Budget 2014: Dishonest and cruel

In the lead-up to Federal Treasurer Joe Hockey’s inaugural budget speech last night, Twitter offered up a typically anarchic deluge of three-word phrases (#ThreeWordBudget) summarising the budget for 2014-15.

Some were witty.

Some were cutting.

Some were in earnest.

The Treasurer and the Prime Minister would have you believe that “contribute and build” is a fair and reasonable three-word synopsis of their first budget. If you believe that, you’d probably believe anything. Given the volume of election promises the Coalition is seeking to renege on, the extent to which it has squibbed its own illusory “debt crisis” and its plans to extract much of its “contributions” from some of the least fortunate people in Australian society, a fairer three-word description of the budget would be”dishonest and cruel”.

Dishonesty

Let’s first consider the Coalition’s fundamental dishonesty in delivering this budget, starting with the pre-election promises it has broken. Just days before the September 2013 poll, Tony Abbott made an explicit pledge to the Australian people on national television regarding funding cuts:

“No cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS.”

Quite astonishingly, the Coalition’s first budget either explicitly breaks or creates conditions encouraging governments to break every single component of that pledge:

  • Planned needs-based Gonski school funding is to be reduced by tying federal government contributions to CPI.

  • Planned hospital funding provided by the federal government is being cut by $1.8 billion over four years.

  • Pension rates are to be reduced from 2017, with calculations to be based on the CPI rather than by the average male wage.The pension age is also to be increased to 70.

  • No announcements were made regarding an increase to the GST, but the proposed cuts to federal education and health funding have led Queensland Premier Campbell Newman to speculate that this is a debate the states may now be blackmailed into kickstarting.

  • Base funding of both the ABC and SBS is to be cut by 1% over four years.


  • Tony Abbott also made consistent promises in a series of interviews and press conferences prior to the September 2013 election on tax, well documented by ABC FactCheck. The phraseology used by the then Opposition Leader varies, and is certainly open to semantic interpretation, but fundamentally the Australian people had every right to believe that a Coalition government would not introduce any new compulsory contributions to public revenue, regardless of what they were called or how they were framed. In the budget, two such measures have been announced:

    • A 2% “deficit levy” on Australians with incomes over $180,000/year, imposed from July 1st until 2017.

    • A $7 Medicare “co-payment” for each visit an Australian makes to a GP.

    The Coalition has not just been dishonest in relation to its pre-election promises. The primary reason offered up by the Abbott government for the cuts, new taxes, tax increases and welfare claw-backs in the budget is the “budget emergency” the government alleges was left behind by the Rudd and Gillard Labor governments. That Federal Labor left behind a federal budget in deficit is not in dispute; nor is the more general observation that Treasury has a mid-term structural revenue problem on its hands. However, numerous spending and revenue decisions outlined in the Budget seem to suggest that the Coalition that does not really believe that the “budget emergency” is much of an emergency at all. For example:

    • The pre-stated Coalition decision to abolish the MRRT (<$500 million) and carbon taxes ($7 billion), significantly reducing government revenue

    • An additional $245 million to extend the school chaplains scheme for another five years

    • An additional $20 billion to establish a new national medical research fund, funded by the new Medicare GP visit “co-payment”/tax

    • A presumed increase of over $1 billion to fund the Coalition’s proposed Paid Parental Leave (PPL) scheme. Detailed costings for the slightly cut-down (maximum benefit payable reduced from $150K to $100K) scheme, expected to start in July 2015, were not confirmed in the budget.

    • $5 billion in new roads funding

    The words “crisis” and “emergency” imply there is a burning need to get the budget back into surplus as soon as possible: these new spending measures and abolitions of revenue streams suggest that the Abbott government does not think that is necessary. More generally, as economist Stephen Koukoulas has outlined – thanks to its proposed new spending and tax measures, the Abbott government arguably looks set to preside over a “bigger government” in real terms than Labor did under Rudd and Gillard during 2007 – 2013.

    Cruelty

    The Abbott government’s “contribute and build” budget theme is coupled with a narrative arguing that Australians from all walks of life need to contribute to address the “budget emergency”. As the Treasurer helpfully instructed in his budget speech: “we are a nation of lifters, not leaners”. Everyone must lift. Leaners are to be left by the wayside, even if they are fundamentally unable to “lift”. The already mentioned $7 Medicare co-payment is a regressive consumption tax which proportionately impacts people on low incomes and those who need to visit their doctor frequently more than others. For people struggling to make ends meet, it also acts as a disincentive to visit the doctor. Throaty cough? Worried about that strange chest pain? You’d better write it off as indigestion and think twice about visiting your GP, because if you are sweating on your next payday arriving to cover food, rent, or petrol costs, you simply might not be able to afford the visit.

    Perhaps the single most controversial and draconian initiative announced in the budget is the government’s plans to prevent people under 30 from accessing unemployment benefits for the first six months of their unemployment. Under the proposed cyclical regime, recipients will effectively only be allowed to receive six months worth of unemployment benefit support per year. The mind can only boggle at the potential repercussions of this policy. What do you do as a young person if you can’t get a job for that six month period? Sponge off family and friends, destroying your relationships and steering them into financial stress as well? A lot of young people due to circumstances beyond their control don’t have that option or would not consider that option seriously. Do they have to beg for money during that time? Live on the streets? Slash their wrists and be done with it? Unemployment may currently remain at relatively low levels (5.8%), but is expected to rise in the next year, and anybody who thinks it is easy to get a job without experience or skills in today’s brutish economy is clearly out of touch with the real world for people living in suburban and rural areas. A young person can easily apply for 100 jobs within a short timeframe with the best intentions and not get a single positive response. If the Abbott government has its way, they may not even be able to afford to attend the interview if they are lucky enough to – at long last – receive that elusive phone call.

    Other budget measures target – either intentionally or unintentionally – other marginalised groups within Australian society. Sole parents and parents with disabled or high needs children will be hit hard by proposed changes to Family Tax Benefit B (FTB-B), which will now cut out once the youngest child in a family reaches 6 years of age. Farmers and people living in rural and regional areas who rely heavily on the use of their cars to live and work will be hardest hit hard by the re-introduction of excise indexation. Furthermore, the ACT economy and other regional areas hosting federal government offices look set to suffer in the coming years, as cuts in the budget directly result in the loss of over 2000 additional federal government jobs.

    The only saving grace for struggling Australians is that this budget still has a long way to go before becoming legislated reality, and is certain to face some stiff (if mixed) opposition in the Senate from Labor, the Greens and indeed the Palmer United Party. This is a budget and a government in desperate need of civilising.