tag:theconversation.com,2011:/us/topics/federal-budget-2012-2906/articlesFederal Budget 2012 – The Conversation2012-05-18T02:45:44Ztag:theconversation.com,2011:article/70712012-05-18T02:45:44Z2012-05-18T02:45:44ZMaking sense of a bootstrap budget<figure><img src="https://images.theconversation.com/files/10736/original/99yw2pdy-1337221247.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A clear-headed analysis of the budget must delve beyond the buzzwords and political rhetoric.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Each year the budget is like an annual health check on a patient with many complexities. In a black coat, not a white one, the august Treasurer reports the nation’s temperature, provides much-needed tonics and solemnly waves a scalpel over a few unwanted appendices. The budget is effectively a government prescription, curing the perceived ailments presented to date and laying out a prognosis for the years ahead. </p>
<p>So what does the budget really tell us about the state of the economy, Labor’s priorities for reform and its vision for a better country? </p>
<p><strong>The state of the Australian economy</strong></p>
<p>While every budget is a balancing trick, this one is more of a balancing trick than most. It carves out a minuscule projected surplus of $1.5 billion (a wafer thin margin of 0.4% of the budget, and an infinitesimal sum in GDP terms). It brings forward some spending commitments that were meant to be spent in 2012-13 (presumably so that we can borrow to cover this expenditure in this financial year, adding to debt). It delays other spending decisions so as not to impact the next few budgets to enable a semblance of tiny surpluses to be projected. It is also premised on optimistic figures of economic growth, investment, private sector demand and household consumption. It is stimulatory and mildly expansionary, to keep demand up and confidence high, but it does this through a series of cash payments (or bribes) to ease the burden on households.</p>
<p>We have heard much about a “two-speed economy” – implying that different dynamics govern the economy across the continent. Conflicting pressures occur between the dynamics of the highly profitable sectors of the economy such as mining (and the resource-rich states of Queensland and Western Australia) versus the rust-belt sectors in the former manufacturing states of south-east Australia. Global trade has been fortunate to the mining, agricultural and educational sectors, but other sectors have declined massively in their contribution to exports and vulnerability to imports. The two-speed economy has led to a significant increase in the exchange rate for the Australian dollar – unintentionally hurting local producers, tourism operators, some retailers, and many service providers, while encouraging imports, on-line sales, overseas travel by Australians and overseas property buying. </p>
<p>The 2012-13 Budget was framed with these tensions in mind, and so it is premised on redistribution (through direct cash payments and supplementary allowances to welfare beneficiaries) rather than re-investment, with the hope that those with a high propensity to spend will generate more consumer spending. </p>
<p>This intention suits Labor’s political agenda of wooing back disillusioned, working-class voters who have deserted the party in the polls. Those sections of the community that are falling behind are lower paid households and families doing it tough on fixed incomes. Pensioners and benefit recipients of any category are doing it particularly hard because they cannot readily supplement their fixed incomes which have declining spending capacity. </p>
<p>In terms of the economic cycle, we have survived the Global Financial Crisis, but with an inheritance of 4-5 years of large deficits and ballooning debt. With gross debt likely to jump to around 20% of GDP, and net debt 10% or $142 billion, it will still take 10-15 years of future taxpaying efforts to repay this debt. The state of the global economy (and the robustness of our major trading partners) is the major determinant of our growth rates and scope for national income, increased purchasing power and overall wealth. More than ever before, we are dependent now on how everyone else is doing internationally. </p>
<p>In this context the government has decided to compensate the lower echelons of households, families and certain individuals who they have defined as deserving (school kids and students, low-paid families, welfare recipients, the unemployed and disabled). To fund this largesse in a tight budgetary context they have broken other commitments, with business especially (by around $5 billion by not reducing company tax by 1% from 30% to 29%) but also with some other sectors (defence, the states and territories, the public service, limiting foreign aid, intending retirees, PAYE taxpayers with standard deductions, savers with interest income, cuts to pharmaceutical subsidies, and some welfare recipients such as single mothers).</p>
<p>Outside some cash supplementary payments to families for school kids and welfare recipients, much of the budget “spin” is imagery – announcing commitments, and making it appear as if the government is taking positive action, while they are not matching those plans with actual resources. The best example of this is the National Disability Insurance Scheme – which, while announced as part of the budget, commits only $1 billion over four years. This was announced to give the government some good news, although it was not appropriately financed. Much of the debate following the Treasurer’s speech was on how this scheme would be financed in the future and why it was not included in this budget documentation.</p>
<p><strong>Will we see the surplus?</strong></p>
<p>With projections that revenues were down by $12 billion, the government had to make many internal cuts and trimmings to programs and funding measures. Ostensibly, the government made cuts of $32 billion over the forward estimates, and a net cut of $17 billion over four years. This is a big cut made up of many small cuts, spread over four years. The trimming was needed, the Treasurer argued, to balance the budget this year, and without massively deflating economic growth or triggering a recession by the sudden withdrawal of public spending. </p>
<p>Politically, the main question is whether the government can deliver a surplus. A few factors need to be considered before answering this. An election is likely to be held before the financial year is over (or very shortly after, and before the final figures are known in October 2013). Hence we will go to the polls not knowing whether the Gillard government had ever produced a surplus. </p>
<p>If a Coalition government wins (which looks likely), the new government could recalculate and massage the figures for 2012-13 to show a deficit. If in the unlikely scenario that Labor won, then they may be able to arrange their affairs to show a small surplus to underscore some credibility.
However, the election is likely to make many spending commitments and skew the proposed budget yet again – so it will be comparing lemons and oranges. We may never know whether the fifth budget handed down by the Labor government achieved a surplus. </p>
<p>A surplus is theoretically achievable, but rests on very optimistic readings of circumstances over the next 14 months. It assumes that the government holds the line all year, makes no large new spending commitments, can manage to claw back all their proposed “savings”, and that no natural disasters will occur. Most importantly, the budget assumes high commodity prices, good terms of trade, high economic growth, no increase in unemployment, and strong consumer spending. If all this happens, the surplus is achievable. If not, it will disappear - and we could still be reporting deficits for the next few years. </p>
<p><strong>Budget politics and its reception</strong></p>
<p>Labor was understandably crowing about its four projected surpluses but the media were sceptical. Most serious journalists questioned the government’s figures, seeing the budget as a “smoke and mirror” exercise; some doubted the economic growth rates; some accused Treasury of producing politically acceptable figures; some even thought that the cuts were largely cosmetic. Generally, however, the coverage was relatively good and the budget reasonably well-received despite the misgivings. </p>
<p>The Coalition predictably opposed the political drift of the budget. They claimed it was devoid of strategy and vision, was confused, contradictory, and did not include important items such as NBN spending, clean energy projects, or revenues for the disability scheme. Coalition shadow treasurer Joe Hockey focused on the “problem of the debt”, getting excited at the announcement that the government would lift the ‘debt ceiling’ to enable it to borrow funds, perhaps repay any maturing bonds, and anticipate any hold-ups in revenues being available. </p>
<p>Although net debt was hardly changed, this did not prevent the Opposition from accusing the government of recklessness. On the spending side, the Coalition said the government was again bribing families who would be hit by the costs of the carbon tax, and claimed that the government was hypocritical to claim we had to have a flood levy when there was $2 billion in this budget handed back as cash payments. They also claimed that business was hurt, even though the government’s reason for abandoning the cut in company tax was because they would not agree to pass it in the parliament. Despite their bluster, it was not clear that a Coalition government would be able to achieve a budget surplus or where they would make additional cuts or revenue increases.</p>
<p><strong>So what is it all about?</strong></p>
<p>The government had little room to manoeuvre, and chose to give battlers cash in a gesture of goodwill. It was a little disappointing that there was marginal support for increased productivity, investment incentives, measures to stimulate economic growth, carry forward taxation reform or deal with some of the ticking time-bombs of our ageing demographics. The toughness of this budget suggests that the government was not tough enough in the last two budgets and that it should have started its fiscal consolidation (getting a balance) much earlier than it did. The government felt it could not afford to offend its own constituencies, and put their immediate concerns ahead of the nation’s longer-term interests.</p>
<p>I would expect far more “good news” announcements to trickle out as the budget year unfolds and we know better where we are, and as the election date (some 15 months away perhaps) gets ever closer. </p><img src="https://counter.theconversation.com/content/7071/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Wanna does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Each year the budget is like an annual health check on a patient with many complexities. In a black coat, not a white one, the august Treasurer reports the nation’s temperature, provides much-needed tonics…John Wanna, Sir John Bunting Chair of Public Administration , Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/70422012-05-15T20:04:16Z2012-05-15T20:04:16ZNavigating Australia’s bumpy road to aged care reform<figure><img src="https://images.theconversation.com/files/10693/original/k9s93r7r-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Post-budget analysis has largely ignored the government's achievements in aged care reform.</span> <span class="attribution"><span class="source">Ernst Vikne</span></span></figcaption></figure><p>Much of the budget analysis over the past week has concentrated on the shuffling of expenditure for 2012-13 back to this financial year in order to achieve a surplus. It’s true that $17.6bn of such transfers is hardly pocket money, and needs careful assessment, but this focus (together with the media’s preoccupation with the Slipper/Thomson affairs) means the government’s achievements in aged care have largely been ignored.</p>
<h2>Catalyst for change</h2>
<p>Australia has fallen far behind most European countries in reshaping its aged care arrangements. This is despite the important <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/health-investinginagedcare-report-index.htm">Hogan Review</a> of residential aged care facilities in 2004. The Department of Health and Ageing, which commissioned the report, did little to implement Hogan’s findings, as did aged care ministers of either political persuasion since then. Instead, they passed them off as “too difficult to tackle”. </p>
<p>Federal Treasury’s last three <a href="http://archive.treasury.gov.au/igr/">intergenerational reports</a> highlighted the problem of a huge shift in the population towards old age, with inevitable rises in health costs and broader aged-care needs. The reports warned this would potentially outstrip available fiscal resources for both the Commonwealth and states. But the problem still didn’t resonate as a priority in health-care planning. </p>
<p>It became almost an afterthought in the <a href="http://www.health.gov.au/internet/nhhrc/publishing.nsf/Content/nhhrc-report">National Health and Hospitals Reform Commission’s</a> (NHHRC) 2009 report. The NHHRC noted the need for improved flexibility in aged care arrangements – and some promising examples in Austria, where the elderly could be cared for in their homes with minimal use of nursing homes – but made little comment on advances across Europe, Scandinavia and Singapore over the past two decades. </p>
<p>The NHHRC simply recommended the whole field become the responsibility of the Commonwealth, rather than building on shared programs with the states. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10694/original/99gtvds3-1337066243.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Successive ministers have put aged care reform in the ‘too hard basket’.</span>
<span class="attribution"><span class="source">Richy Schley/Flick</span></span>
</figcaption>
</figure>
<p>Action on the NHHRC report became the responsibility of then Prime Minster Kevin Rudd and Health Minister Nicola Roxon. The former wanted to achieve real reform in many areas, while the latter was concerned primarily with improved national bureaucratic control, better funding for hospitals, revised primary care strategies to take pressure off hospitals and enhanced preventive care. </p>
<p>A series of <a href="http://www.coag.gov.au/">Council of Australian Government</a> (COAG) negotiations saw many of the important elements of the Rudd plan dismantled, as the Roxon agenda came to dominate. She had the support of officers the Department of Health and Prime Minister and Cabinet, but faced opposition from several state premiers who didn’t want to surrender control of their health systems. </p>
<p>Rudd chose to refer the whole set of aged care issues to the <a href="http://www.pc.gov.au/">Productivity Commission</a>, which conducted extensive consultations with the many organisations representing and supporting the aged. The Commission also undertook a rigorous international review, which included care structures in Europe and Asia. </p>
<p>The Commission’s three-person team, chaired by <a href="http://www.pc.gov.au/about-us/commissioners/mike-woods">Mike Woods</a>, did an outstanding job, and presented a <a href="http://www.pc.gov.au/projects/inquiry/aged-care/report">very comprehensive report</a> to the Commonwealth in June 2011. It advocated huge reform to achieve an ongoing, viable structure for aged care into the future. This included a new national system and new funding arrangements including the necessary, but controversial, user-pays elements. </p>
<p>The Productivity Commission achieved broad agreement from all those consulted, despite raising the controversial issues of how to constructively use accumulated capital of elderly people (largely vested in their homes and superannuation) to contribute to aged care. </p>
<p>The alternative was for the growing cost to be fully met by a younger generation still in employment. But this would require heavy public taxation and intergenerational wealth transfer, which wasn’t tenable. </p>
<p>The proposals came to light when the Gillard government planned to slash expenditure to achieve a budget surplus, and the report was passed to the Minster for Mental Health and Aged Care, Mark Butler, who had just completed a mental health reform project. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=627&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=627&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=627&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=788&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=788&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10695/original/pygfv2gq-1337066243.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=788&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The government’s aged care reform package will improve the lives of ageing Australians.</span>
<span class="attribution"><span class="source">Erik Starck</span></span>
</figcaption>
</figure>
<p>Butler carried out this difficult task with real skill and <a href="https://theconversation.com/aged-care-reform-experts-respond-6576">last month announced</a> his government would adopt most of the Commission’s recommendations and establish a new national administrative process. </p>
<p>Under the reforms: </p>
<ul>
<li>Elderly people will gain support to remain in their homes as long as possible,</li>
<li>Support services will be developed so they’re readily accessible to elderly people, including advice on alternative arrangements, </li>
<li>The growing problem of care for people with Alzheimer’s disease will receive specific support, and </li>
<li>Further funding will be provided to enhance training of community nurses and other carers. </li>
</ul>
<p>This major reform package has huge implications for all ageing Australians and for Commonwealth and state budgets for many years to come.</p>
<h2>Next steps for reform</h2>
<p>New ways must be developed to use the growing availability of broadband information technologies to improve communication with the elderly in their homes. This would improve access to support and advice, without the need for frequent visits to GP surgeries. </p>
<p>Such changes will enhance the productivity of skilled community nurses and nurse practitioners who can visit as needed, and will reduce the sense of isolation, which can be such a problem for the elderly. </p>
<p>For the first time, Australian governments have grasped the nettle. The reforms are every bit as important for our social fabric as was Medicare in 1984, even though they will take three to four years to become fully operational. </p>
<p>The package deserves bipartisan support as the many changes are worked through with the states, local governments, health professions, educational institutions, residential care and accommodation providers, and organisations for the aged. </p><img src="https://counter.theconversation.com/content/7042/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Pennington has received funding from the ARC.</span></em></p>Much of the budget analysis over the past week has concentrated on the shuffling of expenditure for 2012-13 back to this financial year in order to achieve a surplus. It’s true that $17.6bn of such transfers…David Penington, Emeritus Professor, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/70082012-05-14T05:15:26Z2012-05-14T05:15:26Z‘Class warfare’ or not, Australia has moved on from Labor’s old-fashioned rhetoric<figure><img src="https://images.theconversation.com/files/10620/original/nxxyq7cf-1336968881.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Labor is out of touch with the attitudes of 21st century Australians.</span> <span class="attribution"><span class="source">AAP/Dan Peled</span></span></figcaption></figure><p>“Class warfare” is an emotive term that would seem to belong to a bygone age when there also existed, as in the minds of many people, something called the “class struggle”. </p>
<p>It would seem strange that in age when blue-collar jobs seem to be always in decline that anyone should be referring to “class warfare”. The classes of an earlier age are no more. Australia is a different country to what it was in the 1930s and 1940s.</p>
<p>The country may have moved on, but our politics and political culture has not. Union numbers may be declining but we still have a political party tied to the unions and which has a tradition that leads back to the “class warfare” of an earlier age. </p>
<p>It may now be the case that unionism has particular strengths in such areas as public education, but there is a romanticism about the good old days, of referring to one’s “comrades” and dreaming of the classless society to come.</p>
<p>The political culture may not have moved greatly with the times but the culture of the wider society has changed considerably. Most people are not employed in blue collar, manual occupations. </p>
<p>They work in retail, IT, finance or some other sort of service industry. They want to enjoy the benefits of a society, which, for all its faults, offers them a way of life that few in human history have enjoyed. </p>
<p>“Class warfare” is rhetorical flourish that has more to do with an ingrained view of Australian identity than with the reality of Australian life in the 21st century. I suspect that it was used by Tony Abbott to indicate that that the government was walking back towards the 19th century rather than “moving forward” in the 21st. It was shorthand for the fact that the Labor Party is reverting to its traditional values at a time when those values have little meaning.</p>
<p>Manning Clark used to divide people into “straighteners”, who appeal to our conservative side, and the more progressive “enlargers”. His assumption was that it would always be the Labor side of politics that are the enlargers. But I think that there is a good argument that, in reality, there was a strong element of “straightening” on that side of politics. One has only to consider the way in which the machine tried to control the politicians and make them do its will.</p>
<p>What was particularly refreshing about Bob Hawke was that he was an enlarger who wanted to push beyond the old style of Labor politics. I think the same can be said of Kevin Rudd. It was through leaders such as Hawke and Rudd that Labor attempted to move beyond old-style “class warfare”. </p>
<p>They recognised that Australians no longer wished to be straighteners and wowsers, that they wished to do more and more things for themselves, and that Labor would need to change accordingly. The culture had changed and the political culture needed to change with it.</p>
<p>All this leads to the current Labor leadership, the budget and accusations of class warfare.</p>
