Will tonight’s budget bring gain or pain?

By Joe Montero

On the eve of the federal budget, a great deal is being made of the expected $15 billion surplus, something that hasn’t been seen for 15 years. How can this be when the demands on the government’s responsibilities are rising, along with the gap between this and the revenue coming in? More on this later.

The details have not been public yet. But custom has been followed with some telling leaks. so far there are few gains and the promise of a lot of pain.

Even with some small improvements for the parenting payment, and a small increase in the Jobseeker base rate for those over 55, the rising poverty faced by those on social security will not be addressed. They will continue to fall further below the poverty line.

Photo by Lukas Coch/AAP: Treasurer Jim Chalmers will deliver the budget tonight.

The bigger issue is the matter of the rising cost of living. A $4 billion package over four years is included in this budget. This includes rebates up to $500 for households on government payments, or $9.60 a week, which goes nowhere near covering the recent surge in energy prices. There is the additional low-income and rental household electrification package, forced on by the Greens during negotiations. A small improvement in the Pharmaceutical Benefits Scheme will be provided. A change in the dispensing rules will make it possible for pharmacists to sell up to two months’ worth of certain medications under a single prescription.

Most of the unemployed, those on disability support, and age pensioners get nothing, Single parents will still be left far behind.

A 15 percent rise in pay for age care workers though an $11.3 billion fund will be provided. In other words, employer wage costs will be subsidised. Given the history of the industry, there is no guarantee that this will create more jobs and take service provision to the goal of daily around the clock care.

In sum, this is a minimalist budget, in meeting the needs of the most vulnerable Australians. It is designed around the political reality of having to look like doing something, while really doing almost nothing to address growing poverty. This carries significant risk of alienating Labor’s political base more than already has.

Add there is nothing here to address the cost of housing crisis, which happens to be the most important part of the rising cost of living. New tax breaks will be given to developers to build rental housing. This assumes the problem is housing shortage. The real problem is the structure of the housing market, where it is mostly driven by speculators, supported by government handouts. Only bringing in structural changes to the housing market and sufficient investment in alternative housing can address the problem. The imposition of maximum rents would help.

There is a commitment of $2.2 billion to primary health care. There will be a boost to the number of nurses, increased after hours care, and incentives to GPs to open later and pharmacists, paramedics, and nurses to take up extra duties. Another part is changing the Medicare system with the inclusion of a “MyMedicare” patient identification number, which will separate Australians into distinct groups. What this will pan out to mean is still not clear. On the one hand, it may improve the capacity to deliver specialist service. On the other, it lends towards helping the privatisation of health services and extending the user pays system on different levels.

What we don’t know yet, is how much of the funding will be diverted to the private health and how much will be left in the public system on which most Australians depend on.

A big give away is the $55.3 billion childcare package, to be delivered over four years, and covering training of new early childhood and care workers. What isn’t addressed are the low wages and poor working conditions that have driven thousands out of the industry and attract few into it. Unless this is addressed, the increased spending will have little impact.

Education and training get a boost of $3.5 billion over five years, and there is another $400 million for 300,000 fee-free Tafe and vocational education and training places. This is the most positive part of this budget.

While there is considerable talk about energy transition, only $23 million have be n devoted to this be that for the first year, and a further $400 million for underserviced regions through the Powering the Region. Nothing has been said about what will follow this.

On the revenue raising side, the government will reap $2.4 billion more in the petroleum resource rent tax, by capping the level that can be offset by deductions, of up to 90 percent. A minimum 15 percent tax rate limit on debt-related deductions will be put in place, to bring Australia in line with the OECD. This will raise $3.4 billion over four years. There will be a tax rise of 5 percent a year over the next three years, raising a further $3.3 billion over four years. From July next year, the 30 percent tax rate on pensions over $3 million will be applied. This will raise #3.2 billion over the next five years.

The total new tax gain will be in the order of just over $9 billion. This is positive and will go a long way to cover minimalist improvements. But it will not cover the real needs. A significant part of new tax revenue is due to inflation. If this is accounted for, the real increase is considerably less. Furthermore, it will be more than offset with the coming stage three tax cuts for those on the highest incomes.

Defence spending is the big winner. There is about $19 billion over four years, which includes $9 billion towards the purchase of the AUKUS nuclear powered submarines, and $4.1 billion for missiles and assembly of components. This is a politically sensitive issue, and it may that it will overshoot the $21.1 billion distributed so far.

This is shaping up to be a budget that will satisfy no one. It does not deliver a great deal more to the big end of town, and It delivers less to everyone else.

Barring any surprises, the fixation on the budget surplus remains and this means that eventually there will be major government expenditure cuts in the wings. The usual voices are calling this budget a good start, and that a major reduction of future expenditure is necessary, to bring in an ongoing budget surplus. These are the advisors who informed a succession of coalition governments into the economic policies they applied. Labor is now taking their advice.

The only way to avoid this and deliver better and affordable service to Australia is to take on the problem of the revenue shortage. And the secret to this is reordering the priorities.

If the starting point is meeting the responsibility of putting the wellbeing of the people at the forefront, raising spending on social security, housing, health, and education will be on the top of the list. There would not be the big boost to military spending.

Meeting these needs requires contributions by all according to ability. This means returning to a more progressive taxation system and raising the rate on the highest incomes, instead of proceeding with the stage three tax cut. It means taking on the corporate tax evasion industry and introducing a super profits tax. The corporate world will still be profitable, except that it contributes a fairer share to the society it makes this profit from.

Nor is business as usual good for the economy. The future depends on decarbonisation, much more expenditure on sustainable energy and other important infrastructure, nurturing and growing manufacturing, and adopting new technologies. These matters are being ignored.

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