tag:theconversation.com,2011:/us/topics/federal-budget-2013-5396/articlesFederal Budget 2013 – The Conversation2013-06-07T02:41:23Ztag:theconversation.com,2011:article/144822013-06-07T02:41:23Z2013-06-07T02:41:23ZWhy soft power is so hard: the impact of aid cuts on regional security<figure><img src="https://images.theconversation.com/files/24677/original/67h69kjs-1369892263.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's foreign aid commitments play an integral role in the nation's 'soft power' and regional security.</span> <span class="attribution"><span class="source">Marion Doss</span></span></figcaption></figure><p>Amidst the controversy over Julie Bishop’s Guardian <a href="http://www.guardian.co.uk/world/2013/jun/02/foreign-policy-julie-bishop-coalition">interview</a> earlier this week, many of the interesting facts about foreign policy under a putative Coalition government were lost. </p>
<p>Notably, the opposition’s shadow foreign affairs minister said that:</p>
<blockquote>
<p>Our foreign policy assets - military, defence, economic, trade, diplomatic and foreign aid will be focused not exclusively but unambiguously on our region, and our focus will be on economic diplomacy. </p>
</blockquote>
<p>This view of aligned “foreign policy assets” is an important one when it comes to a more strategic understanding of foreign aid in particular.</p>
<p>The federal budget this year was full of confusion and angst on aid issues. Foreign affairs minister Bob Carr proudly <a href="http://ausaid.gov.au/Publications/web/australias-international-development-assistance-program-2013-14/Pages/home.aspx">announced</a> Australia’s largest aid budget ever at A$5.7 billion.</p>
<p>But he also confirmed that Australia will delay its commitment to reaching 0.5% of national income by another year to 2017/18 and continue to divert aid away from international programs in order to pay for domestic asylum seeker costs. Including the delay already announced in last year’s budget, the Australian Council for International Development (ACFID) <a href="acfid.asn.au/resources-publications/files/2013-2014-federal-budget-analysis">stated</a> this means a $6.5 billion cut from the aid commitment over five years.</p>
<p>The opposition have <a href="http://www.juliebishop.com.au/transcripts/1281-sky-news-on-the-hour-12-noon.html">recommitted</a> to increasing aid to 0.5% of national income, but without providing a timetable for this increase to take place.</p>
<p>Defence received a $1.2 billion increase, consistent with the new <a href="http://www.defence.gov.au/whitepaper2013/">Defence White Paper</a>. The White Paper stresses the importance of “regional engagement”, with bipartisan commitment to a 2% aspirational target.</p>
<p>Now the budget dust has settled, we can ask the sober question. What makes Australians secure within our region, in the Asian Century? As Hugh White <a href="http://nsc.anu.edu.au/documents/occasional-3-white.pdf">asked</a> in 2012, “how are we to align and prioritise a huge range of very diverse policy instruments – aid, diplomacy, armed force, policing, economic and trade policy, immigration policy, health policy, etc., with [a] huge range of security problems to create a coherent strategy linking one to the other?” </p>
<p>It is arguable that foreign aid and to a larger extent development policy, which includes not only Official Development Assistance but also people-to-people links, migration policy, trade policy and peacekeeping is a core part of our regional identity and a core component of our “soft power” in the Asian Century.</p>
<p>Australia consistently under-invests in its own soft power. As Harvard professor and former US diplomat Joseph Nye <a href="http://www.ted.com/talks/joseph_nye_on_global_power_shifts.html">states</a>:</p>
<blockquote>
<p>In this new world of transnational threats and the information age, it is not just whose army wins, it’s whose story wins.</p>
</blockquote>
<p>Australia has a great story to tell in the region as a partner in development; as a friend when humanitarian disasters strike, and as a leader when neighbours like the <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1301.0%7E2012%7EMain%20Features%7EAustralia's%20overseas%20aid%20program%7E217">Solomon Islands and East Timor</a> are in transition.</p>
<p>And yet, all this is thrown out the window whenever there is a tough domestic budget in a casual manner that no one would dream about adopting with regard to defence.</p>
<p>Think of aid and diplomacy as core to debates about our national security. The fundamental purpose of Australian aid is - and should remain - to help people overcome poverty. There may be a debate about emphasis but almost all commentators agree that the aid program is at least relevant to our national security. </p>
