Bill Shorten’s budget reply: experts react

Opposition leader Bill Shorten delivered his first budget in reply speech on the floor of parliament tonight. AAP/Alan Porritt

Opposition leader Bill Shorten has vowed to oppose funding cuts to hospitals, schools and higher education in his budget in reply speech, threatening more than A$10 billion in budget savings proposed by the government.

Labor will also oppose the $7 Medicare co-contribution, arguing it threatens the universality of Medicare. Shorten has also confirmed the opposition will oppose the fuel excise and changes to pensions.

Wearing a red tie and standing in front of an opposition emblazoned in red, Shorten said: “We reject a US-style, two-tiered system where your wealth determines your health.”

Shorten said the opposition would support “reasonable and balanced remedial budgetary measures” but would not support “the conscious development of an underclass”.

He pointed to NATSEM modelling which showed a couple with a single income of $65,000 and two children in school would have over $1700 cut from their family budget.

“This is a budget that will push up the cost of living for every Australian family. A budget drawn up by people who have never lived from paycheque to paycheque.”

Shorten said the $80 billion in funding the government planned to take away from the states for hospital and school funding was “a Trojan Horse to a bigger GST”, and would not be supported by Labor.

On education, he said Labor would vote against cuts to university funding and student support.

“Labor will not support a system of higher fees, bigger student debt, reduced access and greater inequality. We will never tell Australians that the quality of their education depends on their capacity to pay.”

Expecting tradespeople, labourers, cleaners, and nurses to work to 70, while paying “multi-millionaires” $50,000 in paid parental leave was unfair, according to Shorten, who vowed to fight for a “fair pension”.

Shorten was silent on the $11.6 billion infrastructure package proposed by the government.

Expert reaction follows.


Stephen Leeder, Emeritus Professor, Menzies Centre for Health Policy at University of Sydney

In relation to health care, the rebuttal of the federal budget presented by opposition leader Bill Shorten repeatedly repudiated the imposition of co-payments for general practitioner services, pointing to the hardships the $7 a visit would cause to less affluent patients and criticising the idea that doctors would serve as collectors of the tax.

Shorten’s harshest criticisms, however, were reserved for the “small print” of the budget that he claimed proposed multibillion dollar cuts to health and education outlays to the states. These cuts, he argued, would provoke financial crises in the states and territories that would mean they would search for mechanisms to raise revenue. This would lead to the states pressing for increased goods and services tax, the only sizeable tax other than federal outlays that they currently receive.

The Shorten response leaves no doubt that the Coalition proposals will be resisted strongly by Labor. Whether the co-payment proposal comes to fruition is therefore in serious doubt. Shorten expressed special distaste for the proposition that the co-payment revenue, rather than reducing the purported unsustainability of the health system for which it was touted as a remedy, would now be applied to a future fund. He said:

You don’t fund the search for the cures of tomorrow by imposing a tax on the patients of today. Australians are smarter and more generous than this.

So the budget ball is in play in a tough and aggressive game. Economics and social fabric are the stakes, and they are high.

The economy

Margaret McKenzie, Lecturer, School of Accounting, Economics and Finance at Deakin University

Bill Shorten’s speech worked well as a mission statement, eloquently keeping the focus on the practical implications of the budget for millions of Australians, especially poorer ones. He did a good job of demonstrating how out-of-touch the government appears to be with the situation of ordinary people.

It was interestingly short on comment about implications for business (although he did refer to small business), and didn’t mention infrastructure or federal–state issues of cost-shifting. It was intended for appeal to a wider audience, and there were plenty of rich pickings there.

However, it did not mention any of the issues referred to by Anthony Albanese this morning. It didn’t include Albanese’s point that most of the expenditure claimed for infrastructure was in fact already factored in under the previous government. Nor did it refer to the cuts to rail infrastructure expenditure, including the $3 billion earmarked for the Melbourne metro rail link, $500 million for the Perth rail system and and $715 million for the Brisbane cross-river link.

In a sense, the small and targeted amount of $5 billion for infrastructure – in fact, a quasi-bribe for the states to privatise – is small beer in the scheme of some of the losses. It is also unlikely to make up for the loss in trade resulting from the withdrawal of a similar amount of foreign aid.