<p>Australians in the 21st century, by and large, want to be enlargers. They have moved beyond the old, narrow ways of the straighteners, of the world where one cut down the “tall poppy”, and tried to make everyone conform to a particular way of doing things. An awful lot of Australians do not hate the rich but would like to be rich themselves.</p>
<p>Unfortunately, the language of Gillard and Swan is the language of the straighteners: of resentment against those who have worked hard and made a few quid. It says: “It’s great that you’ve worked so hard and made some money, but where is our share?” </p>
<p>It’s just another version of the little red hen. We didn’t do anything to grow the wheat or mill the grain, but we still should eat the bread.</p>
<p>Now this may have been an attractive view 70 years ago when there was a fair amount of resentment in Australian society and the wowsers ruled the roost. But in the Australia of the 21st century, which is ruled less by resentment and more by a desire to use one’s capacities to do things for one’s self, it simply looks mean and nasty. It looks like old-fashioned “class warfare”.</p>
<p>My sense is that Australians do not wish to go back to that sort of world and those sorts of values. It may make sense in some traditional Labor areas. But in the rest of Australia the world has moved on. Labor has also, in the past, tried to move on; it’s pity that Gillard and Swan seem now failing in their attempts at moving forward.</p><img src="https://counter.theconversation.com/content/7008/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gregory Melleuish does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“Class warfare” is an emotive term that would seem to belong to a bygone age when there also existed, as in the minds of many people, something called the “class struggle”. It would seem strange that in…Gregory Melleuish, Associate Professor, School of History and Politics, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69702012-05-13T20:31:31Z2012-05-13T20:31:31ZClass warfare in Australia? We should be so lucky<figure><img src="https://images.theconversation.com/files/10572/original/rdzn5q8z-1336717880.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Try telling sacked Toyota workers we live in a classless society.</span> <span class="attribution"><span class="source">AAP/Julian Smith</span></span></figcaption></figure><p>The idea that Julia Gillard and Wayne Swan have launched a “<a href="http://www.theage.com.au/business/federal-budget/pm-waging-class-war-says-abbott-20120510-1yfo9.html">class war</a>” in Australia through last week’s federal budget is a huge joke. I don’t believe The Australian’s editor-in-chief Chris Mitchell even believes his own rhetoric.</p>
<p>A small “redistribution” of wealth, in the form of increased family benefits, hardly constitutes an attack on the privileged few. The class war argument is even harder to sustain when the budget gives with one hand and takes away with the other. Some family payments have gone up, but single mothers will be forced onto the dole.</p>
<h2>All quiet on the North Shore</h2>
<p>This <a href="http://www.budget.gov.au/">budget</a> has not increased the pain for Australia’s richest people and it certainly does not represent any kind of class war push-back against those with privilege or against members of the elite.</p>
<p>There’s nothing in this budget to make the ruling class tremble. Scrapping a 1% cut in corporate tax rates hardly constitutes class warfare; nor does throwing a few dollars at child care, disability services or education.</p>
<p>Wayne Swan <a href="http://www.abc.net.au/news/2012-05-08/cassidy-budget-2012/3998706">called this budget</a> “Labor to its boot straps” and it seems that this line has been seized upon to justify the class war rhetoric. But the boots in question would be unrecognisable to Labor’s founding fathers. They are Dolce & Gabbana gold-embossed snakeskin, not hobnail Blundstones.</p>
<p>Then Julia Gillard accused Tony Abbott of being out of touch with ordinary Australians because he lives in Sydney’s reasonably affluent northern suburbs. A red rag to some bulls already predisposed to snorting and charging at shadows.</p>
<p>Hardly enough evidence to back up <a href="http://www.theaustralian.com.au/national-affairs/treasury/budget-reform-agenda-lost-in-class-war/story-fndbwnla-1226351467424">headlines</a> like “Reform agenda lost in class war” from Thursday’s Australian newspaper. But enough for Tony Abbott to jump on to the tumbrel as it rolled passed his well-upholstered doorway. </p>
<p>In his <a href="http://www.abc.net.au/news/2012-05-10/abbott-gives-budget-reply-speech/4004238">budget reply speech</a>, the Opposition leader accused the government of cynically playing the “class war” card. He also repeated the myth at the heart of this nonsensical charge:</p>
<p><em>“Our country has normally been free from the class struggle that’s waged elsewhere to other countries’ terrible cost.”</em></p>
<h2>The myth of a classless Australia</h2>
<p>The idea that Australia is a classless society is a myth that many of us cling to – mateship and egalitarian stories of sacrifice in war are promoted as enduring and iconic virtues.</p>
<p>But it is nonetheless a myth. The truth is somewhat less saccharine. The class struggle is alive and well in Australia and low-level class war is a constant feature of daily life. Most workers know this instinctively – prices go up faster than wages, car industry handouts don’t save their jobs but (coincidence the bosses claim) seem to be equal to the “profit” announced by the “struggling” Ford Motor Company.</p>
<p>However, this low-level and constant class war is not talked about in these terms, particularly not in the mainstream media. It is there, it is just hidden inside unchallenged assumptions along the lines of competition and growth are good for everyone and that we are all “middle Australia”.</p>
<p>We can’t all be in the “middle”, some are on the top and some on the bottom. The top 1% are almost invisible except as unassailable role models of vast entrepreneurial skill and business savvy and the bottom 10% are invisible because they exist in the liminal cracks of long-term unemployment; or they are marginalised like the vast bulk of indigenous Australians.</p>
<p>But these groups are tiny compared to the bulk of the population: most of us work for wages or salary. </p>
<p>The 2012-13 budget holds out a small and rather limp carrot to this group (by far the majority of Australians) in the form of a mild redistribution of tiny amounts of “wealth”. But what it does most certainly not do is declare class war.</p>
<h2>Four truths about class in Australia</h2>
<p>The Australian’s headline from Wednesday – “<a href="http://www.theaustralian.com.au/national-affairs/treasury/wayne-swan-finds-17bn-in-cuts-to-deliver-surplus/story-fndbwnla-1226350430909">Smash the rich, save the base</a>” – sent out alarmist signals that the ALP might be about to charge the Stock Exchange. The front page cartoon certainly gave that impression with Wayne Swan and Julia Gillard at the head of a phalanx of marching workers, with the hammer and sickle red flag aloft behind.</p>
<p>But why would The Australian go down this line? </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=738&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=738&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=738&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=927&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=927&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10571/original/xfc896jd-1336717342.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=927&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">The Australian</span></span>
</figcaption>
</figure>
<p>The simple and direct answer is that it is a newspaper which supports the interests of Australia’s ruling class and, like ruling elites from Moscow to Cairo, the Australian elite is greedy. Even a small impost on profits must be resisted, at the same time such naked grasping must be dressed in the rhetoric of national interest.</p>
<p>A few truths have emerged from all the rhetoric about class warfare.</p>
<p>The first and most obvious is that the ALP is desperate. On current projections and readings of voter sentiment, there is almost no chance that Labor can win the next federal election. </p>
<p>The ALP response, as The Australian has <a href="http://www.theaustralian.com.au/national-affairs/treasury/wayne-swan-stands-by-the-surplus-forecast-in-what-he-calls-his-battlers-budget/story-fndbwnla-1226349576240">pointed out</a> correctly, has been to launch <a href="http://www.themonthly.com.au/rising-influence-vested-interests-australia-001-cent-wayne-swan-4670">assaults</a> on Australia’s small group of super-rich. In particular Clive Palmer, Gina Reinhart and (to a lesser extent) Twiggy Forrest. </p>
<p>But this does not signal a return to class war politics for the ALP – that’s actually the last thing they want – it is merely a rhetorical flourish and perhaps too little too late to save their arses at the polls.</p>
<p>The second truth is that The Australian is clearly in support of Australia’s ruling class and has this week cynically exploited the rhetoric of class warfare to support the Coalition’s attacks on Labor.</p>
<p>The third point is that the convenient national myth of a classless Australia is strong. Instead of understanding real class divisions, we prefer to think of ourselves as all being “middle Australia”.</p>
<p>The fourth is that Tony Abbott is now and always has been a class warrior. He learnt his politics at the sclerotic knee of <a href="http://www.australianbiography.gov.au/subjects/santamaria/">B. A. Santamaria</a>, Australia’s leading anti-communist for more than 40 years. Nothing has changed.</p>
<h2>The struggle continues</h2>
<p>Despite a refusal to talk about real class politics in the media, the class struggle is alive and well in Australia and low-level class war is a daily reality for many workers.</p>
<p>The workers at the <a href="http://www.heraldsun.com.au/news/guard-attacked-at-baiada-poultry-company-during-union-strike/story-e6frf7jo-1226191649467">Baiada</a> chicken processing plant certainly know about it. They resisted full frontal attacks from Victorian police to maintain a picket line and win their union fight for improved wages and conditions. </p>
<p>The <a href="http://www.skynews.com.au/businessnews/article.aspx?id=739934&vId">workers at Toyota</a> in Melbourne also got a lesson in class warfare when the company hired a private security firm to escort sacked staff off the premises.</p>
<p>TAFE teachers in Victoria learned a thing or two about class warfare when their <a href="http://www.theage.com.au/victoria/teachers-students-protest-over-tafe-cuts-20120510-1yfay.html">funding was cut</a>.</p>
<p>Victorian nurses also learned the hard way when they were forced to take illegal action and <a href="http://www.abc.net.au/news/2012-02-24/victoria-nurses-industrial-action/3850768">walk off the job</a> to save their jobs and working conditions. </p>
<p>If real class warfare were to erupt in Australia Julia Gillard, Tony Abbott and Chris Mitchell would all be on the same side, while the chicken pluckers of Baiada would be on the other and (I reckon) so too would be TAFE teachers, car workers and nurses.</p>
<p>Until then, Abbott and Mitchell’s fearmongering will remain ultimately meaningless.</p><img src="https://counter.theconversation.com/content/6970/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin Hirst is a trade unionist and a member of Socialist Alternative.</span></em></p>The idea that Julia Gillard and Wayne Swan have launched a “class war” in Australia through last week’s federal budget is a huge joke. I don’t believe The Australian’s editor-in-chief Chris Mitchell even…Martin Hirst, Associate Professor Journalism & Media, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69722012-05-13T08:19:57Z2012-05-13T08:19:57ZBudget 2012: Why the experts will get it wrong<figure><img src="https://images.theconversation.com/files/10565/original/5gvncjyh-1336714042.jpg?ixlib=rb-1.1.0&rect=142%2C126%2C5355%2C3505&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">System 1 thinkers on the left, System 2 thinker on the right?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>It’s an old joke, but hard to resist around Budget time. That is, that economic forecasting was invented to make astrology look respectable.</p>
<p>Over the past few days we’ve heard a lot about how notoriously inaccurate economic forecasting is, so much so that every commentator and politician is confident Wayne Swan and his Labor team will have got the numbers wrong in promising a surplus.</p>
<p>And the government’s critics could be spot on. Not because they have a superior insight into the workings of the economy but because most forecasting is no more useful than gazing into a crystal ball.</p>
<p>Why? Because for anything worth commenting on, the job is simply too complex. There are too many variables.</p>
<p>Most famously, we didn’t see the global financial crisis coming. All those stockbrokers and bankers, whose very professional existence relies on picking trends, failed en masse. </p>
<p>But they are in good company. Teachers envisaging in advance the grades of students, parole boards predicting recidivism rates of released prisoners and clinical psychologists assessing their patients’ prognoses: all are also unreliable forecasters.</p>
<p>This is the gist of Nobel Prize winning psychologist and behavioural economist, <a href="http://www.princeton.edu/%7Ekahneman/">Daniel Kahneman</a>’s latest book, <a href="http://www.nytimes.com/2011/11/27/books/review/thinking-fast-and-slow-by-daniel-kahneman-book-review.html?pagewanted=all">Thinking, Fast and Slow</a>. Studies by Kahneman, who has been <a href="http://www.samharris.org/blog/item/thinking-about-thinking">described as the most important psychologist alive</a>, conclude that no one can readily predict the future.</p>
<p>This is not because economists - or the rest of us - don’t know our stuff, but because there are two cognitive processes at work in all of us.</p>
<p>System 1 is our basic, automatic response to whatever we perceive. It’s rapid, effortless and almost always on. You walk into a room and survey the scene, making judgements about the occupants in a blink of an eye. Is the crowd young, old or mixed? Upbeat, sad or otherwise? There for a while or dispersing soon? Interesting or boring? Or you might glance at a TV news bulletin showing a train or car crash, the stock market results, a football match, or be momentarily distracted by a chat show.</p>
<p>System 1 is a kind of hard-wired, fast-track, “weighing up” machine. It creates a coherent, believable, instant story: the train or car crash is bad and unquestionably led to loss of life, your superannuation went down, your team is in trouble, that chat show host sure is funny.</p>
<p>This capacity for your brain to read situations or people in milliseconds had evolutionary benefits. Surviving on the savannah in a hunter-gatherer band facing constant danger required a very well honed “make-sense-of-what’s-going-on” fast device at the top of your brain stem.</p>
<p>When you listen to all those budget experts on TV and radio or skim across a page like this, for example, you respond via System 1.</p>
<p>Its counterpart, System 2, operates when you need to analyse something more thoroughly. This takes effort, and is painstaking, especially if the problem is thorny, complex, or important. A step-by-step evaluation or deliberation is required.</p>
<p>Both cognitive systems have limitations. They are good but imperfect, which means human judgements and predictions are, too. System 1 is fast but provides an incomplete picture, ignores any other perspective or evidence to the contrary, and signs off on your narrow evaluation without any query about whether your view is inconsistent or even right. For most people, System 2 takes too long in today’s busy world.</p>
<p>Economic forecasters do, of course, use System 2 thinking to form their views over time, so the numbers and arguments they present seem plausible. But although System 2 may allow us to construct a sophisticated analysis of what has already happened, the multitude of real world variables that may, or may not, influence future events mean even System 2 is not adequate for forecasting what will happen.</p>
<p>(And for all of us lay people digesting the Budget via the media, analysis is squeezed into short System 1 grabs anyway, morphing it into a constant stream of meaningless, forgettable sound bites).</p>
<p>The upshot? Pontificating, power-dressing experts and commentators in any field are no more likely to be right than anyone else, or chance.</p>
<p>What’s the consequence then for Budget 2012? Not much, except that is might be worth re-considering the political culture in which we wrap the numbers.</p>
<p>The Treasurer has been under immense pressure to deliver a surplus, no matter how many extraordinarily complex factors shift over the next 12 months, and beyond, in an entirely unpredictable globalised economy.</p>
<p>So, we might be better off using a different measure for judging a government’s success, or otherwise. My vote would go to a nimble team; a group of very well informed individuals, who’ve done all the high quality System 2 thinking they can, so are able to adjust the policy levers adeptly and quickly as the economic sands shift around us – as we can be sure they will.</p><img src="https://counter.theconversation.com/content/6972/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey Braithwaite receives funding for his research, principally from the Australian Research Council and the National Health and Medical Research Council. He is affiliated with University of New South Wales, where he receives a salary in his role as Professor and Director, Centre for Clinical Governace Research, and Foundation Director, Australian Institute of Health Innovation.</span></em></p>It’s an old joke, but hard to resist around Budget time. That is, that economic forecasting was invented to make astrology look respectable. Over the past few days we’ve heard a lot about how notoriously…Jeffrey Braithwaite, Foundation director, Australian Institute of Health Innovation, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69682012-05-11T04:10:17Z2012-05-11T04:10:17ZGhosts of ideologies past hover around Abbott’s budget reply<figure><img src="https://images.theconversation.com/files/10548/original/jqbdtd7z-1336701756.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tony Abbot's budget reply speech was rife with contradictions.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>To quote American baseball manager Yogi Berra, it was “déjà vu all over again” last night when I listened to Tony Abbott’s budget reply. I was back in the 1970s but without the big-collared shirts and clunky shoes. And I felt like invoking Hawaii Five-0, saying “Book ‘em, Danno” for the crimes of partisan hyperbole and assassination of complexity. </p>
<p>When I heard Abbott shrilly asserting the crime of “class
warfare” by Labor, I thought of Malcolm Fraser and his rhetoric about radical, socialist big government. Likewise, there was Abbott glorifying the Coalition as the party supporting small business, self-reliant citizens and reward for hard work. </p>
<p>It is amusing to think that only Abbott and Trotskyists talk publicly these days about class struggle. You won’t find the Labor Party walking that talk any more. That stopped in the 1960s under Whitlam, and the Hawke and Keating governments certainly put paid to such notions. So Abbott’s accusations sit awkwardly next to the complaints on the left about the selling-out of Labor. </p>
<p>Even John Howard highlighted the changed Labor philosophy in his <a href="http://www.harpercollins.com.au/books/Lazarus-Rising-John-Howard/?isbn=9780732289959">recent autobiography</a> by strongly contrasting Whitlam, who expanded government spending to replace private enterprise, with Kevin Rudd, who expanded government spending to help private enterprise.</p>
<p>Meanwhile, Swan and Gillard still tried to stir some ghosts of Labor past by claiming theirs was a traditional Labor budget that helped the battlers. </p>
<p>Of course, the contradictions continue to pile on top of each other. Last night Abbott invoked an archaic piece of left terminology in order to frighten swinging voters about the radicalism (eh?) of Labor, as if denying tax write-offs for business trips and reducing superannuation contributions was some Marxist monstering of the ruling classes. </p>
<p>If those are the measures of radicalism, then Robert Menzies and Dwight Eisenhower must be revolutionary communists: much higher and more widespread tax rates were quite acceptable during their times. </p>
<p>While conjuring ghosts of Labor past with clarion calls of class struggle, Abbott was also trying to deny Gillard and Swan their claims to it, using his speech to mourn a “once honourable party”. This was, of course all done with tongue firmly planted in his check. Abbott wants to replace the Light on the Hill with the Right on the Hill by appealling to Labor voters. </p>
<p>And, of course, right-wing, capitalist Abbott refused left-wing, socialist Labor the chance to reduce company tax, but blames Labor for cancelling the commitment. He did remind me of the hysterical complaints from the right of rampant socialism in 1973 when Whitlam reduced tariffs by 25% and removed the superphosphate bounty. Think about that for the current parallels: free-market reforms introduced by a Labor government attacked by the guardians of free enterprise.</p>
<p>Both left and right have always used each other as means of navigating their own quests for meaning and ideology. Each party, then, cannot do without the other, just as the terms left and right have no meaning without each other. Thus, the Coalition has always used Labor to complain of big government while proclaiming their own capitalist purity. Therefore, last night Abbott mouthed the usual stuff of hard work, small business and reward and insisted the government live within its means just as households have to, and reducing the “massive” debt. </p>
<p>Despite implications, Abbott has not declared himself a believer in small government with a desire to slash government spending across the board. He just talks of reducing Labor’s spending, not of reducing spending for constituencies he wants to attract. And lots of Australians believe in reduced government spending – for other people but not for themselves for they, of course, are hard-working battlers who are hard done by. </p>