<p>Our aid program is focused on the eradication of poverty in our immediate neighbourhood. Poverty is a source of insecurity, and so our national interest is promoted by poverty reduction in the region, as well as other human security issues such as pandemics and climate change adaptation.</p>
<p>John Howard <a href="http://epress.anu.edu.au/sdsc/hap/mobile_devices/ch07.html">once argued</a> that the building mosques to support moderate Indonesian Islamic schools helped to address terrorism. Although the evidence base for this proposition is slim, it probably cannot hurt. </p>
<p>NGOs often argue that focusing on Papua New Guinean education and health programs and constructing Afghani community buildings result in both enhanced opportunities for local communities as well as promoting Australia’s national interest. A win-win.</p>
<p>Should we go further? The Australian Strategic Policy Institute argued in a 2011 report, <a href="http://www.aspi.org.au/publications/publication_details.aspx?ContentID=285">A Better Fit</a>, that the government needed to explain the link between aid and national security much more clearly, and be more explicit and strategic about the “strategic investment” aspect of the aid program:</p>
<blockquote>
<p>….our aid…strengthens our security by assisting friendly states that we believe are important to us.</p>
</blockquote>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/24670/original/rgt7vxjb-1369888656.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The federal budget saw A$6.5 billion cut from Australia’s foreign aid commitments over the next five years.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>Many NGOs object to interweaving aid and security in particular contexts with special mention to military-delivered aid in Afghanistan. The Australian Council for International Development, the peak body for development NGOs, argued in a 2011 <a href="http://www.acfid.asn.au/resources-publications/publications/acfid-research-in-development-series/in-it-for-the-long-haul-delivering-aid-to-afghanistan">report</a> that the close identification of aid and security in Afghanistan was bad for both. </p>
<p>Aid that follows the fighting - the involvement of military forces in aid projects without development expertise - encroaching on the “independent and impartial space” for NGOs are all negative results for Australia in the long-term.</p>
<p>In the US, they talk about three equal pillars of national security – development, diplomacy and defence. Equal pillars. In the UK, when Clare Short was Secretary of State for International Development in prime minister Tony Blair’s government between 1997 and 2003, she had power to veto other government measures that would undermine the impact of the UK’s development policies. That is not being wished for Australia. Yet.</p>
<p>Settling for strategic use of soft power is a better solution, dependent on getting the respect soft power deserves at budget time.</p><img src="https://counter.theconversation.com/content/14482/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan Harris Rimmer 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>Amidst the controversy over Julie Bishop’s Guardian interview earlier this week, many of the interesting facts about foreign policy under a putative Coalition government were lost. Notably, the opposition’s…Susan Harris Rimmer, Director of Studies, Asia Pacific College of Diplomacy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/143332013-05-18T01:02:47Z2013-05-18T01:02:47ZKeep them off the rails: politics and transport don’t mix<figure><img src="https://images.theconversation.com/files/23941/original/ygtv32vk-1368681514.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Playing politics with transport will only lead to a train wreck.</span> <span class="attribution"><span class="source">Flickr/awmalloy</span></span></figcaption></figure><p>The 2013-2014 Federal budget includes <a href="http://www.budget.gov.au/2013-14/content/overview/html/overview_11.htm">billions of dollars allocated to transport</a>, including a new Melbourne rail tunnel. At the same time the Victorian State government has plans for a different tunnel <a href="http://www.linkingmelbourne.vic.gov.au/pages/east-west-link.asp">linking the city’s highways</a>. </p>
<p>Competing transport priorities across State and Federal budgets and across the political divide may sell newspapers – but what does it mean for projects on the ground? </p>
<p>When it comes to the separation of transport and state, the United States lead the way. So, what can we learn from them?</p>
<p>Quite some time ago, moves were made in the United States to separate political actors and individual transport project decisions. This took place within the US’s more cautionary democratic system of “checks and balances”.</p>
<p>American politicians retain the right to support a small number of projects at their discretion, but these are subjected to rigorous processes and oversight. </p>
