NATIONAL AFFAIRS: by Peter WestmoreNews Weekly
Comment on the 2011 federal Budget
, May 28, 2011
1. Budget savings and return to budget balance
This is a “nothing” budget in terms of returning the budget to surplus in 2012-13. The claim that this will be achieved in a couple of years is hard to believe.
The savings (Budget Paper No 1, Table 3, p.314) of several billion annually is pitiful. The few billion in reduced spending would only be in the error margin of a $368 billion budget. In addition, most of the reduced expenditure comes not from cuts to the regular budget, but from the end of the one-off stimulus programs implemented in the wake of the global financial crisis.
Compare this to the first two years of the Howard Government. They Coalition cut spending by 0.5 per cent of GDP each year.
Furthermore, when Treasury is forecasting above-average economic growth of 4 per cent, at the same time as Australia is experiencing the highest terms of trade in over 100 years, this is the time for serious expenditure cuts. But it’s not happening.
Indeed, the Government’s lack of restraint in the Budget is seen in the growth of government expenditure from $351 billion to $368 billion (Budget Overview, p.40). Even allowing for inflation, this is a real increase in expenditure, and radically contradicts the Government’s claim that it has reeled in spending in the current budget.
At a time when there is imminent pressure on interest rates due to rising costs, the expansion of government expenditure will make further increases in interest rates inevitable. This means the real pain from this Budget will be felt in higher interest rates, the burden of which falls most heavily on low and medium income families (particularly those with a single-income), home-buyers and small business.
2. Attack on families
There is a major attack on families, aimed at conscripting women into paid work. The measures include:
• the freezing of family allowances for higher income earners;
• the phasing out of the tax offset for dependent spouses, starting with women under 40 with no children; and
• measures to push teenage mothers into paid work.
This comes on top of discriminatory paid parental leave, designed to pay women at a higher rate to be in, and return to, paid work, than if they were full-time, unwaged mothers working at home. Also, the cuts come as families are experiencing sharp rises in the cost of living.
The cutting of the dependent spouse tax offset ignores the fact that the largest amount of voluntary work in Australia is done by women who are not in paid work.
A 2003 Institute of Family Studies report (Measuring the value of unpaid household, caring and voluntary work of older Australians; Research paper No 34, October 2003) found that for people aged 25-44 years:
• Women contributed around $130 billion in unwaged work to the economy; and
• Women contributed almost $29 billion to “unpaid child care”, or $25,857 per woman annually, and men $9.8 billion, in 1997 dollar terms.
For women under 40 without children who will lose the dependent spouse tax offset, they still keep a house, care for the elderly, care for their relative’s children, volunteer for a raft of unpaid jobs. The dependent spouse tax offset used to recognise this unpaid work.
Further, it’s crass politics to push teenage single mothers to return to the workforce. It can only have the effect of ensuring that their children are not cared for by their mothers, and contribute to a generation of deprived and delinquent children.
The government is treating family payments as “middle-class welfare”, instead of family support. Families earning higher incomes should be treated better than single people earning the same income, because of the importance of families and children to the future of society.
3. Cost of living
It is doubtful if the efforts to boost infrastructure expenditure are directed or serious enough to boost investment in electricity and water to avert the big impact that shortages of both will have on the rising cost of living.
The planned carbon dioxide tax and the mining tax will both add to the cost of living.
There is almost nothing for agriculture in this budget, in the face of rising interest rates and a high dollar (high terms of trade), which is battering agricultural and manufactured exports.
5. Training and mental health
The only bright spots in the budget are the long overdue recognition given to mental health needs, and more for jobs training.
However, a lot of the mental health problems in rural and regional Australia stem from the damaging agricultural policies that are driving farmers out of business, stressing out families and contributing to family breakdown.