Labor paves the way for Coalition's cuts

May 17, 2013

"By keeping, if needed, all Labor's budget cuts and by not implementing any of their budget spending measures unless specified, we will achieve the first duty of every government -- namely, to preserve the nation's finances," said Tony Abbott in his budget reply speech.

This is what is to come under an Abbott government -- a continuation of Labor's cuts and restraint when it comes to spending.

In Queensland, a manufactured budget crisis was used to justify widespread cuts and the sacking of 14,000 public servants in one year. No one should believe the hype when it comes to Australia's allegedly cataclysmic debt levels.

Australian government debt-to-GDP is 20.7%. In Greece, which endures huge austerity, it is 156.9%. In the United States, it is 101.6%. Compared with these, Australia is hardly falling over a cliff burdened by debt.

However, that this argument has any traction at all is really the fault of the Labor Party. It was the Labor Party and Treasurer Wayne Swan who for years told everyone how important it was to return to surplus. As a sign of being responsible economic managers, they sought to do this with some reactionary spending cuts, then gave up on it and fell $19.4 billion short.

Labor argued for how important it was and then demonstrated their inability to achieve it.

In his budget speech, Swan didn't correct his fetishisation of a budget surplus but rather claimed that it will occur later. The only reason it didn't occur this year, Swan said, was due to revenue write-downs that ensured that less tax came in.

"This year we face the second-largest revenue write-down since the Great Depression," he said. The revenue write down was $17 billion. Over four years it is estimated to reach $60 billion.

You'd be forgiven for thinking that the government played no role in designing the taxes that have failed to bring in revenue given the way Swan portrayed the government as a victim of circumstance.

In fact, it was Swan who led the charge to redesign the mining tax after Kevin Rudd was overthrown.

The Australian said on February 14: "The big three mining companies, BHP Billiton, Rio Tinto and Xstrata, made short work of Wayne Swan and Martin Ferguson when they sat down to renegotiate the mining tax … They walked away after two days of talks with the new Prime Minister signing off on everything they wanted…

"The two ministers doubtless gave away more than they needed to.”

Last week, the Sydney Morning Herald said the revenue targets from the mining tax had been downgraded again, “with Treasury now expecting just over $200 million”.

This is 10% of the $2 billion that was forecast in October. The original predicted net receipt was $3 billion in last year's May budget.

Similarly, a dramatic cut in the forecast price of carbon contributed to the write-down. The Treasury slashed the price by more than half, from $29 per tonne to $12 per tonne.

The ABC said: “That has been triggered by the collapse in the carbon price in Europe, which the Australian scheme will link to from 2015."

The decision to link Australia's carbon price scheme was made in August last year and supported by Labor and the Greens.

Green Left Weekly wrote at the time: "Don't trust anyone who tells you that Europe's carbon price will be much higher in five or 10 years' time. Such predictions are no more believable than the pundits who pretend to know what stock market trends will be like five or 10 years from now…

"The decision means Australia's future carbon price will be set by a European market notorious for fraud scandals, consumer rip-offs and a seven-year-long record of failure."

Moreover, it has been known for a long time the distorting effect that the mining boom and a high dollar is having on other industries. The failure to tax mining companies properly has caused a double impact on tax revenue.

Then there is the blow-out in costs, particularly due to the undying commitment to locking up refugees overseas, which has a projected cost of $3.2 billion over four years to 2015-16.

Since Labor came to power in 2007, it has been proud to say it is a party of low taxes. Swan said on budget night: “If we were taxing Australian families and Australian businesses like our predecessors did, we'd have an extra $24 billion in taxes in 2013-14 and be comfortably in surplus every year of the forward [estimates].”

Yet the big crises in Australia are not of deficit or of government debt, but rather social and environmental problems. These crises need public investment to be rectified, which need revenue to rise.

Simply returning tax levels to that of the former Coalition government would bring in $24 billion to be spent this financial year alone.

Going further, the Australian Council of Trade Unions found in 2011 that tax avoidance by wealthy individuals costs $26 billion a year. The mining industry receives $10 billion in tax breaks and small business tax avoidance costs $10 billion a year. Contractor tax avoidance is worth $17 billion a year.

That is $63 billion extra each year, not including large corporations outside the mining industry.

The Labor Party congratulated itself for not entering into austerity. But it utterly refused to make the rich pay their share and put money in to solve social and environmental problems. All of this has paved the way for the savageness of Abbott soon to come.

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