<p>Neither party is willing to annoy too many constituencies. That’s why the government turned around the budget without making hard cuts. That’s also why Abbott talked of cutting the carbon and minerals taxes and why there were the usual attacks on the “tribes of public servants” (boo hiss to them for wasting all our hard earned dollars; they’re not battlers like us). </p>
<p>With Tony, it will be all so easy to get rid of all that nasty debt and reduce government spending – while also covering the income lost from carbon and mineral taxes. And, like the proverbial magic pudding, more would suddenly spew forth from the Australian economy.</p>
<p>On matters of debt, he treats Australians as if they are paragons of virtue. But the dirty secret of the past 20 or more years is that no politician has wished to commit political hara kiri by telling many Australians to pull their heads in. Private debt stands at 150% of GDP. It’s only gone down because the GFC frightened many people into cutting back spending. If only private debt was as low as our government debt! </p>
<p>Abbott complained about government measures that mean “a full pensioner faces up to $10,000 a year more for in-home aged care and up to $25,000 a year more for residential care”. </p>
<p>Is he backing the Coalition away from means-testing social security, the bedrock of our welfare system, for more universal entitlement? If so, that is truly Whitlamesque. Similarly, he complained the government’s National Disability Insurance Scheme “was short-changed $2.9 billion from the Productivity Commission’s version”. Will Abbott also pony up to that?</p>
<p>On this matter of the Alice in Wonderland unreality of Abbott’s stand, he repeated the intention to turn back the refugee boats, even though the Indonesians and the Immigration Department either refuse to cooperate or deny that it can work. </p>
<p>As I said, things have always been messier than the usual partisan labels allow and it is always useful to probe partisan hyperbole of either side. </p>
<p>However, now I think we are in the era of zombie politics when the party corpses mouth words that remind us of the past but are effectively brain dead. Recently, the conservative American thinker Francis Fukuyama <a href="http://andrelevy.net/temp/Fukuyama.2012.The%20Future%20of%20History.pdf">wrote an essay</a> challenging the left for its failure in ideas for social justice in this age of globalisation. “This absence of a plausible progressive counter-narrative” was, he said, unhealthy. </p>
<p>Equally, however, the right is effectively caught by this problem of globalisation. The nostrums from die-hard sections of the right are more economic rationalism, more of the same that got us into the global financial crisis in the first place. Mitt Romney is a zombie repeating such recipes for America’s malaise.</p>
<p>Yet most Australians are opposed to them, opposed to more privatisations and the other measures. What will Abbott do in power when faced by such voters on one side and by business on the other which still believes in such measures for their bottom lines?</p>
<p>Both sides are focused solely on the short-term battles and struggles of survival. This suits Abbott as, to borrow from his past time as a boxer, he is good in the clinches. </p>
<p>But we don’t know what he believes. It is a melange of things designed to carry him into the Lodge. It seems as though he is letting the mounting contradictions wait until he gets there. But he will find himself immediately backed into a place that the ALP took five years of political incompetence to nurture - a corner. </p><img src="https://counter.theconversation.com/content/6968/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Rolfe does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To quote American baseball manager Yogi Berra, it was “déjà vu all over again” last night when I listened to Tony Abbott’s budget reply. I was back in the 1970s but without the big-collared shirts and…Mark Rolfe, Lecturer, School of Social Sciences, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69292012-05-10T00:09:08Z2012-05-10T00:09:08ZClass warfare in the budget? That’s a bit rich<figure><img src="https://images.theconversation.com/files/10475/original/2yyr2gmz-1336606418.jpg?ixlib=rb-1.1.0&rect=107%2C69%2C3966%2C2522&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The increased provisions for welfare spending are partially symbolic, but also lay the foundations for a more progressive tax and welfare system.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>The Treasurer Wayne Swan has described the 2012 Budget yesterday as “a Labor budget to its bootstraps”, and commentators have variously seen it as <a href="http://www.abc.net.au/news/2012-05-09/kohler-budget-2012/3999224">“a big taxing, big spending budget, including a big increase in welfare”</a> and as <a href="http://www.smh.com.au/business/federal-budget/swan-budget-big-on-class-warfare-20120508-1yb1l.html">“a big dose of class warfare”</a>.</p>
<p>While the budget aims to achieve a small surplus – which was not a surprise – there were some unexpected changes, including an increase in Family Tax Benefit Part A (FTB-A), the income-tested cash payment for families with children, with the biggest increases going to families with the lowest incomes. This comes at a cost of around $1.8 billion over four years. </p>
<p>A new Income Support Supplement to be paid to Newstart recipients and people receiving Youth Allowance will cost around $1 billion over four years, and give recipients $210 a year for single people and $350 (combined) for couples. Moreover, families with school aged children who receive FTB-A will also get a School Kids Bonus, worth $410 for each primary school aged child and $820 for each secondary school aged child. This will replace the Education Tax Rebate, which tended not to benefit low-income families.</p>
<p>The government also announced the first stages of the National Disability Insurance Scheme (NDIS), substantial improvements in dental health care and new spending on aged care reforms among other items.</p>
<p>These figures need to be put into context. The combined impact of the “spreading benefits of the boom and support for families” package, the dental health package, the first stage of the NDIS and the aged care package is to increase spending over four years by around $8 billion. Out of <a href="http://www.budget.gov.au/2012-13/content/overview/html/overview_42.htm">total annual Commonwealth Budget spending of $376 billion</a> close to $132 billion or 35% is on social security and welfare, and a further $61 billion on health. Therefore $8 billion represents less than 1% of total spending on health, social security and welfare over the same four-year period.</p>
<p>In addition, there are relatively substantial savings being made in social security and welfare at the same time - including nearly $700 million over four years on Parenting Payment changes, $360 million on lowering the age of eligibility for FTB-A and $127 million in restricting the portability of pensions. </p>
<p>Overall, whether this constitutes a “big increase in welfare” is debatable – it is just that given the size of the Australian economy and the size of the Commonwealth budget, small percentages translate into large numbers.</p>
<p>It is also worth noting that some of the smaller changes are particularly welcome, even if their impact is more symbolic than substantial. The Income Support Supplement will be equivalent to an increase of around $4 a week in the single rate of Newstart, which is not likely to make much of an impact on the <a href="https://theconversation.com/paltry-newstart-allowance-is-fast-becoming-a-poverty-trap-6218">deepening poverty of this group</a>, but it is at least some recognition of the fact that there has been no real increase in the level of payment for close to 20 years. Just as welcome is the decision to <a href="http://ministers.deewr.gov.au/shorten/budget-2012-13-helping-newly-unemployed-australians-keep-more-their-savings">double the liquid assets test thresholds</a>, which will help reduce the likelihood that people will have to impoverish themselves just to get on to Newstart in the first place. </p>
<p>These and other initiatives, and the achievement of a budget surplus, are to be financed from around $32.6 billion in savings over four years, although for the purposes of the coming year’s surplus, it is $4.4 billion of savings in 2012-13 that are relevant. In this year, the largest single item of savings is $965 million in defence spending, followed by $600 million in deferring changes to the superannuation concession cap, around $450 million in deferring increases in overseas aid and $320 million in not proceeding with the company tax cut. </p>
<p>Whether these changes constitute “class warfare” is also debatable. In fact, the one major change that specifically targets the very rich – the reduction in the tax concession for superannuation for very high earners (those earning over $300,000 a year, a subset of the top 1%) - actually has a small cost to revenue in the 2012-13 year. However, over a four-year period, the changes labelled as “Improving fairness in the tax system” will become more significant, bringing in additional revenue of around $2.5 billion. </p>
<p>In sum, the targeted additions to spending in the budget are in part symbolic, but also likely to be quite progressive in their impact. Whether this signals an ongoing commitment to a more progressive tax and welfare system in the future remains to be seen.</p><img src="https://counter.theconversation.com/content/6929/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Whiteford and Gerry Redmond receive funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Gerry Redmond does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Treasurer Wayne Swan has described the 2012 Budget yesterday as “a Labor budget to its bootstraps”, and commentators have variously seen it as “a big taxing, big spending budget, including a big increase…Peter Whiteford, Professor, Crawford School of Public Policy, Australian National UniversityGerry Redmond, Associate Professor, School of Social and Policy Studies, Flinders UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69132012-05-09T20:38:33Z2012-05-09T20:38:33ZSwan struggles to help the poor in a straitjacket of his own making<figure><img src="https://images.theconversation.com/files/10469/original/kcjy8cx7-1336540968.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Swan would have an easier time if he were more honest with voters about what Labor is trying to achieve.</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p>Labor’s budget continues a path set since 2007. It shows the technocratic skill of a government clever at policy detail; but also one unable, or perhaps unwilling, to challenge the economic straitjacket it has adopted since the 1980s.</p>
<p>That leaves a budget that makes life fairer for the majority, but at the expense of an increasingly marginalised minority. It reflects the politics of a party more committed to core values than it is credited for, but also much more timid in actually pursuing them.</p>
<p>That logic is at the centre of this budget. There is a clear, continued commitment to a fairer society. The budget increases tax revenues largely from high profit companies and high income earners, and it expands payments to, and lowers taxes for, low and middle income families. Combined, these changes will have a substantial redistributive impact. But it shies away from even modestly difficult political territory, and so reinforces a worrying division between the deserving and undeserving poor.</p>
<p>These achievements are all the more impressive because they come despite Labor accepting two political straitjackets initially imposed by conservative economists, but increasingly willingly accepted by Labor. It can simultaneously leave observers in awe of its ability to manoeuvre so skilfully in such a confined political space; and yet deeply disappointed by just how little room Labor has left itself. In this sense, it’s a budget for the technocratic true believer.</p>
<h2>Smoke and mirrors</h2>
<p>The first straitjacket is Labor’s iron clad-promise to achieve a surplus. Unwilling to make the argument that employment and growth are more important than reducing debt, Labor has abandoned its brief adventure in defending Keynesian economics and the need for a larger role for the state, and instead embraced the logic that underpins the austerity drive in Europe.</p>
<p>But having put on the straitjacket, Wayne Swan has proved almost Houdini-like in avoiding the most important negative consequences. The cuts have generally hit the rich rather than the poor; and have been structured to do everything possible to promote employment while reducing debt.</p>
<p>There are two sides to the Houdini act. The cuts come from those areas with the weakest link to consumer spending – defence contracts for largely imported machinery and tax concessions for the savings of high income earners.</p>
<p>Alternatively, the new spending goes exactly where it is most likely to improve confidence and spending – to low and middle income families, the same target as the highly successful stimulus payments. </p>
<p>This is exactly what the old Keynesian model suggests, but wrapped in the clothes of austerity. The effect is topped off by some clever rearranging, extra spending happens just before and just after the financial year, maximising the surplus while minimising the effect of withdrawing funds.</p>
<h2>The “deserving poor”</h2>
<p>Discussions of welfare often focus on government payments. But promoting employment has always been the core pillar of Labor egalitarianism. As is clear from a quick glance at Europe or the US, unemployment is the bedfellow of poverty.</p>
<p>But this only leads to Labor’s second straitjacket. While the party has accepted the need for redistribution, in line with its historical values, it has increasingly abandoned another key element of the social democratic project, a commitment to a right to a decent standard of living. Labor’s defence of equity is limited to what we might call the “deserving poor”.</p>
<p>New spending targets families with children. This is an important group, and indeed the steady increase in family payments since the 1980s has been responsible for a significant decline in child poverty, just as Labor’s increase in the age pension has reduced deprivation amongst the old. But for groups with less public sympathy support has been hard to come by.</p>
<p>Labor excluded the unemployed from the stimulus. It has not only accepted, but extended the Northern Territory intervention. It not only accepted work for the dole, but has now extended “welfare reform”, reducing payments to many single parents. </p>
<p>There is a small increase for some of those on the lowest payment, but much less than for other more “worthy” groups. This is a clear sign that Labor has given up the struggle for the right of Australians to be free of poverty and treated with dignity, and instead reinforces the neoconservative logic of workfare.</p>
<p>But even here, there are some clever tricks. People often fit many categories. So while single parents may get less as single parents, they receive more as families with children; and they receive extra assistance with child care as potential workers, looking for jobs or undertaking education and training. It minimises the impact of policies that marginalise the “undeserving poor”, but it also tends to reinforce this division.</p>
<h2>Dancing on a pinhead</h2>
<p>It helps to explain why it is that Labor can seem so at sea and so disappointing, while at the same time appearing to have made real achievements (particularly in retrospect). </p>
<p>It’s the product of increasingly technocratic true believers, who fight for redistribution, while denying they are really redistributing. Who target payments to prevent child poverty while talking only about “cost of living”, and who covertly promote stimulus while appearing to embrace austerity. </p>
<p>You can be impressed by how expertly they dance on a pinhead, yet wonder why they don’t lift their head, argue on principle, and perhaps gain a little more room to move.</p><img src="https://counter.theconversation.com/content/6913/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Spies-Butcher is the Deputy Convener of the Australian Greens.</span></em></p>Labor’s budget continues a path set since 2007. It shows the technocratic skill of a government clever at policy detail; but also one unable, or perhaps unwilling, to challenge the economic straitjacket…Ben Spies-Butcher, Lecturer in Economy and Society, Department of Sociology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69242012-05-09T20:37:27Z2012-05-09T20:37:27ZThe politics behind the ‘cuts’ to foreign aid<figure><img src="https://images.theconversation.com/files/10462/original/k82pjmww-1336529158.jpg?ixlib=rb-1.1.0&rect=26%2C29%2C1940%2C1275&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Much of the media commentary surrounding the budget has seized upon so-called "cuts" to Australia's aid program.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Reporting on the federal budget has been replete with commentary about “cuts” to foreign aid. But the fact is that the aid program was not cut in any meaningful sense of the word. </p>
<p>In nominal terms, aid spending will grow by 6% during the next financial year—from $4.8 billion to $5.2 billion. Given the low level of inflation in Australia at present, this means that it will also grow in real terms. As a proportion of gross national income (GNI), aid spending will be maintained at 0.35%.</p>
<p>The aid program has only been “cut” to the extent that the government has not delivered on promises to ramp up aid spending so that it reaches 0.5% of GNI by 2015-16. The government has maintained its commitment to increase aid to 0.5% of GNI but pushed back the target date to 2016-2017. Sticking to the 2015-16 target would have meant aid spending in 2012-13 of around 0.38%of GNI.</p>
<p>Some commentators have lamented these “cuts” to the aid program, claiming they will cost thousands of lives. It is possible that they will. But the reality is that given the prevailing political context, this is not such a bad result for the aid program and those who have a stake in it. </p>
<p>When Australian governments have wanted to slash spending in the past, aid has been one of the first areas to be cut, reflecting the political weakness of the domestic aid lobby. Development NGOs, church groups, aid contractors, and universities — the key members of this lobby — have weak links to the major political parties (compared to, say, trade unions and business groups), little capacity or inclination to organise large public protests, and no economic clout. And the size of aid budget is not an issue that weighs heavily on voters’ minds come election time. As one former Foreign Minister said to me a while ago: “There are no votes in aid.”</p>
<p>Throw into the mix Kevin Rudd’s move to the backbench (Rudd has been a key champion of the aid program since Labor was elected in 2007), and the fact that several OECD countries have recently cut their aid budgets substantially - reflecting the economic fallout of the global financial crisis and the budgetary problems now plaguing Europe - and one could easily reach the conclusion that substantial cuts to the aid program were inevitable.</p>
<p>But the government did not cut deeply into the aid program nor walk away from the 0.5% of GNI target, as some had feared. Why?</p>
<p>Broadly, I think there were three main reasons, the first two of which augur well for the aid program looking forward, even if there is a change of government later this year or next year.</p>
<p>First, the advent of the Asian Century means that Australia will face new competition for influence within the Asia-Pacific region, reflecting the economic rise of China and India and their respective attempts to cultivate closer relationships with countries within the region. In this context, winding back Australia’s aid program would have been a geo-political misstep. </p>
<p>While Australia’s aid program has, for many years, been justified publically in terms of its contribution to global poverty reduction, it has also been a key tool of foreign policy. To cut aid substantially would have weakened the effectiveness of this tool at a moment when Australia is looking to enhance important foreign relationships and China and India are both making extensive use of aid in promoting their own foreign policy agendas.</p>
<p>Second, there remains a broad in-principle commitment at the international level to increase aid to help achieve the Millennium Development Goals (MDGs). While several OECD countries have cut their aid budgets, others have maintained or even increased aid spending in the face of severe budget constraints. The British government, for instance, has effectively ring-fenced its aid program from cuts to the public sector while Germany, Switzerland, South Korea, and New Zealand all substantially increased their aid spending in 2011. Given Australia’s relatively strong budgetary position compared to other OECD countries, making deep cuts to the aid program in this context would have reflected poorly on the Australian government and undermined its reputation as a good international citizen.</p>
<p>Finally, at this particular moment and for this particular government, it is possible that there are in fact some votes in aid. One of the key reasons for Labor’s poor poll results in recent times and in particular, the drop in its primary vote, has been a loss of support to the Greens: a party that has expressed strong support for substantial increases in aid spending. By maintaining rather than cutting the aid program, Labor may be hoping to lure some of these voters back into the fold or at least stem further loss of support to the Greens.</p>
<p>These factors have “saved” the aid program from severe cuts this time around. If the Coalition wins the next election, it will probably want to cut government spending overall. It is possible that it will take an axe to the aid program to help achieve this, even though it has also signed up to allocating 0.5% of GNI target. However, the first two of these factors will give it some pause for thought. I hope it will be enough to dissuade the Coalition from making cuts but, should it choose to do so, one hopes they will be modest rather than severe. </p><img src="https://counter.theconversation.com/content/6924/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Rosser has received research grants from three AusAID-funded facilities or programs: the Australia-Indonesia Governance Research Partnership (2007), the Australian Development Research Awards scheme (2008), and the Developmental Leadership Program (2009). His research is currently supported by an Australian Research Council Future Fellowship (2011-2015).