In economic terms he did not take advantage of the chance to point out that such a budget is damaging to the economy on two counts. The budget measures shift income away from poorer people who spend all their income and who spend less when their income falls towards those on higher incomes who would save more when they get more income. This means that spending in the economy is likely to grow more slowly and unemployment will increase.

Together with the lack of attention to investment and industry development, including energy saving technologies, this means that slower growth for the Australian economy is likely. It will increase those eligible for welfare payments at the bottom and reduce the tax take, thereby increasing future budget deficits.

Richard Holden, Professor of Economics at the Australian School of Business

Bill Shorten articulated well the substantial cuts and hits to low and middle class families. That’s really where the pain will be felt, but most of it was about politics more than policy.

He doesn’t like all of the cuts, but he did say there needs to be a more sustainable budget. I didn’t see a plan for what that would be. I think the most interesting thing was the vehement opposition to the GP co-payment, and the claim it’s an attack on the universality of Medicare.

It may or may not be a good idea, but it’s not clear to me this is an attack on the universality of Medicare, especially given you’ve already got a co-payment for pharmaceuticals.

With the push to take hospital and schools funding away from the states, the government have made themselves a fairly large target. It’s going to be difficult for the states going to an election saying “if we’re elected we will put up the GST, but first we have to change the act that requires us all to agree”. Labor has also been opposed to any rise in the GST in the past.

Schools education

Glenn C. Savage, Researcher and Lecturer in Education Policy, Melbourne Graduate School of Education at University of Melbourne

The federal budget resolved months of speculation about where the Coalition sits in relation to the Gonski school funding reforms. It is now clear the federal government will keep its pre-election promise to honour the reforms for the first four years, but will cease the funding model from 2017-18 onwards.

After that, Gonski will be history. Or, in Bill Shorten’s words, the Gonski reforms are “dead, buried and cremated”.

In his budget reply speech, Shorten argued that Labor is “the party of education” and is “committed to making every Australian school a great school”.

This, Shorten argued, is a crucial dividing point that separates Labor from the Coalition with respect to education policy. Labor, he argues, “wants a quality education for every Australian child”; whereas the Coalition, in his view, “tell Australians that the quality of their education depends on their capacity to pay”.

Shorten is right to be concerned about the Coalition’s retreat from Gonski. The Gonski Review represented a watershed moment in the history of school funding reform, recommending a needs-based funding model to address entrenched inequalities in Australian schools.

Walking away from Gonski sends a strong message to the Australian public that the Coalition does not support Gonski’s findings and has no intention of implementing its recommendations beyond the minimum period required to ensure it does not break another pre-election promise.

Of course, the question now begs: if the Coalition wins a second term in government, what exactly will happen to school funding from 2017-18 onwards? The budget suggests that school funding will be indexed to inflation from 2018.

However, only time will tell as to whether any further reforms will be pursued. It is not out of the question, for example, that the Coalition might commission yet another review into school funding and propose a new model of its own.

In Shorten’s view, the Coalition’s budget reflects a turn towards a “colder” and “meaner” Australia, set to create “a lost generation of Australians”. If the Coalition continues to deny the relevance of reviews such as Gonski and broader structural inequalities in Australian education, then Shorten is not far from the truth.

Higher education

Tim Pitman, Senior Research Fellow, National Centre for Student Equity in Higher Education at Curtin University

Reiterating the traditional party line that Labor is the “party of education”, Bill Shorten used his budget in reply to accuse the Abbott government of destroying Australia’s “fair and equitable higher education system”.

Citing $5 billion in government cuts to higher education, Shorten accused the government of denying the next generation of Australians what many in the parliament have had: access to free or relatively inexpensive higher education.

But beyond that – as expected – Shorten was light on specifics. Unsurprisingly, he advised that Labor will vote against cuts to university funding and support and will not vote for “a system of higher fees, bigger student debt, reduced access and greater inequality”. This statement can be taken as a blanket rejection of all measures announced under education minister Christopher Pyne’s portfolio, including increased student contributions and fee deregulation.

In many respects this is understandable. The proposed changes, which the government argues will make Australian universities more competitive and diverse, are so complex and interdependent that Labor’s simpler option is to reject the government’s plan in full rather than, for example, negotiating elements they might be sympathetic to (such as expanding the support to sub-bachelor places) yet refusing to compromise on others (such as fee deregulation).