Magazine of Socialist Action in Australia

Federal budget: $22 billion of unnecessary cuts

Reading Time: 3 minutes

Wayne Swan’s fourth budget is set to deliver a number of blows to society’s most vulnerable. While the screws are tightened on the disabled, long-term unemployed, Indigenous people and single mothers, the big mining companies are rubbing their hands together with glee.

In several polls 80-90% of people have said that they feel the budget will not leave them better off. The only people set to gain are the super rich. Consequently Labor has plunged in the polls with Julia Gillard recording her worst figures since she took over from Kevin Rudd a year ago.

Against the backdrop of a world in economic turmoil the mantra from the ALP has been ‘bring the budget back to surplus by 2012-13’. The surplus was wiped out in the aftermath of the financial crash as Rudd moved to bail out the system through a raft of stimulus measures. Now a total of $22 billion worth of cuts has been proposed with ordinary people expected to foot the bill.

Amongst other things, benefits will be cut for sole parents with teenage children as well as young job seekers. Some groups of single parents can expect a $56 per week reduction in their payments while those under 21 and unemployed will have their payments cut by $43 per week. Income management will be extended to more Indigenous communities while paid paternity leave will be delayed by at least another six months.

There will also be an increase in the ‘public service efficiency dividend’ over the next two years. This is basically code for cuts and forcing public sector workers to work longer and harder for less. It is estimated that 1,200 public sector jobs will be lost which will impact on the quality of and access to public services.

The government claims that this was a ‘tough love’ budget but that the cuts are targeted at those who can afford to pay. Their stated aim of slashing “middle class welfare” is nothing more than a policy of divide and rule. The government hopes to drive a wedge between low paid workers and those who are a bit better off. Once they introduce cuts to the childcare rebate and family tax benefits for relatively high paid workers they will be looking to extend them down the line.

In reality, no cuts to welfare or public services are required. Wealth is in abundance in Australia, it’s just that it is concentrated in the hands of a tiny few. Gillard’s decision to scrap Rudd’s modest proposal for a mining super profits tax and replace it with a watered down version has lost the Treasury $60 billion in revenue over 10 years. Imagine what could be done if the mining giants were in public hands and all the profits were directed back into areas like health, education and services.

Mining is in fact the only part of the economy that is doing well. Manufacturing, retail, education, and the service sectors are all either flat or in decline. The only reason that the mining sector is still powering along is because it is being propped up by huge demand from China.

The government has pinned all its hopes on Chinese growth continuing unabated but unfortunately there are a number of things that could go wrong for China and therefore throw Swan’s budget into disarray.

Demand for raw materials in China for example is largely thanks to speculation in the property market and a resulting construction boom. China’s property bubble is unsustainable and will inevitably burst. When it does it will send commodity prices tumbling and impact badly on Australian government revenue. Flow on effects will be felt in the Australian housing sector and by Australia banks.

Even if China was able to avoid a slowdown the budget will only just register a surplus of 1% of GDP by 2012-13. With Europe unable to solve the sovereign debt crisis and the US and Japan bogged down with economic dilemmas of their own, any number of things could impact on the Australian economy and force the government to push ahead with even deeper spending cuts.

This budget should act as a warning to the labour movement. When Australia’s economic luck runs out ordinary people will be faced with major attacks on our living conditions. We need to be prepared.


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