</span></em></p>Reporting on the federal budget has been replete with commentary about “cuts” to foreign aid. But the fact is that the aid program was not cut in any meaningful sense of the word. In nominal terms, aid…Andrew Rosser, Associate Director of the Indo-Pacific Governance Research Centre, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68542012-05-09T02:35:39Z2012-05-09T02:35:39ZLabor’s populist turn unlikely to succeed<figure><img src="https://images.theconversation.com/files/10461/original/nyptr5fj-1336526422.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Swan may be appealing to a voting bloc that doesn't exist.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>The 2012 budget came at a particularly challenging time for Labor. The government has sought to achieve two distinct (if related) political goals: bolster Labor’s “economic management” credentials and to appeal to imagined swinging voters. It is unlikely to be successful on either. </p>
<p>It has been an overwhelming source of frustration for Labor that despite a strong economy, voters continue to regard the Coalition as better economic managers. The experience of the Rudd-Gillard administration contrasts with the experience of the Hawke government.</p>
<p>In its first years, this government established Labor as superior economic managers in the eyes of the public and this perception enabled Labor to win elections despite falling living standards. Contemporary Labor sympathisers have been bewildered by the failure of voters to give the party credit for the (relatively) strong economy; some have blamed the communication skills of Wayne Swan, others the Murdoch press. </p>
<p>More significant is the political conjuncture. Labor came to power in 1983 at a time of widespread pessimism about Australia’s economic future, and as consequence voters cut the government slack. Labor’s 2007 victory was at a time of national complacency and celebration, as in the early 1970s voters expected the good times to continue unchanged. To some, the Chinese economic boom provided an alternative explanation for Australia’s prosperity. </p>
<p>Frustrated by voter discontent, Labor has sought to bolster its economic policy credentials by defining a budget surplus as the test of budgetary credibility. The government has also pursued a rhetorical strategy of concern and understanding. </p>
<p>Wayne Swan declared on budget night that “we understand the pressures Australians face”. Ministers imagine themselves as Bill Clinton-style empathisers, who feel voters’ pain. </p>
<p>Labor’s current management of discontent differs from that of the 1980s. Then Labor espoused a modest cultural leftism, expressed in environmentalism and defence of multiculturalism; modern Labor, spooked by an image of suburban conservatism, has eschewed this appeal, but it has ramped up egalitarian rhetoric. </p>
<p>The object of Labor’s “fair go” appeal is not the truly disadvantaged. Labor has accepted the folk wisdom that the electorate consists of segmented groups to whom targeted appeals, usually to direct economic interest, can be made and, who vote as blocs. </p>
<p>In fact this is not the case. Electoral swings are usually fairly uniform, and when they are not, it makes little difference to the outcome. Labor’s imagined political target are the suburban battlers beloved of pop electoral analysis: blue-collar, with children, actual or aspirant small businesspeople and socially conservative. </p>
<p>The budget contained initiatives such as concessions to small business (including a $5000 grant to encourage tradespeople to develop business skills), and increases to family payments. These initiatives left little for the real battlers who depend on direct government benefits (rather than concealed tax concessions). </p>
<p>These voters are assumed to be solid Labor regardless and mostly live in Labor’s rotten suburban boroughs or safe National Party electorates. </p>
<p>The love affair with small business in Australia is tri-partisan. It includes the Greens. The inconvenient fact that large businesses are better employers and invest more in innovation is ignored. But there is a more fundamental problem with Labor’s appeal to small business; their viability is dependent on consumer demand. </p>
<p>No amount of tax code tinkering or a “Small Business Commissioner” will benefit the sector more than a growing economy. In the early 1990s, policymakers underestimated the sensitivity of the economy to high interest rates and the result was a severe recession. We can only hope that the government is not similarly underestimating the impact of fiscal consolidation. </p>
<p>Labor’s dogged pursuit of a surplus has been criticised by many commentators as a doomed attempt to appease conservative critics, but there is another, more significant, political strategy at work here. </p>
<p>Labor hopes that fiscal consolidation will encourage lower interest rates and spark a revival in housing prices. This is a risky strategy; lower interest rates are not in themselves a sign of economic health. The best way to reduce interest rates would be to induce a severe recession. The political class seems to assume that median voters are more concerned about the value of their main asset (their house) than the overall health of the economy, and in particular unemployment levels. </p>
<p>Both Labor and Coalition governments have championed workforce participation as the solution to poverty, and the budget’s reforms to supporting parents payments conform with this approach. The fiscal strategy of both Labor and the Coalition calls into doubt the sincerity of their commitment to lower unemployment. </p>
<p>Federal Labor’s political fortunes are at low ebb. The Gillard government seems on track to a defeat of 1996 proportions. Voters across the social scale, perhaps unfairly, have judged Labor’s overall performance harshly. Labor’s attempt to target imagined suburban battlers is unlikely to be successful.</p><img src="https://counter.theconversation.com/content/6854/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoffrey Robinson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The 2012 budget came at a particularly challenging time for Labor. The government has sought to achieve two distinct (if related) political goals: bolster Labor’s “economic management” credentials and…Geoffrey Robinson, Senior Lecturer, School of Humanities and Social Sciences, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68652012-05-09T02:17:04Z2012-05-09T02:17:04ZA political shell game for small business?<figure><img src="https://images.theconversation.com/files/10463/original/nqf7n5sr-1336529548.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While the budget proved somewhat of an empty shell for corporate Australia, small businesses had reason for cheer.</span> <span class="attribution"><span class="source">tiny banquet committee</span></span></figcaption></figure><p>The 2012 federal budget offers to return a modest surplus of $1.5 billion over the financial year 2012-2013, with the hope of further surplus budgets in the following years. In normal circumstances, this budget would not be particularly remarkable. However, in the context of a hung parliament and with the federal government’s popularity with voters at low ebb, this budget is of critical significance.</p>
<p>Overall, the budget is something of a political shell game. The Treasurer, Wayne Swan, has deftly moved money from one hand to the other, swapping the peas around so as to produce the illusion of change. The deferment of large defence purchases (such as the new F-35 joint strike fighters) does not remove these expenses, but simply pushes them off into another shell for some other budget to worry over. </p>
<p>So far, the political discussion on the day following the budget announcement is a mixture of disappointment from those who found their shells empty, and mild satisfaction for those who discovered their shell contained a pea.</p>
<p><strong>So what about small business?</strong></p>
<p>One of the biggest disappointments in the budget was the failure by the government to deliver on the much anticipated tax cuts for business. Admittedly, the cut was only a modest 1%, but it was a policy intention that Wayne Swan did much to tout in the lead up to the budget. His attempt to shift the blame for this failure to deliver onto the Opposition seems rather hollow given that the decision will contribute around $4.8 billion in savings, perhaps the most significant single chunk of money after the defence cuts.</p>
<p>For small businesses with cash-flow problems caused by the high dollar, declining consumer spending and banks unwilling to pass on interest rate reductions, this reneging on the tax cuts will be a bitter pill. </p>
<p><strong>Loss carry-back to the rescue</strong></p>
<p>In a gesture of recognition that the small business sector needs some help, the Treasurer announced the “loss carry-back” scheme. Under this program, companies which experience tax losses in financial year 2012-2013 will be eligible to offset up to $1 million against taxes paid on profits from the previous trading period. From financial year 2013-2014, companies will be able to carry back tax losses for up to two years to a level of $300,000. </p>
<p>The Treasurer has made much of this “loss carry-back” scheme and, on the surface, it looks fairly attractive. However, these measures may be too late for many small businesses who took significant losses in the wake of the global financial crisis in 2008-2009. Bankruptcies in Australia rose substantially over the period 2007-2010, with many small firms having to restructure and write off losses permanently. </p>
<p>The “loss carry-back” scheme is also fraught with some technical issues, of which the most significant is that of the “same business test”. This requires that a business seeking to carry-back its losses demonstrate that they were lost as part of the same business operations that produced the profits upon which the original tax was paid. </p>
<p>In many cases, this might pose problems for small businesses who have sought to diversify their business operations. For example, a business that has done well in a specific industry sector might seek to open new business opportunities by launching new products and services. These may be developed under new brand names or even under new business structures better suited to the new market. As innovative and therefore higher risk strategies they may result in losses, but these may not pass the “same business test”.</p>
<p><strong>Tax breaks for cash flow</strong></p>
<p>The budget also contains some sweeteners for small business in the form of immediate tax write-offs for assets costing less than $6,500. There will also be immediate deductions of up to $5,000 for new or used motor vehicle purchases. </p>
<p>Eligible businesses will need to have annual turnover of less than $2 million, which means that these taxation measures are targeted largely at the micro-enterprises and smaller firms. However, these companies comprise the vast majority of the nation’s businesses.</p>
<p>Such tax write offs are a good initiative from the budget and will help to ease cash flow and assist in replacing much needed items such as computer equipment or small scale capital items. </p>
<p>Over the longer term, the government is promising more work on the taxation system and the reduction in red tape. However, these remain mere promises and given the backflip on the corporate tax cuts one could be forgiven for being sceptical. </p>
<p><strong>Future outlook</strong></p>
<p>The budget also promises to retain the Small Business Advisory Service and to boost its funding by $28 million over four years. The Small Business Support Line will also be extended to 2015-2016. As has already been announced, a federal Small Business Commissioner will be appointed in 2013.</p>
<p>A major criticism of the budget is its lack of big ideas or a clear future vision. The budget does contain a strategic desire to see Australia take advantage of the anticipated rise of the Asian economies. It is here that some initiatives can be found, such as the “Buy Australian at Home and Abroad” program, aimed at helping local firms get more of a share of the mining and resources project investments. </p>
<p>There is also a “road map for manufacturing”, and some useful initiatives to help enhance skilling of the workforce. The $30 million investment into the new Manufacturing Technology Innovation Centre is welcome, as is the $5,000 payment to tradespeople to help them set up new operations. </p>
<p>Also welcome is the $1.8 billion for the next financial year for R&D Tax Incentives that will help foster innovation in industry, plus the $100 million to match private venture capital investment funding. Since the GFC, the venture capital market in Australia has been depressed, so this may help.</p>
<p>Other schemes of benefit to the longer term are the continuation of the “Enterprise Connect” business assistance program and clean technology and energy schemes. However, the decision to cut funding for the green buildings program may reduce opportunities for innovation in the construction sector.</p>
<p>Despite these positives, the overall impression one gets of this budget is that it is a political shell game. The federal government needs a political fix to give it a fighting chance at the forthcoming elections in 2013.</p>
<p>Securing a surplus was always more of a political necessity than an economic one. The decision has been to feed money to the lower income households and make life more difficult for the Opposition, who seem keen to impose more pain on the community through deeper cuts to federal government spending.</p><img src="https://counter.theconversation.com/content/6865/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Mazzarol receives funding from the Australian Research Council. He is affiliated with the Small Enterprise Association of Australia and New Zealand (SEAANZ) and the International Council for Small Business (ICSB).</span></em></p>The 2012 federal budget offers to return a modest surplus of $1.5 billion over the financial year 2012-2013, with the hope of further surplus budgets in the following years. In normal circumstances, this…Tim Mazzarol, Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy , The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69032012-05-09T02:15:18Z2012-05-09T02:15:18ZNDIS funding a start but limited trial means a long wait for most<figure><img src="https://images.theconversation.com/files/10458/original/35gnx4yq-1336524398.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">At the end of the four years, only 5% of Australians with a disability will be covered.</span> <span class="attribution"><span class="source">Flickr/afri</span></span></figcaption></figure><p>Last night’s budget contained an <a href="http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst1-07.htm">important step</a> towards realising a <a href="http://www.ndis.gov.au/">National Disability Insurance Scheme</a> (NDIS), with $1bn allocated over the next four years. Of these funds, $342.5 million will pay for individualised care and support for 10,000 people in four yet-to-be-announced “launch sites” in 2013-14. The trial will grow to include 20,000 people by 2014-15. </p>
<p>The remainder of the funding will go towards the <a href="http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst1-07.htm">set-up costs</a> of the NDIS over four years, including systems for data collection and analysis, local area coordinators, a new agency to oversee implementation and manage delivery, assessment of need and monitoring of outcomes and the effectiveness of the scheme.</p>
<p>The government’s announcement will see people assisted by the scheme a year earlier than the timeline the Productivity Commission suggested in its 2011 report into <a href="http://www.pc.gov.au/projects/inquiry/disability-support/report">disability care and support</a>. </p>
<p>But there are some major shortfalls in last night’s announcement. At the end of the four years, only 5% of the estimated 411,000 Australians living with a significant disability will be receiving individualised support under the scheme. </p>
<p>The NDIS is a large and complex reform that must be managed carefully. A graduated roll out is inevitable – and could strengthen the scheme over time as lessons are learned from each stage and then applied. But people living with a disability have already waited too long for improved services. The Productivity Commission recommended a rapid increase in the number of people included until the scheme is fully rolled out in 2018-19 and <a href="http://www.pc.gov.au/projects/inquiry/disability-support/report">warned</a> “the scheme must not be open-ended”. </p>
<p>The budgeted amount is also considerably less than the Productivity Commission’s estimate of the start-up costs – $893 million for support and care for the first 20,000 people, along with additional funds for administration. The budget has only allowed $345.4 million for these costs in that year, or 39% of the Commission’s estimate. The four-year allocation is just 26% of the Commission’s recommended amount for the same period.</p>
<p>The Productivity Commission has <a href="http://www.pc.gov.au/projects/inquiry/disability-support/report">labelled</a> the current disability system as “inequitable, underfunded, fragmented, and inefficient and give people with a disability little choice”. Resources are often only allocated after a family crisis. This is damaging for the people involved, and costly and inefficient for the system. </p>
<p>Inevitably, crises have to receive priority, but redirecting resources away from more timely assistance creates a cycle of crisis. If the funding allowed for the trial is inadequate, it will be harder to break this cycle, skewing outcomes and making evaluation of a properly functioning scheme difficult. </p>
<p>Another concern is the government hasn’t detailed plans beyond the next four years, including when full roll-out will be achieved. This is a missed opportunity to articulate plans for legislation of the scheme and dates for full implementation. The slow pace and uncertainty around future expansion will exacerbate the unfairness of the current system in the short run.</p>
<p>If informal care collapsed in this country, or even followed a natural decline as carers age while their disabled children live longer, the government would face a huge surge of liabilities. The NDIS is a major reform that must be undertaken to address this problem, and to improve what Bill Shorten <a href="http://www.smh.com.au/national/labor-backs-disability-insurance-scheme-20111203-1ocid.html">once described</a> as systemic second class treatment of people with disabilities. </p>
<p>Budgets are about fiscal management and responsibility, and they are also about social choices. The allocation for the NDIS in this budget is welcome, but much more needs to be done.</p><img src="https://counter.theconversation.com/content/6903/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elizabeth Manning's daughter has a disability.</span></em></p>Last night’s budget contained an important step towards realising a National Disability Insurance Scheme (NDIS), with $1bn allocated over the next four years. Of these funds, $342.5 million will pay for…Elizabeth Manning, Economics lecturer , Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68222012-05-09T01:32:50Z2012-05-09T01:32:50ZAccounting “tricks” behind the federal budget surplus<figure><img src="https://images.theconversation.com/files/10460/original/zp7vd6fn-1336525597.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Treasurer Wayne Swan is chuffed about the surplus, but it pays to take a deeper look at the numbers.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Government budgets are increasingly becoming more political documents. This has been particularly evident with the federal government’s pledge to return the budget to surplus.</p>
<p>However, budget numbers are calculated pursuant to accounting principles, and a number of accounting “tricks” can be identified behind the $1.5 billion surplus number. </p>
<p>Some relevant observations on the Commonwealth budget from an accounting perspective are outlined below. </p>
<p><strong>Will the surplus actually be delivered?</strong></p>
<p>While the government is budgeting for a 2012-13 bottom line surplus (underlying cash balance) of $1.5 billion, the question is whether this will actually be achieved. The budget is merely a forecast of what is expected for the ensuing financial year. </p>
<p>Take the 2010-11 budget year as an example. The government originally budgeted in May 2010 for a deficit of $57.1 billion. However, some 16 months later in September 2011, the actual final outcome was a deficit of $47.4 billion - a 17% difference. Similarly, the 2011-12 deficit, originally forecast to be $22.6 billion, is now expected to blow out to $44.4 billion.</p>
<p>The government is making much of the return to surplus at this point in time, but we will not know whether that will actually be achieved until around September 2013. And the budgeted surplus of $1.5 billion provides only a very thin margin for error.</p>
<p>If the past is any guide, the final outcome due for reporting around September 2013 will not receive anywhere near the same attention as the budget now, especially as a further budget will have been released in May next year.</p>
<p><strong>Shifting of spending out of the 2012-13 budget year</strong></p>
<p>Given its commitment to announcing a surplus, the government has had an incentive to move spending out of the 2012-13 budget year. What is especially evident is the extent to which the government has made “policy decisions” that have taken spending out of the 2012-13 year and brought it forward into the current financial year (ending 30 June 2012).</p>
<p>The commencement of this strategy was evident in the government’s <a href="http://www.budget.gov.au/2011-12/content/myefo/html/index.htm">Mid-Year Economic and Fiscal Outlook</a> (MYEFO) released in November 2011. Under the heading “Fiscal reprioritisation”, the government indicated that in the six-month period between the release of the 2011-12 budget in May 2011 and MYEFO, the net budget impact of policy decisions was to provide a $2.9 billion improvement to the 2012-13 bottom line. A further $3 billion saving to the bottom line has been achieved with policy decisions made between MYEFO and this budget. The net effect has been an improvement of $5.9 billion in the budget bottom line. Without these decisions, the 2012-13 budget bottom line would have been a $4.4 billion deficit.</p>
<p>A particular trick evident here is that the aggregate amount of the shift ($5.9 billion) can only be detected by examining both the MYEFO documents and the current budget.</p>
<p><strong>Increase in dividends from public corporations</strong></p>
<p>A particular feature of this year’s budget is the expected increase in the “efficiency dividends” from government public corporations. These dividends are budgeted to provide revenue of $1.1 billion for the 2012-13 budget year.</p>
<p>However, in terms of the whole-of-government sector, these public corporation dividends represent a fiddle, as they are merely distributions from one sector of government to another.</p>
<p>The announced budget surplus of $1.5 billion is that for the general government sector (GGS). The GGS comprises the government units and non-profit institutions controlled and financed by the government. The GGS budget figures represent taxation and other receipts and spending through the various government portfolios and departments.</p>
<p>However, the whole-of-government sector, representing a government’s total operations and finances, is comprised not only of the GGS but also includes various public corporations. These public corporations represent government-controlled companies and quasi-corporations, examples of which include Medibank Private, the Reserve Bank of Australia, Australia Post, the NBN Co, Airservices Australia and the Australian Rail Track Corporation.</p>
<p>Dividends from public corporations are akin to a dividend paid to a parent company by a subsidiary in a wholly owned group of companies. Such a dividend makes no difference to the wealth of the group as it does not reflect a transaction with an external entity. In consolidation accounting terms, these dividends would be eliminated as an intra-group transaction in any financial statements prepared at the whole-of-government level.</p>
<p>Given their inclusion, though, another interesting observation is that the government is budgeting for a one-off increase in these public corporation dividends in the year of the return to surplus. From an amount of $374 million for 2011-12, these dividends are budgeted to increase to $1.1 billion for 2012-13 and then return to $446 million and $476 million respectively for the following two years. Of course, it is the government that controls these public corporations and determines the annual dividends, so the figures suggest the government has deliberately increased these dividends to assist in budgeting for a 2012-13 year surplus. This increase in dividends above their normal level provides benefits to the budget bottom line of around $0.7 billion - almost half the amount of the surplus.</p>
<p><strong>National Broadband Network</strong></p>
<p>A further issue stemming from the use of public corporations can be illustrated by the example of the National Broadband Network (NBN). As the NBN will be undertaken by the NBN Co Ltd, a public corporation, this expenditure and the related borrowings will not appear in the general government sector budget. Accordingly, the $40 billion or so of NBN spending that has commenced and that will continue into future years will never appear in the budget bottom line.</p>
<p>Perusal of the NBN Co’s annual report for the year ended 30 June 2011 reveals that the 2010-11 budget bottom line would have been adversely affected to the extent of approximately $0.7 billion had the NBN spending been undertaken through the GGS rather than a separate public corporation. As the NBN spending is ramped up over future years, the effect of this omission from the budget bottom line will become greater and greater.</p>
<p><strong>Underlying cash balance versus accrual accounting</strong></p>
<p>Unlike the states and territories, the Commonwealth government uses a cash-based measure - the underlying cash balance - in announcing its budget bottom line. A cash-based measure is subject to manipulation by the types of adjustments to spending patterns outlined above. If an accrual-based measure of the budget bottom line was used, consistent with the surplus/deficit announcements of the state and territory governments, a $202 million “net operating balance” deficit - not a surplus - would have been announced. What is of interest here is the rhetoric that accrual accounting has been adopted throughout the public sector. But the Commonwealth government’s budget announcements are an obvious exception.</p>
<p><strong>Conclusion</strong></p>
<p>Isn’t it lucky we have a “Charter of Budget Honesty”!</p><img src="https://counter.theconversation.com/content/6822/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Graeme Wines does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.