<p>The bulk of funding goes into a so-called “contested” market for projects – in which State government and local professional teams submit well-planned infrastructure proposals. The best plans and proposals with the best economic fundamentals get the cake.</p>
<h2>Taking marginal seats off the map</h2>
<p>In Australia, allocations of infrastructure funding are often assumed to be based around <a href="https://theconversation.com/from-western-sydney-to-western-australia-how-marginal-is-marginal-12777">marginal seat</a> plays. Our cynicism regarding the odious impact of “marginal seats” motivation is well-founded.</p>
<p>But let’s pause for a moment and think: because most interpretations of Australian public sector accountability and conduct would suggest that mobilising taxpayer dollars to achieve a personal or party-political outcome is pushing the legal boundaries (to put it mildly).</p>
<p>In a practical sense, the “marginal seats” driver of infrastructure spending also overlooks the overwhelming majority of us that live in non-marginal seats. We have needs too. </p>
<p>So after a generation of politically-driven handouts for <a href="http://www.nationbuildingprogram.gov.au/funding/r2r/index.aspx">regional roads to nowhere</a>, those of us riding an overcrowded tram, bus, or train to work would like to send the political class a hearty “thanks for nothing, guys”.</p>
<p>In the US they recognised these problems long ago and removed the temptation and potential for politically-motivated allocation of taxpayer funds. They largely removed politicians from proposing projects and choosing between projects - and transport infrastructure outcomes are better for it.</p>
<h2>Infrastructure Australia and the de-politicisation of transport</h2>
<p><a href="http://www.infrastructureaustralia.gov.au/">Infrastructure Australia</a>, the Federal government’s advisory board on infrastructure and investment, represents a step in this direction, but its style, structure and effectiveness will need substantial renovation in years to come. </p>
<p>Infrastructure Australia seems to be too much of a one man show (rather than a “board”), and seems to have one eye on keeping merchant banks happy. It is captive to a stultifying interplay between bureaucrats and bland consultants. And it has fallen into the “behind-closed-doors” approach to planning and funding. </p>
<p>The board tells us that Melbourne Metro is “ready to proceed” - but does not back that assertion with extensive public-domain documentation and analysis. “Trust us” - they are saying - “…this stuff is too complicated for you the taxpayer to follow”. </p>
<p>Those of us with expertise in transport back the Melbourne Metro idea solidly, but feel the current concept is anything but ready to proceed. Fixing the alignment to deliver fundamentally important inter-line connections and transfer opportunities at Arden and South Yarra respectively would be a start.</p>
<p>If we want to trust Infrastructure Australia with more money and responsibility, it needs to become open and accountable, and needs a harder-edge on innovation, policy, and 21st century transport thinking.</p>
<p>A better future for Australian transport would involve elected officials overseeing and renewing the institutional framework itself, and creating positive policy change - rather than meddling with individual projects.</p>
<p>They would be involved in deciding an annual amount of funding for infrastructure. They would step in and rectify problems as they arose, and would be accountable for the quality and effectiveness of the institutions they govern.</p>
<p>That’s more than enough work for a state or federal Minister interested in delivering better transport. </p>
<h2>Let’s admit politicians and bureaucrats aren’t perfect</h2>
<p>While this direction may at first seem different and radical, it is simply the age-old requirement to deliver institutional arrangements that account for inherent weaknesses in politics and bureaucracy. </p>
<p>We should no longer hope in vain that politics itself will throw-up an effective and intelligent State or Federal minister of transport, or that the bureaucracy will begin promoting the best and brightest.</p>
<p>The future of Australian infrastructure governance follows the dictum to “hope for the best, but plan for the worst” in terms of political and bureaucratic personnel and frameworks. </p>
<p>It involves a move away from personalities, and a new focus on better institutions and processes.</p>
<p>This may sound dull – but a renewed approach to transport institutions and funding lays the groundwork for a grander future in Australian cities. Those metros, bus networks, invigorated tram systems and freight connections are within our reach. We can also improve our freeways with a smarter funding mix.</p>
<p>Australia is a wealthy, advanced nation. We can well afford better infrastructure. But our institutional settings resemble those of a developing country, rather than best practice. </p>
