CANBERRA OBSERVED: by national correspondentNews Weekly
Nation braces itself for tough Budget
, April 16, 2011
When the history of the great China resources boom is eventually recorded, one of the conclusions will surely be that successive Australian governments squandered their chance to set aside the bounty from the ground for future generations of Australians or to build projects to provide for future prosperity.
The 2011 Budget — the first of the Gillard Government — due to be brought down on May 10, however, aims to go against this trend.
Australia remains almost alone in the Western world in having defied the global downturn as a result of its resources wealth. While France, Britain, the United States and Ireland are stricken with double-digit unemployment, Australia enjoys not only low unemployment but a dearth of skilled workers.
It is in this context that Prime Minister Julia Gillard has warned the Australian people to prepare for a tough Budget. She wants to put the Budget in surplus to sustain the growth in the economy.
The tough budget mantra is a ploy used in the lead-up to the May Budget to soften up voters. But Ms Gillard insists that this time she means it, although she is also reassuring voters that the pain of this Budget will enable a return to surplus within a year.
But given the extent of the resources boom and the unlikely historical convergence of the two most populous nations on the planet, China and India, transforming into modern economies at the same time, the Government should be using the opportunity for a wholesale rethink of its spending and savings strategy.
It is doubtful, however, that this will eventuate, given the Government’s record on spending.
Opposition leader Tony Abbott recently highlighted the human mountain of 700,000 individuals who are now on disability pensions — at least a third of whom would likely have the capacity to do some work.
The disability pension system has become a scandal which successive governments have failed to address.
On the one hand, there are people with genuine disabilities who cannot work and who desperately need more not less assistance.
But, on the other hand, the disability pension has created a scrapheap of potential workers who have been shunted from the unemployment queues to disability queues because they are hard cases who are difficult to find jobs for. This cohort includes great numbers of able-bodied young people and older workers, people on and off illicit drugs, migrants, and individuals who simply refuse to work.
Mr Abbott has declared that people in this category who also live in places where work is available should be stripped of their benefits in a bid to force them to work.
In a similar vein, Ms Gillard has asserted that there are now two million Australians who are either underemployed or actually looking for a job.
She wants to get those two million people working — no easy task when the Government’s new awards system and unfair dismissal laws are inhibiting many small businesses from hiring new workers.
All this is during a time when there is a supposed “skills crisis” in Australia, and at a time when businesses are begging the government to import more and more foreign workers.
There is also a structural problem since successive governments have wasted the largesse from the mining boom to pay citizens not to work, and on churning taxes for various payments to bribe the middle classes to vote for them.
There have been some attempts to stand against this tide of profligacy.
Peter Costello used his final budgets to try to squirrel away money into higher education and health funds; but these funds were raided by the Rudd Labor Government, ostensibly as part of its economic stimulus strategy to insulate Australia from the global financial meltdown.
Once it was clear that China and India’s inexorable demand for iron ore, coal and gas was going to continue, Mr Rudd had a rethink and decided he too needed to save part of the nation’s wealth for future generations.
But in a rushed and poorly executed tax move, Mr Rudd tried to introduce his ill-starred 40 per cent resources super profits tax (RSPT).
Mr Rudd had barely introduced the tax, conjured up by the recently departed Treasury Secretary Dr Ken Henry, before he was back-pedalling in the face of heavy opposition from the big mining companies.
Prime Minister Gillard has been back-pedalling even faster ever since, and it is estimated that more than $100 billion worth of concessions have been made to the big miners.
Ms Gillard’s mineral resources rent tax (MRRT), originally set at a rate of 30 per cent, has been modified and pared back several times and is still not finalised.
Now Treasurer Wayne Swan has to find savings from Government spending — a much harder task.
Ms Gillard has declared 2011 to be the year of decision and delivery.
The Budget will be a true test of her leadership and, with everything else running against her, it may decide the fate of her prime ministership.