</span></em></p>Government budgets are increasingly becoming more political documents. This has been particularly evident with the federal government’s pledge to return the budget to surplus. However, budget numbers are…Graeme Wines, Professor in Accounting, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68532012-05-09T01:03:30Z2012-05-09T01:03:30ZWill Wayne win over the battlers or is it too late for Labor?<figure><img src="https://images.theconversation.com/files/10459/original/zb2dtzqx-1336525249.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Swan's budget targeted the Labor base, but it may not be enough.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>“Walk into the local pet shop and the resident galah will be talking about microeconomic reform.” So Paul Keating once famously quipped about the significance of the government’s microeconomic reform agenda to the national pysche. Well if the resident galah is still alive and talking now Wayne Swan is Treasurer there are two different words on his lips - “budget surplus”.</p>
<p>The cornerstone of the Treasurer’s budget commitment - and one of its primary selling points - is to return the economy to a surplus of $1.5 billion in the year 2012-2013. This promise will, the Treasurer announced in his budget speech, be delivered “on time, as promised and ahead of every other major advanced economy”. This promise is designed to demonstrate the government’s commitment to sound economic management. It is also aimed at showing the strength of the Australian economy at a time when European and other Western economies suffer under the weight of recession and crippling levels of government debt. </p>
<p>The question, though, is do any of the “working families” who the budget is targeted towards actually care about the government’s proposed surplus? In the same way that Paul Keating’s focus on the intricacies of economics such as microeconomic reform led him to lose touch with mainstream Australia, has Wayne Swan similarly lost touch with what average Australians are interested in?</p>
<p>Although inflation is low, and housing prices and interest rates are also falling, many Australians still feel burdened by cost of living pressures. These pressures are reinforced in the psyche by the advent of the carbon tax and the well-publicised threats to manufacturing and retail jobs in states that haven’t been reached by the mining boom.</p>
<p>The difficulty the government and Treasurer faced was that its statements in previous budgets showed an almost messianic commitment to returning the budget to surplus. Any divergence from these commitments given the already parlous state of the government’s credibility would have further shattered the Labor brand. </p>
<p>Despite this attempt to bolster Labor’s public credibility ABC 7.30’s Special Report on the budget still opened with the query – “Can Wayne Swan deliver the surplus on time as promised?” This query would seem a legitimate one given the blowout in last year’s budget deficit. Yet it also reflects the government’s failure to sell its credibility on any issues to the Australian media and public. As the public relations specialists say, your management of current issues depends on how credible your perceived handling of previous issues has been. In this area, for a variety of reasons, the government has been found wanting.</p>
<p>There is another reason, however, to suggest that the Treasurer is barking up the wrong tree when it comes to emphasising the power of the surplus and credentials of economic management to transform the government’s public image. Studies have suggested that people have different expectations of conservative as opposed to Labor governments. </p>
<p>While conservatives are generally perceived as good economic managers and fiscally responsible, Labor governments are perceived as better at dealing with issues such as education, health and social welfare. These perceptions are thought not to change easily over time despite the individual record of the particular government in power. </p>
<p>In seeking to challenge conventional wisdom at a time when his party already suffers from a pre-existing credibility gap, Wayne Swan may thus be setting himself an insurmountable task.</p>
<p>Recognising that the Labor brand requires attention to the core issues of health, education and the welfare of lower and middle-class families, Swan introduced his $3.6B package designed to “spread the benefits of the mining boom.” </p>
<p>Payments to families, a National Disability Insurance Scheme, more money to public hospitals and a reduction in dental health waiting list were all part of these appeals to “core Labor values”. Taking money from the rich through such things as crackdowns on executive perks and scrapping company tax reductions was designed strategically both to pay for the family package and further align the government with the “battlers” in Australian society.</p>
<p>Having said all that, one could easily ask the question: Does the budget matter given Federal Labor’s parlous state in the opinion polls? Experienced political market researchers I know have told me they have rarely, if ever, seen the level of anger, as opposed to antipathy, directed to a federal government in the focus groups they run. Such rusted-on resentment is unlikely to be easily changed by macroeconomic policy aimed at achieving a surplus as well as some budget sweeteners.</p>
<p>One could more plausibly argue that Wayne Swan’s budget is designed in an attempt to preserve the Labor brand for future generations of Labor leaders. In the face of the near obliteration of the Queensland party at the recent state election and the similar calamity that could very easily befall Federal Labor at the next election, Swan had to do something to prevent the party from being unelectable for many years to come. </p>
<p>John Howard, after all, was able to limit the Liberal Party to a 28-seat defeat at the 2007 election. This margin enabled the Tony Abbott-led opposition to come agonisingly close to victory in 2010. The 55-seat defeat of the Whitlam government in 1975 on the other hand ushered in a more sustained period of conservative political dominance.</p>
<p>It remains to be seen whether Swan’s political strategy to sell his budget will have any significant effect on Labor’s political fortunes, both for now and for future generations of labor leaders. </p><img src="https://counter.theconversation.com/content/6853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nick Sharman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“Walk into the local pet shop and the resident galah will be talking about microeconomic reform.” So Paul Keating once famously quipped about the significance of the government’s microeconomic reform agenda…Nick Sharman, Subject Co-ordinator and Lecturer, Media and Communications, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69152012-05-08T12:59:42Z2012-05-08T12:59:42ZGovernment postpones aid target, but ramps up aid effectiveness<figure><img src="https://images.theconversation.com/files/10455/original/rr6sfzvg-1336476918.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">More effective aid has been the focus this year.</span> <span class="attribution"><span class="source">AAP/Australian Defence Force Petty Officer Damian Pawlenko</span></span></figcaption></figure><p>The government has postponed its foreign aid target by a year as part of its 2012 Federal Budget, but has announced a raft of new measures to monitor the effectiveness of Australia’s aid programs.</p>
<p>The Conversation spoke to Stephen Howes, Director of the Development Policy Centre at ANU, about the future of Australian aid.</p>
<hr>
<p>I think you could say this budget was pretty weak on scaling up the aid program but strong overall on effectiveness. It’s important to look at both dimensions, both quality and quantity.</p>
<p>In terms of the numbers, the government has pressed the pause button on the aid-to-Gross-National-Income ratio, which it had been increasing and had committed to increase to 0.5 by 2015.</p>
<p>So they’ve kept that at 0.35 this year. The follow-on is that they’ve pushed back the target of 0.5 by one year with a small increase this year – about $300 million, which is about a 4% real increase, in line with economic growth.</p>
<p>They had to push back the target and I think it will still be a huge challenge to meet it, even with the one year delay. That’s because, on average, you have to increase the aid budget by $1 billion per year to get to the 0.5 target, even a year later.</p>
<p>So it remains to be seen how serious the government is about the aid target, and it remains to be seen whether the opposition buys into this new delayed commitment. One of the positive features of the previous commitment was that it was an agreement between the two major parties.</p>
<p>In terms of effectiveness I think there’s a lot of good material that the government released with the budget. A lot of the responses to the aid review were contained in the budget. It will take some time to go through those documents and give a thorough evaluation, but we know they’ve released the four-year strategy.</p>
<p>So for the first time the government has released a strategy for how they’re going to scale up the aid program. It doesn’t take us to 0.5 but it does take us to 2015-16.</p>
<p>The government has also put out a results framework, so for the first time we can try to hold the aid program accountable. After all, when we don’t know what the program’s trying to achieve, it’s difficult to say whether or not it’s succeeding.</p>
<p>The government also announced the establishment of an independent evaluation committee. This is a senior, independent organisation that would oversee <a href="http://www.ausaid.gov.au/Pages/home.aspx">AusAID</a>’s evaluations and ensure the quality and independence of those evaluations. That’s an important reform.</p>
<p>There are two other striking features relati to effectivenes. First, most of the increase this year is through global programs, rather than country programs – some 60% of that $300 million increase. So that means big increases to non-government organisations and multilateral organisations such as the <a href="http://www.adb.org/">Asian Development Bank</a> and some UN agencies.</p>
<p>That’s something the aid review recommended and I think it makes a lot of sense for Australia to invest more heavily in other organisations rather than trying to do everything ourselves. Especially as we’re scaling up, we have limited capacity, we need to work more through others. I think that’s a positive development.</p>
<p>On the other hand, while there was no increase in the allocation to Latin America, there was no decrease either. The aid review had recommended we stop providing aid to Latin America.</p>
<p>And there is continued rapid expansion of the aid program to Africa, whereas the aid review had argued that country aid to Africa should be kept at a constant level. Rapid expansion of the Africa program doesn’t suggest enough consolidation of the aid program.</p>
<p>But overall the budget seem to be a big step forward on the effectiveness agenda. We should certainly see more effective aid coming out of the budget, though it’s not as much of an increase in aid as we would have hoped for, or indeed as the government had earlier committed to. </p><img src="https://counter.theconversation.com/content/6915/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen serves as a Board Member for the Pacific Institute of Public Policy, and sits on the Advisory Board of the Asian Development Bank Institute.</span></em></p>The government has postponed its foreign aid target by a year as part of its 2012 Federal Budget, but has announced a raft of new measures to monitor the effectiveness of Australia’s aid programs. The…Stephen Howes, Director, Development Policy Centre, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/67922012-05-08T12:29:39Z2012-05-08T12:29:39ZWhat the budget means for dental care in Australia<figure><img src="https://images.theconversation.com/files/10445/original/x685666y-1336458358.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There’s good news in the Budget for the one in three adults who have delayed or avoided visiting a dentist in the last year because of cost.</span> <span class="attribution"><span class="source">illuminaut/Flickr</span></span></figcaption></figure><p>The Federal Budget includes $515.3 million dentistry package that will go some way to easing some of the problems with dental care in Australia. Of this total, $345.9 million will be used to treat patients on long waiting lists and providing other vital services to adults.</p>
<p>Medicare shows Australia has recognised that health care is a right, but oral health care has been largely excluded from that recognition. This has resulted in a social gradient in access to dental care, particularly for adults but, increasingly, for children as well.</p>
<p>The <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1834-7819.2011.01332.x/full">oral health of children has worsened</a> since the mid-1990s. The <a href="http://www.aihw.gov.au/publication-detail/?id=6442468272">number of school dental services</a> that formerly provided free access to school-aged children in most states and territories have also declined.</p>
<p><a href="http://www.aihw.gov.au/publication-detail/?id=6442467608">Dental disease</a> is now one of the most common reasons for children to have a general anaesthetic in hospital. The options devised by the <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/final-report-of-national-advisory-council-on-dental-health.htm">National Advisory Council on Oral Health</a> to address these issues were intended to improve access to dental care for children, either by extending an existing entitlement, such as the <a href="http://www.medicareaustralia.gov.au/public/services/teen-dental.jsp">Teen Dental Program</a> to all children (and by including treatment), or by extending existing public services for children.</p>
<p>Sadly, the Budget has no specific recommendations for children’s dental care, although the money for employing oral health therapists and for oral health promotion may include a focus on children.</p>
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<img alt="" src="https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10447/original/jb87jdpk-1336458758.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><span class="source">libertygrace0/Flickr</span></span>
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<p>Oral health remains a significant health problem for Australian adults. A quarter of adults in Australia have <a href="http://www.aihw.gov.au/publication-detail/?id=6442467953">untreated tooth decay and about one in five</a> have moderate or severe gum disease.</p>
<p>There are many barriers to timely and affordable access to dental care for many adults. Half of the adult population has <a href="http://www.aihw.gov.au/publication-detail/?id=10737418681&tab=2">less than appropriate dental care</a> either because they only visit a dentist when they in pain or have a problem. Or, they visit infrequently so it becomes difficult to intervene early in the disease process.</p>
<p>For the over the one-third of Australian adults who have delayed or avoided visiting a dentist in the last 12 months because of cost, there’s some good news in the Budget. </p>
<p>Prior to this week, the government had announced $165 million to address the long waiting lists in the public dental services. The announcement on the weekend increases that allocation to approximately $350 million over three years. These funds will assist people currently on waiting lists for dental care. </p>
<p>The proposal is in line with one of the options suggested by the <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/final-report-of-national-advisory-council-on-dental-health.htm">Advisory Council</a> for enhanced access to public dental services.</p>
<p>The package to address the shortage of dentists in rural areas is also very welcome, and its success will depend on ongoing support, such as online specialist advice, for dentists who choose to relocate. </p>
<p>The $10.5 million for oral health promotion and the proposal to develop a National Oral Health Promotion Plan will go some way to address its previous underfunding. But it remains short of the $20 million per year suggested by the <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/nhrc-1">National Health and Hospital Reform Commission</a>.</p>
<p>The inclusion of this dental care package in the Budget is welcome and will make a difference for many people. But there’s still much work to be done to establish fair and equitable access to health care for people with oral diseases.</p><img src="https://counter.theconversation.com/content/6792/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kaye Roberts-Thomson receives funding from the NHMRC. She is the director of ARCPOH. Some researchers at the centre receive funding from Colgate Oral Care.</span></em></p><p class="fine-print"><em><span>Jane Harford receives funding from the NHMRC. </span></em></p>The Federal Budget includes $515.3 million dentistry package that will go some way to easing some of the problems with dental care in Australia. Of this total, $345.9 million will be used to treat patients…Kaye Roberts-Thomson, Director of the Australian Research Centre for Population Oral Health, University of AdelaideJane Harford, Senior Research Associate at ARCPOH, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69142012-05-08T11:19:41Z2012-05-08T11:19:41ZFederal budget 2012: expert reaction<figure><img src="https://images.theconversation.com/files/10450/original/ndzjzjxr-1336471802.jpg?ixlib=rb-1.1.0&rect=50%2C38%2C1901%2C1263&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Battler's budget: Will Wayne Swan's budget help win back an electorate?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Labor has made a $5 billion pitch to true-believers with a $1.5 billion surplus, cash hand-outs and tax breaks for low- and middle-income earners in the federal budget.</p>
<p>And the opinion-makers are on the march. As the Canberra pack emerges blinking from the lockout, brandishing their instant verdicts, we’re steering clear of the professional pundits and heading straight to the academic experts.</p>
<p>What will this budget actually mean - for higher education; for parents of school age children; for foreign aid; for complementary medicine; for company tax? What does it tell us about the political fortunes of the Gillard Government?</p>
<p>Our panel of expert reactions will be updated throughout the night as responses come in.</p>
<hr>
<p><strong>Michael Rafferty, Senior Research Analyst, Workplace Research Centre at University of Sydney</strong></p>
<p>What you’ve got with this budget is an attempt to address some long-term issues with massive redistribution away from working Australia to the rich. And this budget is rather a token gesture towards dealing with that. The continuing theme of the budgets of the past 15 years has been tweaking distributional issues between high-income working people and low-income working people, but actually doing nothing about redistribution between the owners of capital and the people that work for capital.</p>
<p>This budget is about some slight income redistribution. That income redistribution is not even going to touch the Clive Palmers and Gina Rineharts. Without getting too ridiculous, it’s sort of like Putin-light. I do believe that if you look at Russia, you actually see oligarchs in the raw, in Australia we have rentiers in the raw, or slightly raw – people who have a lot of money. And despite what Wayne Swan has said in the past, he’s actually done nothing to change Clive Palmer’s revenue streams or Gina Rinehart’s revenue streams. Their incomes or their net wealth can grow by a billion dollars a year, and nothing happens to their tax treatment.</p>
<p>What’s being missed in the political debate is that even a budget like this, which is supposed to be a battlers’ budget – really that’s just a rhetorical flourish which covers up for the massive redistribution from working Australians to the owners that’s occurred over the past decade or so.</p>
<hr>
<p><strong>John Wanna, Sir John Bunting Chair of Public Administration at Australian National University</strong></p>
<p>I think it’s a peculiar budget. It’s got a lot of reigning in, to bring back that $44 billion deficit. It’s very optimistic on the tax revenue increases of $39 billion, which would appear to meet most of it, but that an optimistic thing, assuming that the economy will pick up. But it’s also letting a lot out, particularly over the longer term.</p>
<p>A lot of the announcements were four to five years out, commitments in the tens of millions and the hundreds of millions rather than often in the billions. So there’s a smaller amount of money going out, but it’s over a long time frame. Now when governments are talking about a five-year-long time frame, they’re talking about probably across two parliaments, so that doesn’t necessarily mean anything is going to happen this year – which is probably what Swan is hoping for. Unless revenues pick up drastically, they’re probably not going to start until in 2013-4 budget year, or even longer.</p>
<p>There’s a huge amount of deferred spending. The things he announced in the budget that were sweeteners, relatively small investments in health and disability, but over a relatively longer time frame than some of it was repackaging.</p>
<p>There were times in the benefits of the boom, back with the benefits of tax and they’ve decided to not challenge that. That’s saving them $5 billion and they’re spending about $3.5 billion of that on lower income earners. </p>
<p>Basically, anyone on less that $60,000 is doing reasonably well in terms of the cash benefit or some additional income that they otherwise wouldn’t have had, depending on how many children you have. If you’re above $60,000, you’re probably not getting that much out of this budget at all. Other than what you’re already getting out of the carbon tax plan, which goes a bit higher, it goes up to around $120,000-$130,000 per family income.</p>
<p>Chris Richardson (Access Economics) said business will be a bit cranky that some of their higher income rorts were being targeted, like the living away from home allowance. </p>
<p>As an irritant, I think they’d be upset about the company taxes coming down and there’s no indication of that happening. They’d be pleased with the government’s economic figures though. Low unemployment, reasonably good investments, retail sales are reasonably good, GST is a little bit down – but not a lot. Treasury is talking about growth returning to trend – they’d be quite happy with that if it transpires. I don’t think they’re going to be worried about high-income tax on high-income earners, because unless you’re salaried, you’re probably not paying that if you’re in law firms or executives, or family trusts you’re probably not paying that, so that’s only raising a billion dollars and that’s probably people in the public service on high salaries and that’s a relatively low percentage of people. </p>
<hr>
<p><strong>Jakob Madsen, Xiaokai Yang Professor of Business and Economics at Monash University</strong></p>
<p>I’m in strong favour of a surplus. There are two reasons for that. The best way to avoid a financial crisis is to have a very tight budget, so you can do plenty of cuts. If you look at Greece and Spain, they were very irresponsible during the good years. And when they were down, they didn’t have a penny to finance the deficit. And that’s exactly the situation we want to avoid. </p>
<p>It’s very important to have a surplus. The second reason is we are going to have demographic change. Our population will be ageing. That means there will be a very strong increase in spending for pensions; the revenue from those taxes will decrease. We need to prepare for that situation. The only way to do that is to do it now, while the going is good. </p>
<p>It’s a good budget, but I’d hoped for a better budget. The government is too optimistic about crucial assumptions that are underlying their budget. The most important assumption is about how much the Australian economy will grow. If the economy is not growing, then taxes will not grow. And if the economy is expected to increase over 3% per year, then one assumes revenue will increase dramatically. I think that is a bit optimistic because there are several factors that indicate that the economy is not going to be strong this year or next year.</p>
<p>There are two important things here. When one forecasts, we always have to look at the banking sector and the housing market. The housing market has been going down for the last year, and that’s clearly reducing people’s spending. Then we have, in addition to that, banks becoming more reluctant to lend out because asset prices have gone down. People don’t have the same collateral, so banks have become more cautious in their lending.</p>
<p>Then we have the stockmarket, which has not been very good for a long time. It’s been flat for a long time. Clearly, that’s putting a cut into the revenues of the government, but also points to reduced investment and spending. </p>
<hr>
<p><strong>Bob Gregory, Professor of Economics at the Research School of Social Sciences in the Australian National University</strong></p>
<p>The main issue to my mind is how difficult the situation is in framing this budget, in that the budget really turns on the economy doing much better than a lot of people now think. There’s evidence that Europe is starting to turn down a bit; there’s evidence that China is slowing up a bit.</p>
<p>The economy doesn’t look anywhere near as strong as it did two years ago, when the Government first committed to a surplus, so one has to be edgy about taking so much money out of the economy.</p>
<p>The second point is that within the budget itself, I thought the reallocation of expenditures was quite good, in that it does seem to me to be going in the right direction.</p>
<p>I think letting the income tax cut for companies go was a good decision. The Labor Government blamed the opposition, and that’s true [that the Coalition would have voted against it] but it is a good idea not to go ahead with that tax cut. I thought cutting defence also wasn’t a bad idea. I thought the balance of the budget was quite good.</p>
