Federal budget: the experts comment

Treasurer Wayne Swan will now have to sell his federal budget. AAP

Treasurer Wayne Swan has released his budget, with $22 billion in cuts and a return to surplus by 2012 - 2013, initiatives to increase workforce participation, plans to boost infrastructure investment and spending on mental health.

Initial response from our experts:

Saul Eslake, Grattan Institute:

From a microeconomic perspective I thought it was quite good. There were some quality saving measures, representing permanent structural improvements to the bottom line and were also good policy.

These included tighter targeting of family benefit tax payments, the car fringe benefits measures, the phasing out of the dependent tax offset for spouses over 40 and the withdrawal of low income tax offset for children’s property incomes.

On the spending side, some of the measures for skills, infrastructure, incentives for greater participation in the workforce for the long term unemployed, were all good decisions.

There were a few dodgy ones: such as claiming slippage on the delivery of defence equipment contracts as a saving measure and pulling $2 billion out of contingency reserve and calling that a saving I think is a little dubious. But overall from a microeconomic point of view, I thought the budget looked pretty good.

From a macroeconomic perspective, there’s no way could you seriously call this a tough budget.

It has cut spending over four years by $17.3 billion, and used those savings to increase spending in other areas by $17.2 billon.

It has increased taxes or more strictly reduced tax expenditures by $4.9 billion and applied $1.7 billion towards reducing taxes or increasing tax expenditures, leaving a net $3.7 billion which has been used to increase the budget surpluses for 2013 and 2014 by an average of just $1.6B a year which represents 0.1% of GDP.

In that sense while it has rearranged the furniture in sensible ways it hasn’t reduced the amount of weight on the ship.

It has done nothing to reduce the prospect flagged by the Reserve Bank on Friday that rates will start to go up in the next few months.

Professor John Quiggin, School of Economics, University of Queensland

The government has stuck to the target of returning to surplus by 2012-2013.

That mostly reflects an assumption that the impact of the factors that have caused this year’s deficit will have faded by then. The cuts announced have not been as severe as expected and in that sense the government managed expectations well.

It’s mostly the kind of thing you do in a typical first term. There’s nothing really striking in the cuts.

They have tightened up on the fringe benefits tax on cars while giving up a temporary give-away on the subsidies for small business car purchases.

In the long run that will lead to improvements.

They have tightened up on family tax payments, tightening the means test.

Over time, the so-called middle class welfare will be tightened and families on those incomes will find it increasingly difficult to access those benefits.

With regards to the welfare-to-work theme, the government has very much carried on the policies of the Howard government, which weren’t notably successful.

They have scrapped a number of initiatives on climate on the assumption that they will get the carbon tax through parliament. If they don’t, they wont have any policies at all on that issue.

Julian Disney: Professor of Law, Director of the Social Justice Project, UNSW

In the area of workforce participation and social security it is a fairly well crafted budget. It does have some significant improvements in the benefits that people will obtain from being able to find work.

The big problem is will they be able to find work? There can be tendency to assume that there’s been work around and that the incentives or the harassment were not sufficient to get people into work.

That isn’t the main problem, the main problem is the lack of appropriate work opportunities. That depends on the broader economy but if you assume there’s a reasonable amount of work opportunities around then the budget does improve the benefits for people and removes some of the obstacles that currently face them in trying to get into work.

The budget’s great weaknesses are at the top and at the bottom. At the top it is nothing like tough enough on upper class welfare through the tax system, concessions and breaks, nothing like tough enough on trusts and superannuation although there is some good low hanging fruit on tax rorts being narrowed.

Ian Hickie Professor of Psychiatry, School of Medical Sciences Brain & Mind Research Institute, University of Sydney

The mental health part is very good and the reason it is good is not so much the size of the expenditure but the choices that they’ve made in health and in social services.

In health, the emphasis on early intervention, particularly primary care and early psychosis programs, and setting up a national commission to report on what will be happening in the future. There’s some other smaller ticket items in e-health in particular and in research which is also very important.

They’ve also made some really important investments across the social services sector in employment and housing, which is incredibly important in improving the lives of people with mental illness.

They’ve put money into having services delivered locally across a range of health and social services.

The amount of money is not enormous and is rolled out over five years instead of four, but obviously it is a tough budget environment.

But the choices they have made are fundamentally good choices and where we have gone wrong in the past is putting good money into poor programs.

Professor Jill Blackmore, Director of the Centre for Educational Futures and Innovation, Deakin University

As expected, they see the budget getting into surplus is the major task. I think that’s slightly unfortunate given our budget deficit is such a low percentage of our GDP relative to other countries.

What is good in terms of education is the focus on training. There hasn’t been decent investment in training for a decade and the focus here is significant and important.

The focus on getting everyone into work has been an excellent point and trying to encourage women and teen parents into work is positive as well, if the conditions that make that possible are there.

But without them doing something better about childcare, I think that is a pipe dream. It’s farcical to expect mothers to go back to work unless they do something about childcare and making it affordable.

The focus on regional development is good but they need to do something about infrastructure if they are serious about that.

As for paying the top teachers, who decides what counts? It’s totally arbitrary. We need to invest in schools where there is disadvantage.

With regards to the chaplaincy, I think chaplains are doing wonderful things but one has to ask the question what is the state doing funding religious education for one religion in particular.

