Colombo Telegraph

Australia At Crossroads With The Budget 2014

By Laksiri Fernando

Dr. Laksiri Fernando

Australia’s traditional welfare system or what more appropriately called the ‘caring society’ is definitely at crossroads with the new budget of the (conservative) Liberal Party, 2014/15. The party is liberal by name, but in essence it is outright conservative, more to the far-right than any time in the country’s history before. The budget may reminisce John Howard’s budget in 1996/97 in some sense, but far far to the right and conservative, very openly saying that the ‘Age of Entitlement’ is over.

This evening, the Treasurer, Joe Hockey, presented the budget in Parliament in Canberra, outlining the measures to bring down the budget deficit from 50 billion to 30 billion, an effort which could have been appreciated if not for the way that it was done by burdening particularly the middle and low income earners, while pleasing the big corporate sector in the country.

To please the big corporate sector, the abolition of the Carbon and the Mining taxes was announced.

To reduce the budget deficit, expenditure on schools, hospitals, pensions and foreign aid were drastically slashed (80 billion) and new taxes on fuel, medicare and incomes were newly introduced, but in different names. If there was any innovation in the budget then that was in respect of semantics or nomenclature as follows.

  • Temporary Budget Repair Levy
  • Fuel Exercise Index Adjustment
  • Medicare Co-Payments

All the above are new taxes, but not in name. The reason for this acrobatic gesture was the promise given by the Liberal Party leader, now the Prime Minister, Tony Abbot, to the voters at the last elections that he would not impose any new taxes. Therefore, those are not taxes but levies or co-payments! He has also said, criticizing the last Labor administration, that what is bigger is not the ‘budget deficit,’ but the ‘trust deficit.’ This has been the major theme of criticism by the Labor opposition in Parliament today criticizing the government and their ‘Broken Promises.’ Among the Australian voters, accountability is usually valued high. If a government willfully or blatantly breaks promises, then that would be the end of their political credibility.

There is obvious bias towards the big corporate sector or the big business on the part of the Liberal Party. This is understood by the general public. But in the past, as a responsible democratic political party, the Liberal Party also used to cater to the general public and the ordinary voters. Compared to the Labor Party, the Liberals also had some credibility as good economic managers. Therefore, after a period of Labor administration, there has been a tendency on the part of the voters to prefer a Liberal administration, ‘to fix the economy’ so to say. But this budget is undoubtedly well beyond that and in fact might destroy the economy instead of repairing it.

There was no doubted that the Labor governments were running deficit budgets in the recent past and as a result there has been an accumulated national debt up to around AUD 300,000 million. But compared to other developed countries the debt ratio in Australia as a percentage of the GDP has been one of the lowest. In 2013, the debt ratio was only 27 percent (the highest in years), whereas in other developed countries the average is considered to be around 90 percent of the GDP. There is no ‘debt crisis’ or ‘debt trap’ in Australia. To talk about such is merely to peddle an anti-welfare agenda. In addition, Australia has a triple ‘AAA’ credit rating throughout years.

On the other hand, it was thanks to the government spending particularly in stimulating industries and employment and also consumer confidence that the Labor administrations managed to avoid an international financial or economic crisis in Australia during 2008-2012. Of course as a result, there is (some) debt and a legacy of deficit budgeting and those have to be gradually erased without upsetting the overall health of the economy. This budget has slashed industry assistance amounted to $ 845 million previously which was necessary to stimulate the industries facing the challenge of a financial/economic crisis.

There is sort of a housing bubble or boom at present in the economy. Of course some buyers are foreign but considerable number comes from the high (professional) income earners. Now a 2 percent budget repair levy is imposed on these income earners and this might affect the ongoing housing boom in the country adversely in the coming future.

Likewise, after a long long period, the consumer confidence was regaining in the country. The consumers are the ordinary people whose newly imposed medicare levies, fuel surcharges and cutting down of various other benefits would affect their consumer confidence. Equally or more damaging might be the cutting down of annual pension increases, newstart allowances for the under 30 years age unemployed until six months and various other family benefits. These are in fact inhuman measures to satisfy an obsession on the part of some politicians to have a balanced budget.

Yet the budget is not balanced! There is still a 30 billion deficit hole. It is not yet clear where the spending are going to be. It is said that what is extracted as fuel surcharge would go to road development. That may have a logic. However, it is also said that what is extracted from the sick patients as medicare co-payments who go to see a GP would be invested in medical research! That is obviously a funny way of funding ‘medical research’ to say the least. As one critic remarked, this is might be the beginning of the end of the existing ‘universal healthcare’ policy in Australia.

There is obviously an ideology behind the budget. It is not about any reasonable economics. Perhaps some accounting is there in tallying and counting necessary numbers. It is like a bizarre right-wing Third World Budget. So much so, some of the utterances are also what we hear mostly in budget discussions in Third World Countries prescribed by the IMF and/or the World Bank. There is considerable talk about necessary ‘structural reforms’ to mean a neo-liberal or neo-con agenda. It is also like the austerity measures that became promulgated in Portugal or Spain aftermath of their financial and economic bankruptcy in late 2012/13.

The model that Liberal Party appears to follow undoubtedly is the old fashioned Uncle Tom variety. The current Treasurer, Joe Hockey, seems to be the primary advocate of this ideology even more than the Prime Minister, Tony Abbot. He asks the people to follow the ‘national interest and not personal interests.’ The vision he espouses is a ‘stronger Australia and a more prosperous country.’ But he is silent about the marginalized, the vulnerable and the needy sections of the society.

Mr. Hockey also intends to completely scrap the public funded university system in the country although eventually. Some of the measures in the current budget are the starting points. From now onwards, the university students or their parents have to shoulder a major burden on university education. The loans given by the government will be limited. From 2016, universities are supposed to have their own fee structures.

Some measures in the present budget obviously derives from the recently announced report of the Commission of Audit. But the budget goes beyond that. For example, the Commission has suggested to increase the retirement or the pension age to years 70 by 2050. This suggestion is taken as a ‘divine rule’ in the budget and has advanced the implementation year to 2035. This is a bizarre and a discriminatory proposition by all means. Australia has already increased the retirement age to 67. That may be reasonable. Increasing it by another 3 years is unjustifiable by all means.

It is good that if we all can engage in some productive work until our demise. That however is a personal choice. Some may prefer more leisure. Especially those who exert physical labor obviously cannot go on working for long years. All indications are that in Australia, people find it difficult to obtain gainful employment even by late 50s. The most bizarre and anti-social nature of the budget is revealed also by this proposal.

Australia definitely is at crossroads. The future directions of the country will depend on how effectively the opposition and that particularly means the Labor Party would take the challenge of the budget and educate and prepare the people for alternative policies. There is no question that necessary rationalizations might be necessary in any welfare system from time to time. Perhaps this was delayed or neglected in Australia in the recent past for various reasons. But there is no rational in dismantling the welfare system altogether. The system is one of the best in the world and should prevail. The beauty of Australia is the caring nature of its society. It should prevail. It is not only an Australian task but also a universal task.

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