<p>The real issue though is whether the economy will do well in the next year and a half because the budget is planned to withdraw money from the economy when it’s going to be tough. I think the reaction of the economy to interest rate cuts is going to be slow. So I’m a little fearful that the economy may well go slow as a result of all of this.</p>
<p>The fact that economic growth is so different in different parts of the economy really does make forecasting quite difficult. A good example is that this year tax revenues are very low. The last time they were as low as this was when the unemployment rate was 10% in the Keating years in 1991 and 1992, and unemployment today is only 5.7%.</p>
<p>Last year’s budget reply by the leader of the opposition was a national disgrace. I thought last year Tony Abbott had the opportunity to comment on the future of Australia and instead he gave a low-quality political attack on the government. I hope that this time around, especially as Mr Abbott is so close to being prime minister, that he treats the reply with the respect it deserves, and we do get a good idea of what lies ahead.</p>
<hr>
<p><strong>John Quiggin, Professor, School of Economics at University of Queensland</strong></p>
<p>My problem with the budget is more to do with the framing. The actual question of whether they’re in surplus really isn’t a big deal. The problem is the government has made it incredibly difficult to flick the switch back to stimulus if that’s needed. They’ve got a bunch of little coded statements which imply they might do that, but I think in practice, if the economy turned down very sharply, they’re locked into this claim about the surplus and politically they’ll find it very difficult to avoid that.</p>
<p>Another problem is that they’ve tightened more than they need to. That’s reflected in the fact the Reserve Bank is adopting a 50 basis point cut which is certainly an indication that it (the RBA) has a very pessimistic view.</p>
<p>The standard story, which I think is borne out by long experience, is that contractionary monetary policy is incredibly effective. If you want to slow the economy down jacking up interest rates works incredibly well. But expansionary monetary policy famously is called pushing on a string. If you want an expansion you need fiscal policy. That was proved in the financial crisis, it’s been proved through history. The claim that in expansion terms monetary policy is more effective than fiscal policy is impossible to sustain either on a theoretical or a political basis.</p>
<hr>
<p><strong>Warwick McKibbin, Director, Research School of Economics, ANU College of Business and Economics</strong></p>
<p>There are two things that immediately came across. The first is that this is a budget about wealth redistribution and not wealth creation, and the second is that it’s really about buying votes when you look at the substance of it. That, to me, is very disconcerting.</p>
<p>There are a lot of transfers, which are not investments by the government in the future of the country. It’s actually just transferring money to constituencies that traditionally vote for the Labor party. Now that might be a good idea for them, but I see nothing in this budget which is about investing in Australia’s future. </p>
<p>It’s always responsible during good times to be putting money into savings, so there’s nothing wrong with the idea of surplus. The question is what’s being spent and what’s being cut, and the quality of the spending and the quality of the changes in our revenue base is what’s critical here. Most of what I see is not investments in education or capital, but payments to people to spend on anything they want.</p>
<p>You’ve got the loss of the cut in the corporate tax rate and a big cut in defence, but you are basically giving out a lot of revenue that could be invested in high-return activities.</p>
<p>You see the budget for the year just gone has doubled the deficit from $22 billion to $44 billion. I think the Treasurer’s retirement income should be tied to whether or not there actually is a surplus this year. </p>
<p>That would be a really effective way to stop politicians from promising things that they don’t deliver. For me, that’s the trouble with this political system, in that these guys create these incredible retirement packages for themselves, and they never deliver on what they promise. And I think it’s about time that they get the same sort of packages as executives – if they deliver, great. If they end up not delivering, then they should suffer.</p>
<hr>
<p><strong>Graham White, Senior Lecturer, School of Economics at University of Sydney</strong></p>
<p>On economic grounds, and on equity grounds, there’s been a lot of talk among media commentators that this is a more traditional Labor budget. If there’s going to be pain from the surplus, there’s been an attempt to ensure that most of the lower-income groups are quarantined from that, to an extent.</p>
<p>So, there’s an equity aspect to that, and economically – although I don’t agree that they needed to go into surplus – I imagine things could have been a bit worse than they were. It seems to me, on balance, that it’s probably as good as you can expect from a government that’s painted itself into a corner politically and has been forced to go for surplus. </p>
<p>Deferring foreign aid and the defence cuts are the big-ticket items. Chris Richardson from Deloitte Access has said that they’ve basically got their savings from the corporate sector and high-income earners – but that’s not quite accurate.</p>
<p>There’s also spending there, so it remains to be seen whether there’s any serious constraint on spending that might add to the softening economy. And, if it does, if it is balanced out by the initiatives they’ve taken in terms of benefits for low-income earners. Had the government gone for the tax cuts and crunched down on the expenditure more, it would be a very different scenario.</p>
<hr>
<p><strong>Hal Kendig, University of Sydney, Professor of Ageing and Health and Director of the Ageing, Work and Health Research Unit at University of Sydney</strong></p>
<p>The 2012-13 Budget provides a modest but important beginning to the Government’s $3.7 billion committment over the next five years to the valuable <a href="https://theconversation.com/moving-in-the-right-direction-for-better-aged-care-6582">Living Longer. Living Better Aged Care Reform package</a> announced in April.</p>
<p>Headline items for “strengthening the aged care system” include $955 million for the new integrated Home Support Program, $670 million for residential care, $268 million for people with dementia, $192 million to support diverse groups, and $256 million to build a new aged care system including the Aged Care Financing Authority and a new Gateway to improve access to services.</p>
<p>A closer look at the figures reveals that genuinely new funding is delayed and largely provided through redirecting existing funding. Growth in services will depend significantly on increased user charges albeit with careful means testing and caps on user costs. Means testing is expected to save $183 million in home care and $378 million in residential care.</p>
<p>An extraordinary $1.6 billion of savings to be achieved from “refining” the Aged Care Funding instrument for residential care will largely fund the $1.2 billion to be directed through the Workforce Compact to improve pay and conditions for aged care workers.</p>
<p>Overall, the Government has moved towards a fairer and more sustainable aged care system directed more to the overwhelming priority of older people for more care at home. There are major “buts” and questions ahead, including the capacity of a minority government to pass the enabling legislation. In the end a budget is a plan rather than an achievement but this one has substantial value for care of older people and it deserves bipartisan support. </p>
<hr>
<p><strong>Gregory Melleuish, Associate Professor, School of History and Politics at University of Wollongong</strong></p>
<p>It’s a piece of theatre, and it is as much about spin as it is about substance. So the idea is to put a particular message out there. And the message that you are sending out this time is a bit of a mixed message.</p>
<p>On the one hand Swan’s telling us that Australia is a fantastic place, we’re ahead of the rest of the world; we’re not like the Europeans; were not like the Americans. He’ tells us he’s going to deliver a surplus.</p>
<p>Although we don’t know whether he’ll achieve that come September next year. (And) That would seem to indicate that there is a financial discipline involved and that the government is going to financially be in control. </p>
<p>So that gives the message of being in control. And then having done that, I think there is an indication of an entitlement mentality. We are creating all this wealth: “you may not have earnt it all yourselves, but you’re entitled to it anyway”, Swan is saying. “I’m going to hand it back to you and I’m going to give you money and I’m going to give you this and I’m going to give you that.”</p>
<p>Whereas, if we’re creating all this wealth, then rather than handing back now for the present, it might be better to think about how this wealth is going to be used in the future when perhaps the mining boom is over. So it’s an interesting sort of mentality. </p>
<p>It’s obviously a political exercise, where the government is in trouble. It’s had Mr Slipper and Mr Thomson and this is an attempt perhaps to try an gain some traction with the Australian public. The real question is: is the Australian public going to listen or not?</p>
<p>Will they be happy with the direct appeal to the back pocket? Or just exactly how will they react to this. It’s very difficult to say at this point in time. Some people have argued that the Australian public has been distracted by other affairs and may not be listening.</p>
<p>When you look at all the things that are happening in Europe – the direction of the new French president who also says he’s going to spend a lot more. Also what’s happening in Greece where they don’t want any part of austerity.</p>
<p>The thing is, in democracies like ours people prefer to have money spent on them and they don’t like it when governments take the money away. This is just another trick of the government saying “you deserve things”. </p>
<hr>
<p><strong>Nick Economou, Senior Lecturer, School of Political and Social Inquiry at Monash University</strong></p>
<p>It’s a budget that serves the government’s political purpose quite well and I thought the Treasurer looked very competent when he delivered it. Whether it’s going to have the desired political effect of altering the trend of voter support away from the government, I’m not sure. </p>
<p>The government will have to hope that some of the things it’s done in the budget can impact on the political debate, over all the other things that are going on like the Slipper affair and the Craig Thomson affair.</p>
<p>To that end, given that what they certainly didn’t need was a disastrous budget that looked like it was backing away from doing things for its core constituency, I don’t think that was the case at all.</p>
<p>There were aspects of the budget that would probably appeal to a lot of people, including the idea to try to wind back some of the tax benefits given to the very wealthy by the previous Coalition government.</p>
<p>This Labor government has a slightly easier time of things in the parliament because of the change in the Senate. The last budget that would have been brought down would have been brought down before the Greens got the balance of power.</p>
<p>To use a cliché that’s already coming out: it’s very much a “Labor” budget. Swan tended to use the word “Labor” as much as he could in his speech.</p>
<p>There are a couple of things about the budget that are likely to cause grief further down the track, not for the Federal Government but for the states. They’re talking about an $11 billion decline in revenue to the states.</p>
<p>The state governments are going to struggle because at the end of the day they’re the ones that provide really expensive services.</p><img src="https://counter.theconversation.com/content/6914/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Labor has made a $5 billion pitch to true-believers with a $1.5 billion surplus, cash hand-outs and tax breaks for low- and middle-income earners in the federal budget. And the opinion-makers are on the…Graham White, Associate Professor, School of Economics, University of SydneyBob Gregory, Professor of Economics, Australian National UniversityGregory Melleuish, Associate Professor, School of History and Politics, University of WollongongHal Kendig, Professor of Ageing and Health and Director of the Ageing, Work and Health Research Unit, University of SydneyJakob Madsen, Xiaokai Yang Professor of Business and Economics, Monash UniversityJohn Quiggin, Professor, School of Economics , The University of QueenslandJohn Wanna, Sir John Bunting Chair of Public Administration , Australian National UniversityMichael Rafferty, ARC Future Fellow 2012-2016, School of Business, University of SydneyNick Economou, Senior Lecturer, School of Political and Social Inquiry, Monash UniversityWarwick J. McKibbin, Chair in Public Policy, ANU Centre for Applied Macroeconomic Analysis (CAMA) , Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68662012-05-08T10:59:02Z2012-05-08T10:59:02ZFederal Budget 2012: short-term political gain or long-term economic strategy?<figure><img src="https://images.theconversation.com/files/10453/original/b3ppcjnr-1336473528.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is the Budget politically driven, or is it sound economic policy? Only time will tell.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Good policy should be free of surprises. Households have to make decisions about how much to spend, how much to save, how to finance their retirement, whether to take out health insurance, and so on.</p>
<p>Businesses need to make decisions on how much to produce, how many workers to employ, whether to invest in new capital, the way to finance these decisions, and so on.</p>
<p>All of these decisions have to be made on the basis of prices, wages, interest rates, exchange rates, taxation rules, workplace laws and a whole host of government regulation.</p>
<p>If the government keeps changing the rules in a surprising fashion it is very difficult for households and businesses to make sensible decisions, particularly long-term decisions.</p>
<p>The point is that fiscal policy should be made in the context of a long-term vision for the economy, including getting everyone who wants to work, into work, providing the public infrastructure needed to increase productivity, the right mix of private and government provision of health and education; and reform of the regulatory environment.</p>
<p>However, we still have to go through this charade of locking up journalists until 7pm on Budget night as if a “leak” would make any difference to the economy. This is particularly strange given the stage-managed release of most of the Budget’s content over the last few weeks.</p>
<p>We should see differences between the major parties with regard to their philosophy. Alas, this does not happen, and we have both sides of politics scrambling to grab the vote of “battlers” or “working Australians”, whoever they may be.</p>
<p>Apart from mining, the rest of the economy looks vulnerable and, although China’s thirst for our minerals and energy is very welcome, it does leave the economy precariously dependent on its economic fortunes. Despite Monday’s retail and housing starts figures showing improvement, business and consumer confidence remain low and the European situation is very unpredictable.</p>
<p>The major components of government expenditure tell you where cuts would need to be made to significantly reduce total expenditure. About one-third of federal government expenditure is on social security and welfare. Part of this is due to the worst-off Australians not being in work – more than 1.5 million people of working age (not seniors) currently rely almost entirely on government benefits for their income. </p>
<p>Measures to reduce payments to single parents are designed to increase the “stick” to the jobless, but it is not clear where the “carrot” of more job opportunities is coming from.</p>
<p>Certainly, the Fair Work Act has significantly reduced incentives for firms to hire workers and hinders productivity growth, recognised as a major problem in Australia. The “jobless problem” has been recognised for over 30 years so governments have no excuses for not doing something about it. This would require long-term vision (and yes, more expenditure) but its impact on reducing government expenditure in the long-term would be enormous. There is a grave danger the jobless problem could get seriously worse.</p>
<p>Both ALP and Coalition governments have increased middle-class welfare to couples with children who get most of what they pay in tax back from the government in handouts, and who make greater use of education and health facilities.</p>
<p>This represents a huge degree of inefficient “churning” - taking with one hand and giving it back with another. The latest is the increase in Family Tax Benefit Part A, plus cash payment of $820 for each high school student and $410 for each primary school student paid directly to parents – although they could have previously got the money as a tax rebate. The issue is further confused by the press linking these payments to compensation for price rises induced by the carbon tax.</p>
<p>Will Swan be able to convince the public that his surplus is genuine and part of a long-term strategy, and not a result of creative accounting? For instance, there has been much publicity regarding defence cuts but the suspicion is that the motive is to engineer a surplus by deferring, or slowing down planned purchases, leaving the Abbott government to pick up the tab when it inevitably comes to power.</p>
<p>The payments for school kids will be paid as refunds for the current financial year to parents in June, bringing forward expenditure to this year and reducing expenditure next year. </p>
<p>Will Swan be able to convince us the predicted revenue will be achieved? Mining experts are saying revenue from the mining tax will be lower than predicted given the huge investment spending which can be claimed against profits.</p>
<p>The fragile nature of the non-mining economy, with low consumer and business confidence, may significantly reduce revenue growth. Nobody really knows what the full impact of the carbon tax will be and there is still a strong suspicion that compensation won’t cover the increased power costs.</p>
<p>Finally, a surplus is only the difference between two very large and imprecise numbers (revenue and expenditure) so nobody could possibly be right in forecasting a surplus of $1.5 billion (less than 0.5% of the Budget) with any accuracy. </p>
<p>Confidence is extremely important for an economy. This comes to a large extent from trust in the government as an economic manager; that it has a clear strategy, that it is being honest; and it is doing what’s right, not what’s popular. Trust in politicians, particularly the government, is one commodity Australia has in short supply at the moment.</p><img src="https://counter.theconversation.com/content/6866/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Lewis does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. He also has no relevant affiliations. During his career he has received funding from many private and public sector organisations including most recently the ARC, NCVER, DEEWR and the AFPC</span></em></p>Good policy should be free of surprises. Households have to make decisions about how much to spend, how much to save, how to finance their retirement, whether to take out health insurance, and so on. Businesses…Phil Lewis, Professor of Economics, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68672012-05-08T10:28:44Z2012-05-08T10:28:44ZSwan has the final word on a budget day like no other … but is anyone listening?<figure><img src="https://images.theconversation.com/files/10452/original/y35cn9bk-1336472826.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wayne Swan handed down the 2012 budget after a truly remarkable day in Australian parliament.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>As Treasurer Wayne Swan approached the despatch boxes tonight, the nation’s political focus was finally fixed on the Gillard government’s second budget. His speech ended a budget day like no other, with the Speaker having formally stepped down and a former Labor MP taking to the cross-benches for the first time. </p>
<p>From the outset, the government had vowed that this would be a “tough” budget. Indeed, the government had promised it would return the budget to surplus in the coming financial year. If the government had, for some reason, failed to announce a surplus it would be accused of breaking another promise. And with Labor still trying to deal with the claims about the broken carbon tax promise, it was hardly in a position to produce a deficit tonight.</p>
<p>But it was a case of damned if they did and damned if they didn’t return the budget to surplus. Some analysts have questioned the wisdom of aiming for a surplus. They argue that in times of a slowing economy, the government should increase spending to stimulate growth rather than tighten the purse strings. The government, on the other hand, has argued a surplus is necessary to safeguard the nation’s economy in the longer term.</p>
<p>Tonight’s speech by Treasurer Swan contained few surprises as many of the headline initiatives had been provided to the media days ago. </p>
<p>The promise to look after the “battlers” can be seen in the spending on healthcare and education with particular attention given to extending financial assistance to parents with school aged children. The budget introduced the first phase of the National Disability Insurance Scheme as well as greater resources devoted to dental care. Greater assistance to older Australians, some help to small businesses and additional measures to counter the rising costs of living rounded off the main “sweeteners” of the budget. According to Swan, these policies comprise the core of a Labor Party budget and spread the wealth of the resource boom. </p>
<p>While there was spending in some sectors, the public service and defence were the major focus of spending cuts. In these decisions, we can see a hint of what the government was seeking to achieve on a political level.</p>
<p>Traditionally, the Coalition is seen to be the party best placed to manage the national economy with Labor being seen to be the best party for service delivery. With this budget, the Labor government has sought to show that it can enhance service delivery in key areas while still balancing the books. This ties in to Prime Minister Gillard’s desire earlier this year to debate the economy when she famously asked voters whom they trusted to best manage the nation’s finances.</p>
<p>There are some questions about the budget that will be answered over time. The most important of these is whether the surplus can actually be achieved. While $1.5 billion sounds like a lot, a dip in taxation revenue or fall in mining revenue may scupper the government’s hopes of achieving its targets.</p>
<p>Another challenge facing the government is on the political front. The budget provides Labor with an opportunity to reclaim the ascendency in the political debate. And with the government in the doldrums according to opinion polls, this budget could serve as a circuit breaker.</p>
<p>But muddying the waters into which the budget was released were the lingering problems of Slipper and Thomson. Slipper was the focus of intense media scrutiny over the last few weeks and his suspension from the Speaker’s position in parliament provided an unwelcome distraction for Labor as it sought to “sell” its budget. </p>
<p>Similarly, Fair Work Australia’s report on Mr Thomson’s alleged corrupt behaviour at the Health Services Union was ill-timed. Rather than fiscal policy being at the centre of attention, the government had to deal with questions about whether it could make sound political judgements, and motions from the opposition to suspend standing orders during today’s Question Time.</p>
<p>In trying to combat these distractions, the Prime Minister and Treasurer engaged in a range of pre-budget media opportunities. One of these was a meeting where the media was invited to film the PM and Treasurer flicking through the budget while having a casual “cuppa”. While this provided some interesting footage, the jury would be out about whether such a scenario needs to be created in future.</p>
<p>But with the next election getting closer, the government needs <em>something</em> to resonate with voters. Gillard’s grasp on the Labor leadership will once again start to weaken if the opinion polls remain unmoved in the shorter term. </p>
<p>In a political sense, this is indeed the government’s most important budget. How voters respond to it will give greater insight about whether anyone is still listening to Labor.</p><img src="https://counter.theconversation.com/content/6867/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zareh Ghazarian does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As Treasurer Wayne Swan approached the despatch boxes tonight, the nation’s political focus was finally fixed on the Gillard government’s second budget. His speech ended a budget day like no other, with…Zareh Ghazarian, Lecturer, School of Political and Social Inquiry, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69112012-05-08T06:45:11Z2012-05-08T06:45:11ZCorporate tax cuts at risk - but are they really required?<figure><img src="https://images.theconversation.com/files/10446/original/2kdw9b8g-1336458454.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As the government scrambles to balance the books, the business community has voiced its fears that Treasurer Wayne Swan will renege on his promise of a 1% reduction in the corporate tax rate.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>In the last 24 hours, we have heard mutterings about the possibility that an earlier commitment to cuts in the corporate tax rate may not go ahead in the budget.
