In its point-scoring endeavour to restore the budget to a surplus by 2012-13, Julia Gillard’s Labor government has decided to target the most vulnerable and needy in society.
Instead of targeting the high end of town and the corporate elite a punitive approach was chosen.
The budget deficit for 2011-12 is estimated to be $22.6 billion or 1.5% of gross domestic product. This compares with an estimated $49.4 billion deficit in this financial year, 2010-11. The budget is expected to return to surplus by $3.5 bilion in 2012-13.
Most of Australia's revenue (69% or $240.6 billion) comes from income taxation, which includes individual income tax, company tax, super tax, fringe benefits and resource rent taxation. The second largest category is sales taxes at 15%, which includes GST, luxury car tax and wine equalisation tax.
Any analysis of government spending needs to consider options available for revenue raising policies. Research undertaken by the Greens shows the Labor government’s proposed reduction of the corporate tax rate from 30% to 29% equals an estimated loss of $3.1 billion.
The revenue raising potential of increasing the corporate tax rate is not discussed, not even by the Greens.
The mining industry’s $22 million advertising campaign to defeat Kevin Rudd’s proposed Resources Super Profits Tax resulted in potential tax revenue of up to $100 billion being lost from treasury over the next decade.
This is against a backdrop of BHP's $10.5 billion half-yearly profit announced in February this year — the biggest in Australian corporate history.
These unrealised income options illustrate the ideological nature of the budget and the Labor government's policies in general.
Government expenditure includes 57% on social measures, of which 33% is on social security and welfare, 16% on health and 8% on education.
The highest expenditure within the social security and welfare function is income support for seniors, at $34 billion. This is followed by the family tax benefit, at $18 billion, and then disability support pension, at $14 billion. Medicare spending is at almost $17 billion. Jobseeker income support ranks comparatively low on the expenditure scale, at just over $7 billion.
The budget maintains social security and welfare expenses at about 33% of total government expenditure with a minor real growth increase from $117 billion (2010-2011) to $139 billion in 2014-2015.
This sends a clear message to Australia's poorest and most vulnerable people that the level of assistance overall will not rise and the best that can be expected is some reshuffling of expenditure. Where increases will be allocated, these will largely be taken from somewhere else.
As it stands the budget also squeezes out more revenue from the poorest and most marginalised to fund some of its social security and welfare initiatives.
On May 11, the National Welfare Rights Network expressed “concern and despair over the government’s continued misguided policies that demonise and unfairly target some groups, such as long term unemployed and some single parents”.
Key budget measures can be separated out into categories relevant to community and welfare matters.
The general approach underpinning the various initiatives is one of increased “activity requirements” for people on income support payments, a system of penalties and a reduction of income for young people and young parents.
Some single parents, those with children 12-15 years old, will be transferred to a lower rate of Newstart Allowance and will be $56 a week worse off.
Some 21-year-olds will face a partial or even complete loss of payment until they reach 22, providing they do not meet the “earn or learn” requirement of 25 hours participation in education or training.
In addition, long term unemployed on Newstart Allowance, now required to undertake so called “work experience” two days a week for six months will need to do so for 11 months.
Responding to the doubling of the Work for the Dole period, the Welfare Rights Centre notes that “it is a recycled and wasteful program that has been found to be less effective in getting long-term unemployed people into work when compared to programs of real work experience and wage subsidies”.
Under the guise of simplification some daily compliance penalties will rise from $34 to $47 a day. From July 1 job seekers will be given as little as one day’s notice that they are going to have their payments cut if legislation now before a Senate Committee is passed by the parliament.
Wage subsidies paid to the employers are a significant part of the new welfare agenda. These have been generally welcomed, but there is also some hesitation in the community sector about whether these will end in meaningful jobs for a meaningful length of time.
Misrepresented in the media coverage has been the fixing of Family Tax Benefit A and B and associated supplements. The fixing of these payments means that they will not be indexed by the Consumer Price Index (CPI), for families with household income of $150,000 and more. This measure alone saves the government $307.7 million in 2011-12 and a further $650.7 million in 2012-13.
The budget also axed the $3 billion Chronic Disease Dental Scheme. The scheme was criticised for its failure to means test and poor targeting, leading to cost blowouts.
The Australian Dental Association said many chronically ill patients will miss out until the scheme is replaced. The scheme operated for the past four years and treated nearly 6000 patients. People with a chronic illness could access up to $4000 for major dental work through Medicare.
The National Welfare Rights Network said: “One of the worst decisions in this budget is the extension of income management to five additional locations, costing $117.5 million over five years.
“This expensive and demeaning scheme will target up to 1000 people per site. The government has not even bothered to wait for the results of the promised evaluation Compulsory Income Management before extending it beyond the Northern Territory.”