Adjunct Professor David Black, John Curtin Institute of Public Policy, Curtin University

From what I understand, a lot of the new money for the mental health care is not available in the first year, which some groups will be concerned about.

But from the government’s point of view, to front load it now would make it difficult to balance to budget.

The welfare to work focus is matching what the Opposition would say. They are doing something that the Opposition can’t really attack them for.

There will be social groups who are very concerned about the impact. I would have thought if you want mothers to get back to work, there needs to be positive assistance to childcare.

The government has delivered the budget that it felt it needed to deliver.

The cost of living issue in West Australia is a big issue and there’s a political question as to how that’s handled by the states and by the federal government.

The budget is avoiding issues like the carbon tax and mining tax, which are still up in the air.

Dr Ruth Phillips, Faculty of Education and Social Work, University of Sydney

I think from a welfare perspective, they have proceeded with a punitive approach to certain groups of people like long term unemployed, sole parents and people on disability support pensions.

Particularly the disability support pensions, that’s a new targeted area for saving. The devil is in the detail on how those people are affected if they are forced to take up work if they are deemed work-ready.

It’s not a terribly useful group to target. It’s a quite small saving and for people in the welfare sector they are the most disadvantaged and vulnerable. I am disappointed they are being targeted.

What we have found is that people most vulnerable to the punitive nature of the income support system now are people with multiple and complex problems. Often people with mental health problems are the ones who fail to meet the requirements for welfare.

It’s those people who find themselves in trouble and then lose their benefits and then can become homeless.

People with no support networks who are being pushed to work are the ones who are most at risk.

What’s different with what they are doing compared to Howard is at least this government has an emphasis on training and employment.

It’s good they are putting money into real jobs and subsidising real employer-based and industry-based opportunities rather than abstract training.

With the Family Tax Benefit A, even though they are extending it to teens from low income families they haven’t adjusted the indexing.

Based on the current sole parent pension and allowances for two parent families, they will still be just below the poverty line because the cost of living is rising without the benefit being indexed.

It concerns me they are not looking at that.

Chris Doran, Professor Health Research and Economics, University of Queensland

My initial reaction is that it is a bit of a non-event for health. The only winner for health is the mental health reform and this has been ongoing for some time.

There has been an injection of new money but not enough to reduce the burden of harm associated with mental health.

The other aspects are, in terms of investment, an injection of money into public hospitals which is well overdue and governments have dropped the ball on this over decades. They are playing catch up.

[The investment in regional health] is definitely required in the system but it is again well overdue. There has been an appalling lack of investment in rural services historically and this is a small step in a right direction.

It’s definitely not a magnificent budget for health.

Professor Lesley Farrell, Faculty of Arts and Social Sciences, University of Technology, Sydney

I think most of the education initiatives are in the workforce training area. That seems to be a significant policy direction and is likely to have more long term effects.

The government has been so strong in the past on the education revolution in relation to schooling, what with MySchool and NAPLAN tests.

With this budget, it seems that most of the money is going to vocational education and training rather than higher education or schooling.

In school education, there’s very little, unless it’s hiding in the budget papers somewhere.

There’s $20 million more for the chaplaincy program than for the disabled school students.

If I were looking to support young people in schools in relation to counselling and social interactions, I wouldn’t be going for chaplains. That doesn’t seem to be a carefully thought out way of doing it.

Paying some teachers that are high performing, when you don’t really know if they are high performing or how that is calculated, is divisive.

It’s an extremely rough measure of what is an expert teacher. What you really want is teachers who are so well trained and enthusiastic about teaching that they work together to produce the best outcomes for their kids.

You can’t rely on this idea of the heroic teacher. You need a collective approach.

To suggest there are teachers who could be much better if you only offered them $5000 is very patronising. You need a more systemic approach.

Professor Bob Williamson, Secretary for Science Policy at the Australian Academy of Science

The Academy is pleased that proposed funding cuts for medical and other research have not occurred, but far more could be done to secure a prosperous and technologically advanced future for Australia.

Scientific research is our nation’s guarantee that we can remain productive and economically secure. By protecting its existing investment in research, the Government has shown that it has vision for Australia’s future prosperity.

However, Australia has weathered the global financial crisis exceedingly well, and in this climate we had hoped the Government would support its key researchers with an increased commitment to domestic research and international collaboration.

Although most research funding has been maintained in the Federal Budget, key science agencies have lost ground, including Geoscience Australia, Collaborative Research Networks and Cooperative Research Centres.

The Academy has called on the Government to increase research funding to at least three per cent of GDP by 2020, in line with OECD best practice.

The Academy welcomed the Government’s previously announced investment in building scientific collaborations with China and India.

It is good that we are building these relationships but it is extremely disappointing that valuable programs with other long-term international partners in Japan and Europe are in jeopardy with the imminent demise of the Government’s International Science Linkages program.

The Academy welcomes the Budget commitment to adult education and remains hopeful that the Government will recognise the importance of building scientific literacy and numeracy by supporting school science and maths education.

Although not specifically mentioned in the Budget, we hope the Government continues to support the Academy’s two highly effective independently-assessed primary and high school science education programs.

The Academy is committed to these important programs and is willing to continue to seek alternative sources of funding for both Primary Connections and Science by Doing. (Source: Australian Science Media Centre.)