BY ALISON DELLIT
If anyone expected the 2001-2002 federal budget to kick-start a vibrant and exciting election contest between the two major parties, they will have been sorely disappointed by Treasurer Peter Costello's latest effort.
Facing an electoral revolt against the aggressive economic rationalist policy that PM John Howard's government has pursued so far, Costello had to present a budget which appeared to protect the interests of the disaffected Coalition voters, and at the same time reassured big business of the Coalition's commitment to pro-corporate economic restructuring. And he had to do this with an economy that everyone knows is going down the gurgler.
The guts of the package is straightforward — bribe the elderly well-to-do back into the fold, sling a few hefty concessions to big business, woo the bush back by diverting environment funds, continue the process of transforming welfare into a low-wage subsidy to employers and give a massive boost to military spending.
Winners
The largest concessions go to the big end of town. This budget continues the seemingly endless slide in the company tax rate, from the 1991 level of 49 cents in the dollar down now to 30 cents. Company tax makes up just 17% of budget income, compared to 52% from individual income taxes.
The vehicle industry was a particular beneficiary. Not only did Mitsubishi score $500,000 for "research and development" of a new Magna model, but the GST on company cars was removed. Industry estimates that this will result in a billion-dollar windfall for the car companies, and a major cost saving to all owners of car fleets. (Ridiculously, the corporate press has unanimously declared this a small-business concession. How many shopkeepers own car fleets?)
The other big winner is the military and suppliers of military equipment. They will receive a whopping $32.6 billion over the next four years.
Having taken care of the corporate backers, Howard sought to reassure rural voters with a package of easy giveaways — money for telecommunications, country nurses, more rural campus places and roads funding.
Aware of the anger at privatisation and deregulation, $26.3 million has been set aside for compensation for those adversely affected by industry restructuring. Howard clearly hopes that this will be enough to buy more support for economic rationalism.
The further sale of Telstra was moved out of sight, scheduled for the 2002-2003 budget. If he wins the election, Howard can claim endorsement for the sale and bring it forward, but in the meantime he claims it's not immediately on the table.
However, the budget's main fire was aimed squarely at those deserting voters with the biggest clout in marginal seats — self-funded retirees. Acknowledging the unpopularity of the GST among the elderly, the budget makes significant concessions to the wealthier seniors.
Before the budget, all men over 65 and women over 61, were entitled to a tax-free threshold set at the level of the pension, $11,185. This budget will raise the income at which tax begins to be paid by single self-funded retirees to $20,000, with rebates tapering off after that. For a self-funded retiree couple on $80,000, the handout is $2844. The seniors card will be extended to couples with an income of up to $80,000, or singles with an income of up to $50,000, cheapening pharmaceutical drugs, phone rental and, if the states agree, electricity discounts.
The hand-out to pensioners is not so grand — a one-off $300 payment, enough to purchase a new oil heater and a quilt. As a bribe, it's pathetic.
But the cash handout has a two-fold purpose. As Costello himself pointed out, those living on $12,000 a year are not going to save the lump sum, so it goes straight into the hands of local businesses, possibly staving off a recession until after the election. Secondly, it makes the government look caring, particularly when combined with a $25,000 lump-sum payment to former prisoners of war under the Japanese. After all, what patriotic Australian could disagree with that?
Crumbs and deception
In full election mode, Costello has tried hard to make this budget look more "humane". He announced increased attention to the environment, public schools, the ABC, indigenous communities, single parents and job seekers. But the devil is in the detail. And there's quite a bit of devil.
With all of these areas, the bulk of funding increases has been scheduled for future years. Given the slightly rubbery quality of Costello's figures, this funding is in doubt.
The extra funding for public schools, a 16% increase, is dwarfed by a massive 24% increase to private schools. The package will deliver Scotch College in Adelaide an extra $3 million, and ensures that 68% of federal school funding will go to private schools, despite only a third of students attending them.
The indigenous funding "increases" complete the government's strategy of re-directing funding away from indigenous-controlled organisations like the Aboriginal and Torres Strait Islander Commission and towards "self reliance" to end "welfare dependency". The funding increase of $327 million, far short of replacing what the government has cut out of ATSIC's budget, will be diverted mainly to indigenous work-for-the-dole schemes (which will still provide less training and have less funding than the Centrelink program) and to a plan to get Aboriginal communities to build their own houses and more funding to the Native Title tribunal. The tribunal funding is aimed at promoting amicable relations between indigenous land councils and speeding up land claims, not necessarily to the benefit of indigenous people. Funding to reunite members of the stolen generations with their families has been cut.
The government's sharpest offensive is directed against welfare recipients. Costello estimates that unemployment will continue to rise to at least 7%. The government's strategy is not to get rid unemployment, but to share it around a casualised and low-paid work force. Single parents are especially targeted, forced into six hours work a week from the time their youngest child turns 13.
Work-for-the-dole schemes become compulsory for all job seekers under 40 after just six months on benefits, unless a training or community service alternative is found. Forty to 50 year-olds will be forced into 150 hours of community work (more than most criminal sentences for graffiti); over 50-year-olds will face stricter activity tests.
Costello estimates that these measures will save the government an extra $923 million in reduced payments from fining or kicking off benefits those who do not comply.
Even the "carrots" in the welfare package carry a sting. Increased after school care-programs will sweeten the forced return to work of single parents. The introduction of an income bank system, where casual earnings are averaged out before benefits are reduced, is designed to encourage more low-paid work. Hefty subsidies to employers who take on long-term unemployed will encourage short-term employment at little cost to employers.
This is the budget of a terrified government. Although it is firmly pro-big business, the attacks on working people are both more muted and more veiled than in any of the preceding five Howard budgets. By throwing money at the disaffected sections of traditional Coalition voters, Howard is attempting to convince them that the Coalition parties are acting in their interests.
Six years of economic rationalism — drastic reductions in public assets (both capital and human), self regulation of industry, pro-business tax reform, workplace "flexibility" and union smashing — have run down basic services to ludicrous levels, particularly in rural areas, and destroyed the ability of many smaller businesses to compete with the big corporations.
But all Howard has to offer are bribes, money injections that will be used up while the economic restructuring introduced by the government will continue to cut deeper into the living standards of most Australians, including small business owners.
This budget may help Howard to swing enough votes to hang on to a couple more marginal seats, but it isn't going to make the discontent go away for long.