<p>The result is a lot of money wasted on rubbish transport projects - while the rest of us huddle daily onto overcrowded trains, trams and buses to earn a living.</p><img src="https://counter.theconversation.com/content/14333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Hale works as an infrastructure project consultant in Australia and abroad. He has a contract with AECOM India, but no current Australian project engagements. Through the University of Melbourne, Chris receives small-grant research funding from a list of organisations including - VicTrack, MGS architects, Grimshaw architects, City of Darebin, City of Yarra, and City of Moreland.</span></em></p>The 2013-2014 Federal budget includes billions of dollars allocated to transport, including a new Melbourne rail tunnel. At the same time the Victorian State government has plans for a different tunnel…Chris Hale, Lecturer, Department of Infrastructure Engineering, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142582013-05-17T05:59:48Z2013-05-17T05:59:48ZStrong rhetoric underpins Abbott’s budget strategy<figure><img src="https://images.theconversation.com/files/24021/original/zbqrrdn4-1368768339.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tony Abbott's budget reply was a considered economic strategy amid fiscally challenging times for Australia.</span> </figcaption></figure><p>In last night’s <a href="http://liberal.org.au/Budget_Reply_2013">budget reply</a>, Tony Abbott crowed he will “put the house back in order” and that the “budget will be in better hands under a Coalition government than under Labor”. It was a very measured response that, for the first time, gave the nation some idea of what a prospective Coalition government might do in these tough fiscal circumstances.</p>
<p>He hoisted the government with its own petard, but indicated that the Coalition would probably accept Labor’s $43 billion in cuts and taxation increases, would legislate to implement any that were not passed before the election if it formed government, and would not commit to reverse any of them. He clarified the Coalition “reserved the right to implement all of Labor’s cuts” because there is “now a budget emergency”.</p>
<p>Before we deal with the detail, the first point to make about Abbott’s address is that it did engage with the Budget – a feature that Labor will probably not appreciate. Abbott accepted, modified or rejected Labor’s principal measures, giving Labor much to ponder over.</p>
<p>Past budget replies have not actually tackled the government’s budget; rather, the primetime TV slot has been used to as an election pitch to the nation or to attack the government politically. </p>
<p>However, this time Abbott chose to engage with the attributes of the budget, suggesting what he would do with the items that Labor has put on the table. These included Labor’s own budget cuts; increased taxes (“savings measures”); the NBN; the Gonski education reforms; the Baby Bonus; the 0.5% increase to the Medicare levy; and the funding for DisabilityCare.</p>
<p>The big news item was that carbon tax compensation to households will be preserved (if Abbott can secure passage of the tax’s repeal through the Senate). </p>
<p>This avoids the prospect of going to an election seemingly about to take dollars away from aged pensioners and low-income households. He confirmed, however, that in dismantling the mining tax he would also suspend the supplementary cash hand-outs to be paid to people on benefits. </p>
<p>Abbott claimed electricity prices would come down, a heroic assumption given most suppliers are still public enterprises that act as quasi-monopolies and can dictate prices. The threat to review their pricing by the Productivity Commission may be a worthwhile tactic.</p>
<p>Abbott has committed to pulling some extra $5 billion out of the budget to cover the abolition of the carbon tax, including deferring superannuation and removing the low income government contribution to superannuation and scrapping the green loans program. These may not seem to be clever moves. </p>
<p>In many ways, these changes have become sacrificial lambs picked out to satisfy the need to preserve the compensation payments the Gillard government introduced. They are likely to be short-term sacrifices as each has a worthy policy goal in enhancing long-term retirement incomes and reorienting the economy towards environmental sustainability. </p>
<p>Further confirmation was given that a Coalition government would cut 12,000 jobs from the public service, which would still see it larger (by 8,000 jobs) than when John Howard lost office. There was also a hint that the Coalition would revisit the GST – perhaps after a white paper – perhaps proposing either to increase the rate or include all those areas currently excluded to broaden its application. However, any such proposal would require a mandate from the next election and from the state premiers.</p>