Some in the business community have, unsurprisingly, raised alarm at this possibility.</p>
<p>It is worthwhile, however, considering the justification for such cuts, since the economic imperative is not altogether crystal clear. And this is even more so for a budget where the goal of a surplus poses risks in terms of cuts to the social wage.</p>
<p>One argument raised both in political debate and within the media is that the cuts in the corporate rate are a compensation for the mining tax. </p>
<p>However, for those who thought the latter had something to do with equity and with a broadening of the tax base, particularly for longer-term fiscal sustainability, this is a somewhat strange argument. It seems to be suggesting that there should be some compensation in terms of tax cuts for entities which were taxed in the first place because of their ability to pay. Strange!</p>
<p>The other, more economic, argument that is often put in favour of cuts to the corporate tax rate is that such cuts would stimulate business investment and economic growth.</p>
<p>On closer reflection, it is not at all clear what the mechanism at work is supposed to be by which a cut in the corporate tax rate would stimulate business investment. </p>
<p>If you think about business investment in terms of the fact that it’s generating extra productive capacity, then the critical element is an expectation of growth in sales. If growth in sales is not expected to change, it is unclear why businesses would speed up the rate at which they are expanding their productive capacity and thus the rate at which their investment expenditures are growing, even with an increase in current and near-term after-tax profits.</p>
<p>In this case, one is left asking why businesses would not simply “pocket” the tax cuts without any significant change in their investment activity.</p>
<p>Of course there may be some investment projects where, at the current tax rate, the projected after-tax rate of return is just on below the minimum required to warrant undertaking the investment. In this case, a corporate tax cut could make the difference, pushing the after-tax rate of return just above that minimum.</p>
<p>In this case, the tax cut could conceivably make the difference between investment and no investment.</p>
<p>But one wonders whether or not this would be the general case and whether, as suggested above, it is more sluggish demand which is the constraining factor on business investment.</p>
<p>The only other possibility is that improved net after-tax profits resulting from any change to corporate tax are earmarked for investment in R & D and new technologies which boost productivity, leading in turn to downward pressure on costs and prices.</p>
<p>But here too the story is not as simple as it looks. Even if the corporate tax rate has some downward pressure on prices and the rate of inflation, it is by no means clear that this would stimulate household expenditure and in turn aggregate demand. One producer’s lower costs is another producer’s lower revenue.</p>
<p>In any case, the channelling of greater funds into innovation and new technologies is not automatic. It requires sufficient competitive pressure for a start. And moreover, improvements in technology and productivity are themselves typically bound up with the process of business investment.</p>
<p>So, we are back to where we started - wondering how precisely a cut in corporate tax may by itself spur business to greater heights in terms of faster growth in investment.</p>
<p>To the extent that it does, it would be a useful result in an economy with sluggish activity in a number of sectors, such as manufacturing.</p>
<p>The real question is how likely this is and whether other measures (for eaxmple, stimulating expenditures by low-income level households) in a budget designed to tighten fiscal policy would be better in order to prevent a further softening in the economy, not to mention having an equity-dividend.</p><img src="https://counter.theconversation.com/content/6911/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Graham White does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the last 24 hours, we have heard mutterings about the possibility that an earlier commitment to cuts in the corporate tax rate may not go ahead in the budget. Some in the business community have, unsurprisingly…Graham White, Associate Professor, School of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/69062012-05-08T05:53:31Z2012-05-08T05:53:31ZA guide to aid funding in the 2012 budget<figure><img src="https://images.theconversation.com/files/10444/original/pd5q2tvc-1336454550.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">AusAID's future funding is in play tonight.</span> <span class="attribution"><span class="source">Australian Civil-Military Centre</span></span></figcaption></figure><p>The 2012-13 budget has been the subject of an unusually intensive amount of <a href="http://www.theage.com.au/business/federal-budget/goodwill-hunting-fears-budget-may-shun-worlds-poor-20120504-1y4dz.html">media</a> and <a href="http://www.devdas.com.au/">sectoral</a> speculation and <a href="http://www.lowyinterpreter.org/post/2012/04/26/The-case-for-more-aid-is-still-weak.aspx">debate</a> in the past few weeks. This piece sets out what we should look for in tonight’s budget from an aid perspective, in terms of not only the numbers, but also the effectiveness agenda.</p>
<h2>The numbers</h2>
<p>Given the speculation, it’s impossible not to start with the numbers. In last May’s budget, the government said it would spend $4.8 billion on aid this year (2011-12), which it estimated would be 0.35% of GNI (gross national income). </p>
<p>It also set out targets for the next three years – 0.38% for 2012-13, 0.42% for 2013-14 and 0.46% for 2014-15 – before hitting 0.5% in 2015-16. </p>
<p>If we assume 6% nominal growth out to 2015-16 (which seems to be the going assumption among economic agencies – at least for GDP, and we can assume GNI will follow the same trends), we then obtain the following numbers for the aid budget: $5.6 billion for 2012-13, $6.6 billion for 2013-14, $7.7 billion for 2014-15, and $8.8 billion for 2015-16. It’s basically a billion a year every year for the next four years, or 15% a year. The graph below summarises.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=470&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=470&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10442/original/fx3452d6-1336452812.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=470&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>We have certainly seen growth rates of that order before, but never such huge absolute increases. The largest absolute increase in the aid budget was $625 million in 2008-09. It’s hard to believe that the government will follow through on such an ambitious commitment at a time of fiscal restraint. </p>
<p>And, if it chooses a smaller increase for this coming year, then one would have to guess that the 2015 target would be postponed to avoid looking at even bigger increases in the next few years.</p>
<h2>Beyond the numbers</h2>
<p>So much for aid quantity, what about aid quality? This is an important issue, not least because this budget is the first since the release of the <a href="http://www.aidreview.gov.au/report/index.html">Independent Review of Aid Effectiveness</a> (in which I participated) and the government’s <a href="http://ausaid.gov.au/Publications/Documents/AidReviwew-Response/effective-aid-program-for-australia.pdf">response</a> to that report.</p>
<p>First of all, there are a few interesting allocation issues that will tell us about the direction of the aid program as a whole. As part of its call for less fragmentation and greater focus, the review recommended an end to country program aid to Latin America and Carribean. Last year though, the government further increased the country program for this region from $40 to $48 million.</p>
<p>The review also recommended, for the same reasons, no further scaling-up to country program aid to Africa beyond the then $200 million budgeted for 2010-11, and a reduction in the number of country programs from the current number which is in excess of 40 to a “relatively small number” (p. 140). In 2011-12, however, country program aid to Africa in fact increased to $290 million.</p>
<p>While the review recommended no further increase in country program aid to Africa, it did recommend an increase in overall aid to Africa, but through core funding to effective organisations which already work on that continent. To track this, it is necessary to report not only country program aid, which is what the budget normally tells us, but also aid allocations, which go beyond country aid programs to include an estimate of how much of Australia’s core funding to different international organisations is spent in any particular region. This makes a huge difference, especially for Africa since it is the centre of the global aid effort. </p>
<p>As estimated by the Aid Review, our aid allocation to Africa is twice the size of our aid program. AusAID has agreed to report country allocations as well as programs, and it will be interesting to see if that starts in this budget.</p>
<p>On allocations, the review also recommended increased core funding to effective international organisations. It isn’t always easy to tell from the budget how much core funding the aid program provides, but this is nevertheless something to watch for. Whether the scale-up of aid will succeed will depend on how it is done. Providing more core funding to good organisations is not only a good way to spend aid money; it also reduces the management burden on AusAID.</p>
<p>Finally, there are recommendations for increased spending on humanitarian aid, and for agricultural and medical research, all of which the government has agreed to and <a href="http://ausaid.gov.au/Publications/Documents/AidReviwew-Response/effective-aid-program-for-australia.pdf">said</a> (p. 61) it would release details on with the 2012-13 budget.</p>
<p>AusAID has <a href="http://www.ausaid.gov.au/Publications/Documents/aid-effectiveness-factsheet-april2012.pdf">already</a> announced that it will be releasing two important documents with the budget: a four-year budget strategy and the results framework. The former is intended to provide a firmer basis on which to scale up than the current practice which leaves large amounts of planned increases of aid unallocated to any regions or programs. It certainly has the potential to provide the aid program with a longer lead time for planning than has been the case so far, and could lead to major effectiveness gains.</p>
<p>The Aid Review also recommended an end to the practice of scaling up through discrete initiatives known as New Policy Proposals. It was argued that these led to fragmentation, and diverted attention from the aid budget as a whole by focusing on a subset of activities artificially labelled “new”. Reading the government’s <a href="http://ausaid.gov.au/Publications/Documents/AidReviwew-Response/effective-aid-program-for-australia.pdf">response</a> to the Aid Review, it looks like there will be still be New Policy Proposals (see p.63), which is a pity, but we can still watch to see how extensively there are used. In the last budget, there were eight new proposals for about $1.9 billion over the next four years.</p>
<p>The results framework should help us all hold the aid program more accountable. The government has agreed to a three-tier framework under which there would be reporting at three levels: against development goals at the partner country level, the contribution of Australian aid, and operational and organisational effectiveness. </p>
<p>I hope that the last is not forgotten about, and that the results framework sets out concrete goals for challenges directly under AusAID’s control. In aid, it is often the prosaic that matters the most. For example, targets for reduction in staff churn would be a big step forward. The <a href="http://www.aidreview.gov.au/report/index.html">Aid Review</a> informed us that “the most consistent feedback” it received “was that AusAID’s effectiveness was undermined by rapid staff turnover.”</p>
<p>Finally, the government has said that the Independent Evaluation Committee will meet for the first time before the half year is up, so it is possible that this will be announced at budget time as well. This reform is intended to improve the independence and quality of AusAID’s major evaluations, which would be overseen by this new body.</p>
<p>All in all, it is an unusually important and interesting budget from an aid perspective.</p>
<p><em>This post originally appeared on the <a href="http://devpolicy.org/what-to-look-for-in-aid-budget/">Development Policy Blog</a>.</em></p><img src="https://counter.theconversation.com/content/6906/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Howes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The 2012-13 budget has been the subject of an unusually intensive amount of media and sectoral speculation and debate in the past few weeks. This piece sets out what we should look for in tonight’s budget…Stephen Howes, Director, Development Policy Centre, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68872012-05-07T20:18:45Z2012-05-07T20:18:45ZWish list for Wayne Swan: what the experts want from the budget<figure><img src="https://images.theconversation.com/files/10419/original/hyw5f5jt-1336374547.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">"And then there's this…" Will there be any surprises in store for this year's budget?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Federal Treasurer Wayne Swan will be busy tonight handing down the Federal Budget with all the policy settings we’ll need to ensure Australia’s future prosperity (and not simply as a re-election platform). Right?</p>
<p>Anyway, we thought we’d ask five experts for their last minute “wish list” of what they believe should be in tonight’s budget.</p>
<p><strong>Simon Marginson, Professor of Higher Education, University of Melbourne</strong>: Two things I would like to see in the budget are for higher education and innovation. </p>
<p>First, a modest increase in program, fellowship and project funding for both the Australian Research Council (ARC) and the National Health and Medical Research Council (NHMRC). The Howard Government doubled these two schemes – the core of our national research effort – in 2001 but since then there has not been a substantial increase in either the ARC or NHMRC funding while many other countries, especially in East Asia, have substantially expanded their public research budgets. Second, with university class sizes growing ever larger, it is essential we shore up the level of public support for the teaching of undergraduate domestic students. </p>
<p>Last December’s report of the government’s own Base Funding Review showed that the majority of students are studying in programs where the funding rate (fixed government subsidy plus fixed student contribution) is either definitely below average teaching costs or suspected of being so. The Base Funding Review recommended the rationalisation and shoring up of funding across the range of disciplines. </p>
<p>If Australian higher education is to both augment future workforce productivity and provide meaningful opportunities to more students – the twin rationale for expanding the size of the graduate population - and also continue to attract large numbers of international students, its quality must be maintained and enhanced. Simple as that. </p>
<p><strong>Mike Rafferty, Senior research analyst, Workplace Research Centre, University of Sydney:</strong> Budgets are largely symbolic statements. Most expenditure and revenue is already locked in from one year to the next. Budgets are about tweaking those numbers, but mostly also about symbolism – the message is as important as the content. I don’t have any problem with symbolism per se, but with the quality of political commentary at such an all time low, symbolism is everything - and nothing. What symbolism is there in targeting an accounting residual like the deficit?</p>
<p>I’d like to see some debate about how we can spend $30 billion on superannuation tax concessions and only $30 billion on the age pension. I’d like see some debate about why a society that is so much wealthier than even 20 years ago yet is making access to rights to basic sustenance conditional on presenting oneself in the labour market.</p>
<p>I’d also to see people, corporations and institutions with so much economic power asked about their obvious interests in political positions and about the obvious materiality of their interests.</p>
<p>So I’d like to see different questions asked by different people. That would make a great change to current budget symbolism with real economic potential.</p>
<p><strong>John Vaz, Department of Accounting and Finance, Monash University:</strong> What I would like to see in the budget is incentives that will act to stimulate the slow part of the two-speed economy. </p>
<p>We have previously seen squandering of billions in poorly thought-out stimulus such as cash give-aways and home insulation, which were a waste from a long-term benefit point of view. The government is now trying to recover this waste (that is embedded in the deficit) with a view to achieving a politically driven surplus. This deficit reduction and debt pay-down will be achieved by reducing our fiscal outlays. This strategy runs the risk of stagnating the non-resources driven services sector, such as tourism and residential construction, which are already suffering.</p>
<p>I have two inclusions in the budget. I would like to see the government allow full tax deductions for capital-related items, such as home improvements of a capital nature above say $1000 and up to say $50,000 for the prime residence and that can be subject to a combined income threshold. This will only be offered to prime residences of taxpayers. This will provide benefits to both the services sector and to households, who will spend their own money wisely and will be properly accounted for in their tax returns for the cost and the value received. It will also capture a lot of the cash economy in this sector.</p>
<p>To those who cannot afford a home and are renting, the government could provide a home savings scheme that matches dollar for dollar or some proportion of any savings made for this purpose and any interest earned could be tax-free. This could be means-tested to a maximum threshold. This means that instead of a fixed first home buyers grant, which is typically inflationary with the benefit capture by vendors, individuals as buyers can benefit from a savings scheme that will provide the ability of potential home buyers to capture most of the surplus from, such as scheme.</p>
<p><strong>Paula Lorgelly, Associate Professor, Centre for Health Economics, Monash University</strong>: One thing I’d like to see in the budget is less “budgeting” and more spending. However, this is unlikely given the government’s steadfast stance on returning the economy to a surplus. With this budgeting in mind, the one item on top of my wish list is no cuts to health research, or in an ideal world more funding for health research. Such research is important for both the health and education sector - it helps us build capacity and be globally competitive - but it also means that we can contribute to the often limited evidence base. </p>
<p>Many of the areas that may receive more funding will not have been well evaluated, and we will not know if such services are a good use of our limited resources and offer value-for-money. Senator Wong recently argued that “you don’t come back to surplus simply through accounting. You come back to surplus because you make hard decisions”. With limited evidence, they really are hard decisions, made even harder when you get it wrong. Investment in health research would help inform these decisions, and take some of the guesswork out of where we should be spending money (or indeed making savings if the government insists on returning a surplus in the future). </p>
<p><strong>Graham White, Senior Lecturer, School of Economics, University of Sydney:</strong> My wish for tomorrow night’s budget is that the government backpedals on the goal of delivering a surplus and defers until the signs of softening in the economy are past.</p>
<p>But failing that – and I’m not naive enough to believe that they will backpedal – the attempt to bring in a surplus should be focused more on the revenue side than on the expenditure side and should be targeted away from low to middle-income earners towards high-income earners.</p>
<p>Both of these objectives could be justified on economic grounds, although targeting the higher income earners can obviously be justified on equity grounds.</p>
<p>If the government seeks to bring in a surplus, it will be less depressing on overall aggregate demand if done through taxes, rather than curtailing expenditures. And if we are to have a surplus, we need it to be done in a way that minimises the depressing effect on overall spending.</p>
