Magazine of Socialist Action in Australia

Federal budget reflects government weakness

Reading Time: 5 minutes

On May 8th Treasurer Scott Morrison presented a federal budget that reflects the crisis facing the government. For the second year in a row he has had to deliver a budget straightjacketed by the fact that the Coalition has been unable to get parts of their program through parliament.

The government is stuck between their first priority of pleasing big business and their need to hold back mass dissatisfaction. This particularly worries them in an election year. Instead of pursuing their main policy goals, the government are putting their hope in the economy improving in future years.

This reflects the government’s fundamental weakness. A sustained campaign from the trade union movement could reverse the cuts of previous years and actually gain ground to win victories for ordinary people.

More cuts planned

While it does not include major cuts on the scale of previous years, there are smaller cuts in this budget, such as to the ABC and to ASIC – the financial regulator. The budget also continues the chronic underspending on essential services that is supported by both major parties.

For example, there is no increase to welfare payments, meaning that welfare recipients are effectively in for another pay cut, as costs of living continue to rise. The budget shamefully continues to fund cashless welfare trials and the continuation of the farcical Centrelink ‘robodebt’ crackdown.

This is despite the fact that the media was recently filled with urgent calls for a welfare increase from the Australian Council of Social Services, the Brotherhood of St Lawrence, and even the right-wing Business Council of Australia.

Misplaced optimism

Overall government debt is at $586 billion. This is money borrowed by the government to fund the budget. Budget surpluses can be used to pay down the debt over time, while deficits increase the debt. This year’s deficit is projected to be $14.5 billion, the lowest since the 2008 crisis.

The deficit is projected to be smaller due to higher than expected tax receipts. The new budget assumes this windfall will continue. It projects a rise in wage growth over the next few years, and expects a rate of GDP growth that is higher than the average that we have seen since 2008. This is questionable to begin with, but it also assumes no new crisis erupts, such as a downturn in the housing market, the development of a trade war, or a further slowdown in China.

While Morrison’s budget paints a rosy picture in terms of its forecasts for the next few years, it is clear that the government and the ruling class are not entirely convinced themselves. Turnbull’s $75 billion infrastructure stimulus package is continued from last year, with this budget seeing $24.5 billion of that funding allocated.

That the ‘free market’ Liberals are pushing this infrastructure package highlights the crisis facing capitalism. The winding down of the mining boom has meant that there is very little to stimulate growth, and Australia faces the prospect of recession. We have already seen a preview of this unfold in the mining states of Queensland and Western Australia.

This infrastructure package is an attempt to put an engine into the economy. Capitalist investors have failed to provide enough jobs, and now a right-wing government is intervening to try to boost employment in the short term.

Tax cuts for the rich

Big business wants company taxes to be further slashed, and they want working people to pay for it, through cuts to government services and the sale of public assets.

The Coalition’s goal is to slash the top company tax rate from 30% to 25% by 2026-27. Labor leader Bill Shorten has supported this rate in the past. However, because of the public backlash against handouts to big business, the government have been unable to get it through parliament. Instead, they are using this budget to push income tax cuts for the highest earners.

Currently Australia has a progressive tax system, where the rate of tax paid increases as people earn more. This budget lays out a plan to abolish the second highest tax bracket and move the threshold for the next bracket up, so that those earning $200,000 a year pay tax at the same rate as those on $41,000 a year.

This change is scheduled for 2024-25. This is well outside the control of the current government, and even outside the scope of the budget’s own forecasts of future spending.

The Coalition will try to lock in the future tax cuts through legislation, but this doesn’t mean they will be maintained. Morrison’s strategy is to try and create a political cost for any future government that wants to reverse the tax cuts. This is also the reasoning behind his claim that taxes should never be higher than 23.9% of GDP.

Morrison’s tax cuts are aimed at the very rich, while doing almost nothing for most workers. The Australia Institute estimates that 60% of the cuts will be spent on the richest 20% of the population.
The majority of workers will only receive a small tax offset for the next four years, replaced by a similarly small tax cut afterwards.

For those on the average wage the tax offset would save them the equivalent of $10 a week, beginning in the next financial year. For someone on $30,000 a year it is less than $4 a week. These paltry savings were made fun of on Twitter, with the hashtag #KeepMyTenDollars trending.

Most people support progressive taxation, seeing it as fair to expect higher earners to pay a higher rate. ‘Flat’ taxes, like the GST – which is paid even by people who are too poor to pay income tax – are correctly seen as backwards.

Socialists think underpaid workers should not be taxed at all. Working people are already effectively taxed by their bosses to produce private company profits. Budgets should be funded by company taxes, taxes on the very rich, and the nationalisation of the top 200 companies under democratic workers control.

A working people’s budget

While this budget does not advance the big business agenda as much as the ruling class would like, it still represents another year of stagnation for the rest of us. This is despite the fact that there is plenty of wealth in society to go around.

All this wealth is created by the working class, and it represents more than enough money to fund and expand services such as healthcare, welfare, education and more. To win this, we will need to fight for it.

The recently launched Change the Rules campaign is a good start – it has brought thousands of people onto the streets to call for a fairer system. But in order to have any success, it will need to be ready to use the methods of militant unionism.

Change the Rules is focused on changing anti-union legislation. It can be escalated to include demands to properly fund and expand the services that working people rely on. This could be a step towards proposing a people’s budget – a budget that actually prioritises the needs of the majority of the population.

If working people were to fight for this with militant action, the government budgets that are handed down by the representatives of the rich every year would be exposed as nothing but pieces of paper.

Editorial comment from the June 2018 issue of The Socialist


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