<p>Much of Abbott’s economic strategy rests on a spike in consumer and business confidence upon the return of a conservative government. As economic activity picks up, revenues will improve further and restore the budget to balance. This may well eventuate, but it is an assumption — not yet fact. If any government squeezes the economy too hard through spending cuts or tax increases, it risks tipping the economy into recession - as John Howard nearly did when he made substantial cuts in 1996-97.</p>
<p>Commentator opinion to the speech has been generally positive. <a href="http://www.abc.net.au/news/2013-05-16/crabb---budget-2013-reply/4694244">Annabel Crabb</a> said the reply “was genuinely interesting”; <a href="http://www.afr.com/p/opinion/abbott_golden_age_thing_of_the_past_YQ0IEc3dfvXVPrDAUBEpBJ">Laura Tingle</a> said “Abbott finally broke cover on some of his budget plans”; and <a href="https://theconversation.com/abbott-backflips-on-carbon-compensation-in-budget-reply-14362">Michelle Grattan</a> called it a “backflip on carbon compensation”. <a href="http://www.abc.net.au/news/2013-05-17/kohler-budget-2013-reply/4694182">Alan Kohler</a> remained sceptical, saying that both the budget and Abbott’s reply were all “smoke and mirrors”.</p>
<p>Nevertheless, strong rhetoric underpinned Abbott’s speech. Some of his memorable lines included: “the Second World War was more temporary than this government’s deficits”; “parents do not mortgage their children’s future, neither should government”; “if a public company made these sorts of claims [the government has], its directors would most likely face serious charges rather than asking to be re-elected”; and “I am offering what should be normal: careful, collegial, consultative, straightforward government that says what it means and does what it says”.</p>
<p>But there were also many of the hoary old lines about the government’s money not being their money, that governments don’t create wealth, people do, and “you can’t spend what you don’t have”. These appeals to populism were sprinkled into what was otherwise a thoughtful response to the budget’s strategy in a fiscally challenging set of circumstances.</p><img src="https://counter.theconversation.com/content/14258/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>I have no conflicts of interest with regard political commentary.</span></em></p>In last night’s budget reply, Tony Abbott crowed he will “put the house back in order” and that the “budget will be in better hands under a Coalition government than under Labor”. It was a very measured…John Wanna, Sir John Bunting Chair of Public Administration , Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/143932013-05-17T02:42:53Z2013-05-17T02:42:53ZAbbott’s balancing act: keeping the compensation while axing the carbon tax<figure><img src="https://images.theconversation.com/files/24002/original/x9v2cp5q-1368755532.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In his budget reply speech, Tony Abbott made the unpredicted announcement that he would maintain carbon tax compensation but still abolish the tax.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>In his federal budget reply speech, opposition leader Tony Abbott <a href="https://theconversation.com/abbott-backflips-on-carbon-compensation-in-budget-reply-14362">announced</a> that a putative coalition government would maintain the revised tax-free threshold and other associated carbon tax compensation measures while still scrapping the tax itself.</p>
<p>Abbott told parliament that keeping the compensation would ease the pressure on Australian families. </p>
<p>“The carbon tax will go but no-one’s personal tax will go up and no-one’s fortnightly pension or benefit will go down,” he said.</p>
<p>The coalition has previously said the compensation <a href="http://www.abc.net.au/news/2013-03-06/hockey-on-carbon-tax-compensation/4556010">would not be needed</a> when the carbon tax was repealed, although it had promised that there would be some alternative tax and welfare assistance.</p>
<p>The Conversation spoke with Associate Professor at ANU’s College of Law and Acting Director of the ANU Centre for Climate Law and Policy, Andrew Macintosh, about the political implications and ideological background behind Abbott’s changing position on the compensation measures.</p>
<hr>
<p><strong>Why has Tony Abbott decided to maintain the compensation but axe the actual tax? Are there political motivations?</strong></p>
<p>There’s the straight politics of wanting to retain popular tax cuts and pension and family tax increases. No politician in an election year ever wants to effectively impose taxes or to raise taxes or to cut benefits. That’s the most obvious explanation. The other explanation is that raising the tax-free threshold is good policy, so I would imagine it would be a combination of both.</p>
<p><strong>So you think it’s more of a vote winner than ideologically driven?</strong></p>
