Swan’s budget: continuing Howard’s way

May 15, 2010
Photo: Pj_in_oz/Flickr

Labor Treasurer Wayne Swan’s third budget, delivered on May 11, continued the neoliberal austerity agenda of the previous Howard government. Delivered in the shadow of the Henry tax review, released by the government on May 2, Labor’s budget continues to grind away at social and environmental spending in the name of fiscal conservatism.

The biggest changes affecting the budget bottom line were announced in the government’s response to the Henry review on May 2, or earlier. The Resource Super Profits Tax; the lowering of the company tax rate to 28%; the increase in compulsory superannuation payments to 12%; the $5.4 billion increase in federal spending on health — and the $5 billion extra tax on cigarettes that is hoped to pay for it — have already been flagged.

‘No-frills’ budget

Swan’s budget was projected as a “no-frills” budget, and for working people it certainly was. Real spending growth was capped at 2%, as promised by Labor, as it struggles to pay back last year’s stimulus spending to bring the budget back to surplus.

The result is an ongoing failure to make funds available for badly needed social and environmental projects.

The treasurer did announce an extra $2.2 billion to be spent on health. This money will be used to build 450 more super clinics and provide more funding for nurses.

However, the government has again failed to make any extra funding available for dental care, despite the fact that 2.3 million people in Australia forego treatment because they can’t afford it, says the Australian Council for Social Service (ACOSS).

The budget also failed to redress the imbalance in funding for public schools, actually increasing the gap in favour of private schools. “Treasurer Swan expanded non-government schools funding by 34.6% over the next four years, while government schools are left with only a 30.4% growth”, NSW Greens MP John Kaye said on May 12.

Federal funding for private schools will grow to $8.7 billion by 2013/14, dwarfing funding for public schools at $4.3 billion. “We still have a situation where private schools are receiving two thirds of the recurrent spending on schools despite teaching one third of students”, Australian Education Union federal president Angelo Gavrielatos said on May 12.

Welfare ‘reform’

In his budget speech, Swan was careful to claim credit for the government’s one-off increase in the rate of the aged pension. “For age pensioners we have delivered an historic increase in pensions and benefits”, he said. While the increase in the pension also applied to the more than 777,000 people receiving the Disability Support Pension (DSP), Swan was less anxious to take their part.

Taking up where the previous government’s Welfare to Work program left off, Labor will tighten access to the DSP. From January 1, 2012, new applicants for the pension will have to “provide evidence that they have been unable to obtain employment through an open employment service or vocational rehabilitation”, said employment minister Julia Gillard and parliamentary secretary for disabilities Bill Shorten in a joint statement on May 11.

The government will also apply a stricter test for existing DSP recipients from the same date. It expects both measures to save it $383.4 million over four years.

Meanwhile, the government has ignored the Henry review’s recommendation to raise the unemployment benefit. ACOSS’s call to increase rent assistance rates was also ignored.

Budget savings of $652 million over four years from the shelving of the Carbon Pollution Reduction Scheme were redirected to a Renewable Energy Future Fund. While the funding for renewable energy was welcomed by environmental groups, the failure of the government to develop a strategy to deal with climate change was not.

Military spending was increased, particularly to boost Australia’s imperialist adventures in Afghanistan, East Timor and the Solomon Islands. Meanwhile the government pledged to spend a further $1.2 billion on “border security” to stop the victims of Australian imperialism from gaining refuge in the country.

The bribe

While attacking the poorest and most vulnerable in society, largely ignoring climate change and starving public education of funds, the treasurer did find money for a few small bribes to convince working people to vote for Labor in the coming election.

Following the Henry review’s recommendations, personal income tax returns will be simplified. From 2011/12, workers can choose to lodge a pre-filled return, claiming $500 in work-related expenses without the need for receipts. In 2012/13 the amount rises to $1000.

The government has also made a concession to those with savings, giving a 50% tax discount for the first $1000 earned from bank interest. The maximum saving for a worker earning less than $80,000 a year is only $150.

A significant grey cloud hangs over the government’s budget forecasts, however. They are based on the expectation that the resources boom will continue for years to come, feeding an extra $9 billion into government coffers annually from mining profits.

The sovereign debt crisis in Europe, and the threat of a second and more serious phase of the global financial crisis that has gripped stock markets across the globe, says that things may not be so rosy.

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