A different budget; yes, it is possible

August 21, 1991

By Peter Boyle

The latest national account figures confirm that Australia is still deep in recession. Gross domestic product over the 12 months to June contracted by 0.9%, and unemployment is set to continue at around 10% well into next year. Yet all indications are that the Hawke Labor government intends to pursue the conservative economic course it has followed since coming to power in 1983. Ministers argue that there is no other course, but Democrats, left ALPers, socialists and movement activists disagree. PETER BOYLE spoke to Senator SID SPINDLER of the Australian Democrats, REIHANA MOHIDEEN of the Democratic Socialist Party, HARRY VAN MOORST of the Campaign Against Poverty and Unemployment (and a member of Rainbow Alliance) and TED MURPHY, a member of the ALP National Executive who comes from the left of that party.

The Australian Democrats have published a package of costed alternative budget proposals which, according to Senator Spindler, prioritise jobs and the environment and "reverse the worst legacies of Paul Keating's reign as federal treasurer". Through a combination of interventionist and regulatory measures, the Democrats seek both to stimulate and to shape the economy to create employment and foster ecologically sustainable development.

For instance, the Democrats propose tax incentives and direct government support for alternative energy and recycling in industry, for export development and job creation through public works and community work programs. They also want to impose a series of environmental taxes and levies on fossil fuel emissions, economic activities that harm the environment, use up non-renewable resources or exploit community-owned renewable natural resources such as ocean fisheries, forestry resources and freshwater rivers.

They also call for regulation of the financial sector through controls over capital movement and financial institutions, tightening controls over investment by directing superannuation funds to invest a substantial proportion of their funds in new public sector loans and in refinancing or buying back existing public sector foreign debt.

The latter move would act as a "circuit breaker" to reduce Australia's $133.3 billion foreign debt and relieve high interest rates. Super funds would not be at risk because public sector loans are government guaranteed and carry interest rates of between 11% and 13%.

On social security, the Democrats want to move towards a "guaranteed minimum income" system and propose immediate modest rises to pensions and other benefits, and a reduction of waiting time for the dole.

Taxation

Government spending on environment, housing, health, education and social justice should rise substantially, while defence spending should be cut by $738 million. To pay for this, they want to raise $6.4 billion from reforms to the tax system. "We reject the idea of a consumption tax because it is regressive", said Spindler. "It would hit lower income earners by 13% but high income earners by only 6%. We want to levy some taxes on goods and services for social purposes such as the environment, but we expect to gain much of the extra revenue from reforms to direct taxation."

Tax reforms the Democrats want include:

  • a 60% marginal tax rate on income above $100,000;

  • a 1% wealth tax on assets above $1 million;

  • an inheritance tax;

  • the phasing out of negative gearing

  • increases in luxury taxes;

  • increased withholding tax;

  • full recovery of road costs from trucking companies;

  • a 40% rise in excise on liquor and tobacco.

According to Spindler, this balances the costs of the expenditure proposals and would add at most 0.5% to the inflation rate. The Democrats' proposals, he said, were practical but the problem was finding a government with the political will to carry them out.

"Our critics say that these measures will make Australia uncompetitive, but if we accept this argument, then we have to give up living standards, wages, working conditions as well. We cannot be intimidated by the medium-term consequences because we have to think of our long-term future. If we sacrifice the environment, we won't have a future."

Economic intervention

Ted Murphy would like to see a federal budget that had a reduction in unemployment as its first priority and rejected the present policy of "fighting inflation first". He said that the recent figures on the economy had shaken the government but we would have to "wait and see if there is any real break with the Treasury line or whether the break remains on the level of

rhetoric".

Murphy supports an "active interventionist" economic policy comprising a reversal of the privatisation drive, the establishment of a "national development fund" along the lines proposed in the ACTU's Australia Reconstructed, controls over the exchange rate, a new system of tariff protection, and industry support.

While he doesn't share the government's "fetish" of reducing public spending, he doesn't envisage a massive increase in public works except for developing national infrastructure as agreed in the recent premiers' conferences. The federal budget was already going to be about $5 billion in deficit, so it wouldn't matter if it was a little higher if this meant that state governments would not be forced to implement cuts that were not motivated by making their operations more efficient.

Murphy thought that superannuation funds should be compelled to invest 5-10% of their funds in the national development fund, which would use this money to make strategic investments in the economy.

He favours eliminating tax rorts, the abolition of negative gearing and introduction of an inheritance tax to "broaden the tax base" over reforming the direct taxation system. Australia should also tax the massive flows of money in and out of the country caused by currency speculation.

The government should recognise that "free trade was a myth" and that there was no "level playing field". If the world moved towards trading blocs, Australia should form a common market with New Zealand and work towards a wider Pacific rim market, he said. However, he admitted that he and most in the ALP left had not thought much about assistance to farmers.

Jobs and environment

Reihana Mohideen, a member of the national executive of the DSP, said that her party agreed with many of the proposals in the Democrats' alternative budget and shared the priorities of jobs and the environment.

"We'd also propose a shorter working week of 30 hours, with no loss in pay, to share the work around. If you add to the unemployed those who have part-time jobs but want to work full time, an average 30-hour week should take care of everyone. The benefits of technological advances should be shared and not appropriated as corporate profit. Pensioners and any who cannot be found a job should be guaranteed the equivalent of a living wage.

"There really is no shortage of socially useful jobs that need to be done. There is the transition to an ecologically sustainable

economy, which can generate work. A clear lesson of the last decade is that we cannot trust big business to do the job. Public funds have been frittered away in misguided attempts to promote business."

What we need instead, Mohideen says, is an expansion of public works to provide "quality public transport, affordable and quality child-care, free education at all levels, a free and comprehensive health care system (covering dental care) and affordable and adequate public housing".

Finding the revenue for these measures "is a smaller problem than finding the power to implement these changes. We must recognise that even a modest program of social reforms will be fiercely resisted by big business. That's what they mean when they say the 'market' won't accept a different course.

"So we have to build into an alternative budget practical steps to empower the majority, the working people, small farmers, small business, Aboriginal people, migrants, the unemployed and the activists in the environment, women's and other social movements to counteract this resistance.

"To implement an alternative budget, we will have to democratise this society, to abolish anti-union laws, weaken the repressive arms of the state, create alternative structures of popular power. This government has systematically weakened union power and eroded democratic rights while carrying out its redistribution of wealth to the richest; we have to do the opposite to undo the damage and move to a democratic and ecologically sustainable future."

Harry van Moorst agrees that an alternative budget must challenge the capitalist system itself. "While we can make a dent in unemployment numbers through a number of reforms or simply by not doing what the present government is doing, ultimately we must recognise that unemployment is a structural component of capitalism".

CAPU has worked on "people's budgets" before, and van Moorst likes to believe that that effort has provided some inspiration for the Democrats' alternative budget.

"The left has formulated these sorts of budgets before, and the question of power has come up. Some people in the welfare area have accused us of being 'utopian' but today it is utopian to think of any significant reform without questioning the system itself."

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