<p>I couldn’t say which one is the primary driver, but certainly both are in play and as I said, no politician wants to raise taxes in an election year.</p>
<p><strong>Do you think it’s economically viable or feasible?</strong></p>
<p>Yes, there’s no doubt that a government has the capacity to have a higher tax-free threshold and to retain the associated benefits of pension increases and family tax benefits. But in order to pay for that they have to make cuts elsewhere, unless they want to run ongoing deficits. At the moment we’re still waiting for the details on exactly where the coalition intends to make those cuts.</p>
<p><strong>Do you think it is a wider strategy by Abbott to make himself seem more constructive in terms of policy, as opposed to the negative light that the Labor party has painted him in?</strong></p>
<p>Definitely, it would be partly a defensive measure. If Abbott decided to get rid of those tax changes and family and pension benefit increases then the current government would have used that as part of a strategy to paint Abbott into a corner, and to accuse him of raising taxes - which is against the ethos of the Liberal-National coalition. So I’m sure that played a part in their decision. </p>
<p><strong>Do you think it will be successful with the voters?</strong></p>
<p>I don’t know if it is going to be the one thing that is going to get the coalition over the line, but at the moment they’ve got a lot of fat between them and losing this election. The Labor party’s primary vote is now in the <a href="http://www.news.com.au/breaking-news/labor-fails-to-convert-widespread-support-for-ndis-to-ballot-box/story-e6frfkp9-1226636380425">low-30s</a> and it could even dip below that, so I don’t know if it is going to change anything. </p>
<p>But certainly, as I said before, the coalition will be playing a safety-first strategy in the lead up to the election and this is just one of those things where they have obviously said: “it’s better for us to retain these because they’re popular, they’re also arguably good policies, particularly retaining the tax-free threshold, so we’re going to retain them and make tax cuts elsewhere”.</p>
<p><strong>Where else do you think they’ll make those cuts?</strong></p>
<p>Not sure. That’s one of those things that’s very much up to them. There are all sorts of places where you can make cuts, you know, some of them, people like me will agree with, others won’t agree with them. There’s things like superannuation that could be overhauled, there’s changes in company taxes, there’s a large number of family tax benefits that someone like me would like to see radically overhauled.</p>
<p>But it will very much depend on whether they think, firstly, where they want them to occur from an ideological and policy perspective and then, secondly, what is best for them from a political perspective.</p>
<p><strong>Which would be the more effective approach? Could they win the election maintaining an ideological line, or should they simply stick with what plays well with the public?</strong></p>
<p>It depends on the ideological line. There’s divisions in the Liberal party and the National party, as there are in all political parties, so you have to work out which ideology is dominant. If it is a neo-liberal ideology then that leads to one set of circumstances and if it’s more a modern conservative position then that leads to a completely different set of tax cuts.</p>
<p><strong>Which one do you think is more relevant in the modern context?</strong></p>
<p>A sort of compromised, conservative position is dominant: it was certainly dominant throughout the Howard era. You saw a lot of the family tax benefits and tax cuts that the coalition introduced during the Howard era and a lot of them were certainly nothing like what an economic rationalist or a neo-liberal position would dictate. And I don’t see a lot of evidence of a strict adherence to neo-liberal concepts out of the opposition: certainly not for the last couple of years. </p>
<p>So I would suggest it is going to be more of a compromised conservative position that is driven by politics. That’s the nature of politics I suppose. If you want to be a politician, you have to allow your ideology to give ground to political factors. </p><img src="https://counter.theconversation.com/content/14393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Macintosh 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 his federal budget reply speech, opposition leader Tony Abbott announced that a putative coalition government would maintain the revised tax-free threshold and other associated carbon tax compensation…Andrew Macintosh, Associate Professor ANU College of Law and Associate Director of the ANU Centre for Climate Law and Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142292013-05-17T01:06:14Z2013-05-17T01:06:14ZBreast cancer screening needs to make more than economic sense<figure><img src="https://images.theconversation.com/files/23992/original/tzppfwg9-1368750585.