Magazine of Socialist Action in Australia

Federal budget: Labor’s thinly veiled austerity

Reading Time: 6 minutes

Last month ALP Treasurer Wayne Swan handed down his fifth – and possibly his last – federal budget. In an attempt to meet the Government’s stated goal of bringing the budget back into surplus, Swan announced over $30 billion in cuts and spending reductions. This budget marks a clear shift away from the economic stimulus implemented in the midst of the global financial crisis in 2008 towards the global trend of austerity.

The budget represents a 4.3 percent cut in government spending, including up to 4,200 public sector job losses. Estimates over the next three years suggest more than 12,000 public sector jobs will go. The Government’s own figures expect unemployment to rise from 5.2 per cent to 5.5 per cent over the next year. Inclusive of underemployed, this means the number of Australians looking for work (currently 2.16 million) will continue to grow.

The idea that this budget is about “jobs, jobs, jobs”, as Swan claims, or that it represents a plan designed to create a “bigger and better workforce” is farcical.

For the unemployed, Newstart allowance will remain well below the poverty line and single parents will be forced onto this poverty payment years earlier than before. Rather than creating jobs through much needed infrastructure projects, the Government has opted to punish the unemployed and force more people into low paid, insecure work. The one-off ‘allowance’ for those struggling most with the rise in the cost of living is just $4 per week – hardly a measure that ”spreads the benefits of the mining boom” as Swan claims.

While the Greens were able to squeeze Labor for some crumbs off the table to go to dental care, what they gave with one hand they took many times over from elsewhere. Despite saying that “this budget is good for teeth but bad for brains”, the Greens supported this cuts budget in the parliament.

Whilst Labor’s budget goes some way to placating the anti-worker calls from business and financial markets to reign in social spending, many sections of the ruling class are concerned the cuts aren’t deep enough and are demanding even more savage austerity. One particularly contentious aspect of the federal budget is the incredibly optimistic growth and revenue predictions. Since the onset of the global economic crisis the Treasury Department has regularly presented growth forecasts well beyond what has actually eventuated. For example, at the beginning of this year growth in 2011-12 was expected to reach 3.5 per cent. This has now been revised to just 2.75 per cent.

Despite being consistently wrong in relation to growth forecasts, Labor’s budget projections are dependent on growth of 3.25 per cent this coming financial year. This optimism is based on expectations that Chinese growth will remain at over 8 per cent per year for the foreseeable future, and the global economy will experience 4 per cent growth next year. Meanwhile, the International Monetary Fund has warned Chinese growth could potentially slow to below 5% per cent, and predicts global growth of just 3.5 per cent.

Cost shifts and trickery

Even with these optimistic forecasts, the Government expects next year’s budget surplus to come in at a tiny $1.5 billion. It should be noted that bringing the Clean Energy Advance (part of the carbon tax compensation package) forward adds to the $44 billion 2011-12 budget deficit, yet saves $1.5 billion in next year’s spending. This happens to be the exact amount projected as the first budget surplus!

This is not the only use of ‘clever’ accounting by the ALP. The postponement of military acquisitions and the payments of foreign aid have saved around $8.3 billion, though this money will need to be found in future budgets.

This aspect of the budget prompted the Australian Financial Review to complain that it contained “far too many tricks” and not enough serious (pro-business) reforms.

The reality is that even from a business perspective the budget is very much all show, no substance. The non-mining sectors are crying poor and angry that they didn’t get their promised 1 per cent tax cut. The reality of the two speed economy has not been remotely addressed, and the Government has ceded to an increase in unemployment. After years of handouts to ‘struggling’ business, their payments to families with kids are so insignificant that they have no chance of stimulating a growth in retail spending.

Even Swan admitted that government tax revenues have declined by $150 billion since 2008. This is due to the impact of the global financial crisis, effects of the high-dollar on export goods and the lull in consumer spending due to cost-of-living pressures. Because of this, GST revenue is expected to fall by $11 billion over the next four years. This decrease in tax revenue will not only impact on the government’s ability to deliver a surplus next year, but will also impact heavily on federal funding for state governments, meaning significant cuts to state spending will continue.

The ruling class are aware of these contradictions and have demanded to know what the government will do if their projected growth does not materialise. Swan responded unashamedly that the government will not hesitate to deliver deeper public spending cuts be this the case.

In many ways the Government has attempted to appease the concerns of big business and financial markets by attempting to cut public spending and bring the budget back into surplus, whist at the same time trying to win back votes with empty rhetoric about standing up for working families.

Political instability and electoral annihilation

Calling it the “battler’s budget”, the ALP have made a desperate attempt to reclaim their standing in the polls. They are in the midst of scandals involving two MPs that could potentially threaten their minority government, have experienced recent state elections in which they were dramatically thrown out of office, and are currently polling so poorly they will likely lose both houses of parliament in the next federal election.

Further, a deeply unpopular carbon tax, that will do nothing to seriously reduce carbon emissions, has forced the Government to promise household compensation to keep up with the cost of living.

The money set aside to implement a 1 per cent tax cut for business (which did not have sufficient support to pass through parliament) has been redirected to cost-of-living subsidies. The “schoolkids bonus” amounts to a mere $7.80 per week for primary students, and $15.70 per week for high school students. The increase to the Family Tax Benefit amounts to just $12 per week.

While students on Youth Allowance may receive the $210 one-off ‘allowance’, university maths and science students will effectively have their HECS debts doubled!

At the same time as offering these meager handouts, the Government will save about $700 million by cutting welfare payments to unemployed single-parent families by $60 per week! Around 100,000 families will be affected by this change at a time when charities are reporting an increase in struggling families needing support to afford basics such as food, rent and bills.

These are the “real families” Labor claims to support but who will actually end up worse off with this budget. Recognition of the hollowness of the rhetoric from Swan and Gillard has meant that Labor’s vote has increased just 1 per cent and Gillard’s approval rating has gone down a further 3 per cent.

A ‘class war’ budget?

Opposition leader Tony Abbott echoed sections of the mainstream press in calling the ALP effort a “class war” budget.

Whilst Abbott is a vocal proponent of slashing public spending, he has consistently failed to precisely outline what cuts a government led by him would make. This has led to frustrations within the business elite, who very much wish to be offered a viable alternative to Labor from the Coalition Opposition parties.

All the bluster about the ALP’s ‘class war’ is connected to the fact that business and financial markets want to see much deeper and far reaching austerity implemented. However, international events, particularly in Greece, serve as a warning to the possible social and political implications of forcing ordinary people to pay the cost of the crisis they did not create.

The reality is that both the ALP and the Coalition want to implement the austerity seen internationally, but understand that such a program is deeply unpopular. Joe Hockey was the most honest about this goal in April when he spoke in London to the Institute of Economic Affairs. There he argued for an end to spending “on a range of social programs including education, health, housing, subsidised transport, social safety nets and retirement benefits”. This would mean “reducing the provision of so called ‘free’ government services to those who feel they are entitled to receive them … and is likely to result in a lowering of the standard of living for whole societies as they learn to live within their means.”

There is a class war going on, but big business and their representatives on both sides of parliament are currently fighting unopposed. This is why the Socialist Party calls for the formation of a new workers’ party, built on the basis of the socialist Left, fighting trade unions and progressive community groups. We need a party that is willing to wage a class war unashamedly in the interest of workers, students and the unemployed.

Editorial comment from the June 2012 edition of ‘The Socialist’ magazine


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