still another deliberate "loophole" that allows companies to reduce their tax.
The only real solution to both the budget deficit and unemployment is to tax the rich and invest those funds in a vastly expanded public sector capable of providing desperately needed social services and jobs.
The figures speak for themselves: Simply lifting the personal tax rate to 60% for incomes of $100,000 or more would raise $3.67 billion extra each year from just 1.03% of the population. Actually collecting corporate tax at a rate of 30% (rather than the 20% that is paid on average) would yield at least another $6 billion.