<p>There is a similar justification for having less pain for lower-middle income earners than high-income earners to the extent that the latter spend a smaller proportion of their income. Cuts to higher income earners will likely have less of a depressing effect on consumer demand.</p>
<p>The qualification to all of this is that bringing in a surplus will likely require expenditure cuts – and cuts which will affect low to middle-income earners at least indirectly. Hence it would be best if the achievement of the surplus at this time was put on hold.</p><img src="https://counter.theconversation.com/content/6887/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Marginson works for the University of Melbourne, which, like all Australian institutions of public higher education, would benefit from the implementation of the policies advocated in his statement about the 2012 budget. Simon Marginson also receives research funding support from the Australian Research council. He advocates an increase in the Council's budget. </span></em></p><p class="fine-print"><em><span>Paula Lorgelly works for Monash University, and as such would benefit from the increase in funding she advocates for. She receives funding from both the Australian Research Council and the National Health and Medical Research Council.</span></em></p><p class="fine-print"><em><span>Graham White, John Vaz, and Michael Rafferty do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Federal Treasurer Wayne Swan will be busy tonight handing down the Federal Budget with all the policy settings we’ll need to ensure Australia’s future prosperity (and not simply as a re-election platform…Simon Marginson, Professor of Higher Education, The University of MelbourneGraham White, Associate Professor, School of Economics, University of SydneyJohn Vaz, Course Director Master of App. Finance, Monash UniversityMichael Rafferty, ARC Future Fellow 2012-2016, School of Business, University of SydneyPaula Lorgelly, Associate Professor, Centre for Health Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68892012-05-07T20:18:23Z2012-05-07T20:18:23ZTreasurer or Member for Lilley? Perhaps Wayne Swan doesn’t have to be both<figure><img src="https://images.theconversation.com/files/10413/original/tdsqwgky-1336371222.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wayne Swan's responsibility to the citizens of Lilley may conflict with his role of treasurer. So why don't we separate them?</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>Australia is on the eve of receiving one of its most anticipated budget announcements. </p>
<p>Wayne Swan and the team within the Treasury have put together a pillar from which the Labor Party will draw strength from in the lead-up to the federal election. Shadow Treasurer Joe Hockey has been naturally critical, as his role mandates he must.</p>
<p>But there is a problem here – one that is, for the most part, lost in the flashy lights of contemporary politics. </p>
<p>What Wayne Swan, Joe Hockey, Julia Gillard and Tony Abbott all have in common is that they are, by the nature of their roles, two-headed beings. One head has been elected to represent the interests of their constituencies. The other must manage extremely important and very complex portfolios. </p>
<p>They must carry both of these heads on a body that has to survive the often treacherous waters within their own political party and of course the even more dangerous waters lurking between parties as well as with lobbyist interactions. I have a question for these four individuals and any other constituent-representing, portfolio-holding MP: how is it humanly possible to effectively fulfil both roles at the same time?</p>
<p>My concern with current political engineering in Australia and in other countries with similar systems is that the constituents of portfolio-holding MPs are at an obvious disadvantage. </p>
<p>MPs around the world know how very taxing and time-consuming representing a single constituency can be and frankly, in a representative system, a basic expectation from voters is that at least one person will be working tirelessly on their behalf. </p>
<p>Now, if an MP is selected by the cabinet or PM to hold a specific portfolio (it is not uncommon for one MP to hold more than one portfolio), it is simply not possible to fulfil the basic expectation of dedicated representation for that constituency. They have to give their time to manage one or more truly important portfolios on behalf of the country. </p>
<p>This obviously reduces the attention that these individuals can give to the citizens in their constituency. Wayne Swan and a number of his chief aides, for example, might not be available to meet with a constituent because they are overseas holding strategic talks. </p>
<p>In another example, Tony Abbott might be too busy shoring up support for his party’s bid for the upcoming election to hear about a number of Warringah’s needs that their local council cannot provide. This situation simply does not make sense and needs to be seriously addressed.</p>
<p>A proposition to solve this issue would be to have the offices that are meant to manage portfolios directly elected by the public. </p>
<p>This model would see the parliament expand by 21 seats, the size of the current cabinet. </p>
<p>On election day, Australian voters would have an additional decision to make at the ballot. They would be able to vote for their local representative of choice as well as casting a separate vote for their Treasurer, Prime Minister, Minister for Health and so on.</p>
<p>Political parties would nominate their separate candidates for executive office (preferably through primaries), independents would be able to run, and citizens in the end would choose what their executive looked like and who came to hold these critical roles. </p>
<p>These executive members would sit with their parties or independently, participate as members of the executive currently do in the House of Representatives, and then move to the cabinet to get on with business without having to shirk the responsibilities of a constituency. It is essentially the creation of a third directly elected body in parliament. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=236&fit=crop&dpr=1 600w, https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=236&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=236&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=296&fit=crop&dpr=1 754w, https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=296&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/10418/original/y7yz9b3z-1336373887.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=296&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">It’s time to change the structure of the House of Representatives.</span>
<span class="attribution"><span class="source">AAP/Alan Porritt</span></span>
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</figure>
<p>This model has its place in recent political theory. From discursive democracy and certain empirical studies, there is the desire to create the conditions of a coalition in the executive. This is because coalition governments have thus far, in international comparative politics, made better choices than majority governments. In other words, coalitions work through the necessity of discursive roadblocks, normally making for better politics.</p>
<p>Through the means of choosing the executive, we see the injection of more direct citizen input. It’s more democratic and would spell stronger outcomes for Australia or other similarly structured polities. </p>
<p>Given that this opens the possibility for different parties to be present in the formal cabinet, this idea does have the potential to produce a degree of chaos and intra-parliamentary madness. That being said, it’s hard to imagine a parliamentary situation more mad than the one we currently have.</p>
<p>Another benefit of this proposition is that MPs representing their constituencies will be forced to do exactly that, and not be whisked away from their electors by other, shinier, opportunities. </p>
<p>In my opinion, this is an advancement in political engineering that should be mulled over by at least the Australian public. </p>
<p>It was roughly a century ago that Australia gave the world the secret ballot, then known as the “Australian ballot”. It could now be time for another innovation to spring forward. </p>
<p>I think Lilley, QLD, deserves the full attention of not Australia’s Treasurer but rather Lilley’s Member of Parliament. The same goes for Joe Hockey (North Sydney), Julia Gillard (Lalor, Vic), and Tony Abbott (Warringah, NSW). </p>
<p>These constituencies deserve the undivided attention of their representatives and Australia deserves the full attention of its executive. </p><img src="https://counter.theconversation.com/content/6889/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jean-Paul Gagnon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia is on the eve of receiving one of its most anticipated budget announcements. Wayne Swan and the team within the Treasury have put together a pillar from which the Labor Party will draw strength…Jean-Paul Gagnon, Honorary Research Fellow, POLSIS and SMP, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/67722012-05-06T20:49:33Z2012-05-06T20:49:33ZBudget provides a chance to carve out the path to higher productivity<figure><img src="https://images.theconversation.com/files/10346/original/pkqvb2x7-1336095853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Improving the transparency and evaluation of major infrastructure projects is one way to increase productivity.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Productivity growth results in more valued output per unit of production input, or the same output for fewer inputs. Growth of productivity requires changes involving the adoption of new technology, better management and work practices, and reallocating the product mix and production methods from less valuable to more valuable options. </p>
<p>Higher productivity provides a sustainable base for higher living standards, greater equity of opportunity and outcomes, and better opportunities to protect the environment. The achievement of higher productivity requires changes in behaviour and decisions by governments at all levels, businesses large and small, and all employees. Reform of federal, state and local government budgets offer important opportunities to assist national productivity growth. </p>
<p>Consider the role of Australian governments in the economy. Via taxation they effectively redirect about 31% of the economy’s limited labour and capital from the private sector for public use. About a quarter of national production - including defence, law and order, education, health, transport, garbage collection and disposal, and national parks - are government expenditures funded by tax revenues. Other revenues are distributed as social security payments to the less well-off to assist in meeting social equity goals. </p>
<p>Government budgets spell out the details of taxation and expenditure programs. In framing their budgets, Australian governments - at the federal, state and local levels - have a rich potential agenda of reform options to significantly improve productivity if they are willing to articulate, communicate and then implement reforms.</p>
<p>Taxation transfers labour and capital from use by the private sector for use by the public sector. At the same time, taxation changes relative prices faced by households and businesses in the private sector. These relative price changes alter decisions, such as work versus leisure; spend now or save and spend in the future; the type of business organisation; the mix of saving and investment choice options; and so forth. In the absence of market failures, changes in these decisions are less productive in a national sense, and in this way taxation reduces national productivity.</p>
<p>2009’s <a href="http://www.taxreview.treasury.gov.au/content/Content.aspx?doc=html/home.htm">Henry Review</a> recommended a comprehensive set of productivity-enhancing reforms to taxation. Adoption of the reforms was estimated to increase productivity equivalent to between 2% and 3% of national income, or a gain of $25 to $40 billion in 2010-11 values. To date, few reforms have been made, and the changes to taxation over the last few years have been piecemeal at best.</p>
<p>Here are some of the reform options for consideration. First, there are improvements in productivity, simplicity and generally also in equity to be gained from a package of reforms which remove special tax exemptions and concessions. This will broaden the tax base, place a similar tax burden on alternative choice options and the revenue gain can be used to fund a lower tax rate. </p>
<p>Broader base and lower rate packages are on offer for labour income, by treating all forms of labour remuneration, including superannuation and fringe benefits, the same as wages and salaries; the GST, by adopting a New Zealand-style comprehensive base and using some of the revenue gain to more directly compensate those on low incomes through lower income tax and higher social security payments; removing accelerated depreciation and other business tax expenditures for a broader business tax base and lower rate; and state payroll and land taxes.</p>
<p>Second, the Henry Review found large differences in the productivity loss effects of different taxes, and recommended changes in the mix of different taxes. </p>
<p>Examples of productivity-enhancing tax mix changes include: replacing the current state royalty or quantity base special tax on minerals with an economic rent base tax; replacing state stamp duties on property transfers and insurance with land taxes and perhaps also a larger GST; shifting the income tax from internationally mobile capital to income earned on immobile land and natural resources, and also labour, noting that labour ultimately gains from more capital per worker and higher real wages. A GST for income tax change, as adopted in the UK and NZ in 2010, is another reform package to raise productivity.</p>
<p>Third, the structure of and levels of additional taxation on motor vehicles, pollution, alcohol and gambling could be redesigned to more directly and effectively correct for market failures and so raise productivity.</p>
<p>On the expenditure side of government budgets, there are many opportunities to increase productivity. Governments have an ongoing stream of changes in technology, work, and management practices available to improve the productivity of government supplied defence, education, health, and other services. </p>
<p>In Australia, there are large potential gains by reducing overlaps, conflicts and the blame game between different levels of government-provided health, education and other services. </p>
<p>Second, much greater productivity is on offer from more formal, public and transparent evaluations in choosing infrastructure projects. The hidden political decisions under the false guise of “confidential business information” associated with, for example, the NBN, Building the Education Revolution (BER) and desalination plants should cease.</p>
<p>Third, the Henry Review, and many others, propose reforms to rationalise and simplify the various instruments of the social security system.</p>
<p>Tomorrow’s budget provides an opportunity for the federal government to lead the way on the productivity agenda by outlining significant reforms to taxation and expenditure. A commitment to increasing productivity growth is fundamental to ensuring Australia’s future economic prosperity. </p><img src="https://counter.theconversation.com/content/6772/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Freebairn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Productivity growth results in more valued output per unit of production input, or the same output for fewer inputs. Growth of productivity requires changes involving the adoption of new technology, better…John Freebairn, Professor, Department of Economics , The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/68162012-05-03T20:10:56Z2012-05-03T20:10:56ZCutting rates, then tightening fiscal policy? Trying to make sense of the quest for a surplus<figure><img src="https://images.theconversation.com/files/10291/original/np2mbn6v-1336007749.jpg?ixlib=rb-1.1.0&rect=108%2C89%2C4064%2C2650&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Given the RBA's decision to slash the cash rate by 50 basis points, it's hard to justify Treasurer Wayne Swan's pursuit of a budget surplus.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>The former Governor of the Reserve Bank, Bernie Fraser, hit the nail on the head the other night when he found it absurd that the Reserve Bank could be reducing interest rates one day, while a week later, fiscal policy is set to be tightened in an attempt to bring in a budget surplus.</p>
<p>And it is absurd! Part of the RBA’s justification for its rate cut on Tuesday was that since inflation showed no signs of getting out of the RBA target range, if there was a need to adjust interest rates in the interests of preventing a further softening of the Australian economy, they had the room to do it.</p>
<p>The RBA’s action therefore could unambiguously be read as a view by the RBA that there was a danger of further softening in the Australian economy.</p>
<p>One would have thought on this reasoning that the appropriate setting for fiscal policy was either mildly stimulatory or else standing still: namely, if the economy is sluggish, and the RBA has cut rates, you want a fiscal policy supportive of any stimulus that the rate cut might give to activity.</p>
<p>It is difficult then to see the justification for a budget strategy which, if it has any effect at all, is likely to soften activity (unless one subscribes to the bizarre view that has sometimes does the rounds in economic discussion, that fiscal expansion is contractionary). This is precisely the incoherent economic thinking Bernie Fraser was referring to in his comments about bringing the budget back to surplus.</p>
<p>If the attempt to bring in a surplus is accompanied down the track by further interest rate cuts, then it won’t be for the reasons the supporters of this strategy think.</p>
<p>Rather the tightening of fiscal policy may do this by weakening the economy and putting further pressure on the RBA to cut rates. But this would be a rate cut coming at the cost of a slowing economy and potential rising unemployment: somewhat of a hollow victory.</p>
<p>The Treasurer, in his various justifications for moving the budget back to surplus, has argued that a surplus would provide an economic safeguard in a fragile world economy. He has also argued that in an economy returning to its trend rate of growth, bringing in a surplus is appropriate.</p>
<p>Neither of these arguments are particularly convincing and are barely more than spin.</p>
<p>Regarding the surplus as a safeguard, the argument is presumably that if in the near term fiscal stimulus is again required, the bigger the surplus now, the less of a deficit which would be created by any required stimulus. That logic is correct so far as it goes. But even the fiscal stimulus used in 2008-9 did not put Australia anywhere near the danger zone of a runaway deficit or public debt.</p>
<p>It is clear that the deficits and debt generated in the GFC years were clearly within bounds that allowed them over time to be reduced as proportions of GDP, without the requirement of fiscal contraction sufficient to slow the economy.</p>
<p>Even that bastion of conventional economic thinking, the IMF, is apparently unconvinced by such an argument, having been reported (ABC News, Oct. 2011) as arguing late last year that the Australian government had the “fiscal space” to delay bringing the budget back to surplus.</p>
<p>As for the need to bring the budget back to surplus because the economic activity is returning to trend, economics provides no hard and fast rule here, unless one thinks that economics provides some justification for balancing the budget on average over the cycle.</p>
<p>But the latter is not much more than an article of faith for this writer, and one still looking for a coherent economic argument to justify it.</p>
<p>More importantly, the economic and particularly the social implications of a significant fiscal withdrawal from the economy, cannot and should not be made to serve the quest for a particular budget balance in circumstances where there is no foreseeable danger of unsustainable and burgeoning deficits or public debt.</p><img src="https://counter.theconversation.com/content/6816/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Graham White does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The former Governor of the Reserve Bank, Bernie Fraser, hit the nail on the head the other night when he found it absurd that the Reserve Bank could be reducing interest rates one day, while a week later…Graham White, Associate Professor, School of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.