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The harms from over-diagnosis and over-treatment mean that not everyone benefits from breast cancer screening.</span> <span class="attribution"><span class="source">Ian Hunter</span></span></figcaption></figure><p>A <a href="https://theconversation.com/a-rational-expansion-of-breast-cancer-screening-14159">recent article</a> in The Conversation’s <a href="https://theconversation.com/topics/health-rationing">Health Rationing</a> series endorsed the government’s decision to extend the BreastScreen program to women aged 70 to 74 (from 50 to 69), based on the results of a 2009 cost-effectiveness analysis of the program. </p>
<p>But the landscape of breast cancer screening changed irrevocably in late 2012, with the publication of <a href="http://www.cancerresearchuk.org/prod_consump/groups/cr_common/@nre/@pol/documents/generalcontent/breast-screening-review-exec.pdf">a report</a> by an independent UK panel that reviewed breast cancer screening.</p>
<p>The panel confirmed that screening reduces the risk of dying from breast cancer by about 20%, but also concluded that screening causes over-diagnosis. Over-diagnosed cancers are those that would never have been found without screening. They are not destined to cause symptoms or become life-threatening but, nonetheless, they lead to more women getting treatment for breast cancer. </p>
<p>The panel estimated that 681 cancers would be diagnosed for every 10,000 UK women screened from 50 years of age for 20 years. Of these 681 cancers, 129 would represent over-diagnosis and 43 deaths would be prevented. </p>
<p>In other words, for women invited to be screened, the chance of avoiding dying from breast cancer is about 0.4% and the chance of being over-diagnosed and over-treated is about 1.3%. So, for every breast cancer death prevented, three women will be over-diagnosed and over-treated.</p>
<p>Breast cancer screening is a finely balanced trade-off of benefit versus harm. And there are important question marks over the argument to expand the program based on cost-effectiveness analysis alone. </p>
<p>This is particularly problematic because the analysis itself is based solely on survival statistics, when there are also major impacts on quality of life from both potential harms and benefits of screening.</p>
<p>More important than economic considerations, such as whether the program’s “cost per life-year saved” is improved by screening older (or younger) women, is the question - will we do more good than harm by expanding screening?</p>
<p>The <a href="http://www.cancerscreening.gov.au/internet/screening/publishing.nsf/Content/br-economic-cnt">2009 cost-effectiveness analysis</a> that was used to assess the implications of expanding the screening program was done as part of a wide-ranging evaluation of the BreastScreen Australia program.</p>
<p>That evaluation also included an assessment of the mortality benefit (percentage of breast cancer deaths averted) by screening in Australia. <a href="http://www.cancerscreening.gov.au/internet/screening/publishing.nsf/Content/br-mortality-ecological-cnt">It found</a> that, while screening significantly reduced the risk of dying from breast cancer among women aged 50 to 69 years, there was no significant reduction in breast cancer mortality among women aged 70 to 74 years.</p>
<p>So why have we expanded a program that will likely harm women over the age of 70 through over-diagnosis, without clear evidence that it will deliver a benefit for this age group?</p>
<p>While the 2009 cost-effectiveness estimates included treatment costs, they did not explicitly consider the effects of over-diagnosis and subsequent over-treatment on either survival or on quality of life. </p>
<p>The UK panel’s report suggested that new cost-effectiveness estimates should be made, taking account of over-diagnosis. This needed to be done before the decision to expand the program was made.</p>
<p>The <a href="http://www.cancerscreening.gov.au/internet/screening/publishing.nsf/Content/8463830B90E5BDF5CA25762A000193C6/$File/ch%201-3.pdf">2009 BreastScreen Australia Evaluation</a> recommended a focus on increasing screening participation rates through social marketing and other strategies. But is it ethical to promote screening to women in their 70s when we cannot demonstrate that it will reduce the risk of dying of breast cancer in this age group? </p>
<p>Might we not inadvertently pressure older women to undergo breast cancer screening and treatment that they may not need nor benefit from? An example from <a href="http://www.bmj.com/content/346/bmj.f158">recent research</a> conducted by our group is revealing in this regard. </p>
<p>When presented with information about both the benefit of screening and the risk of harm through over-diagnosis, one study participant was angry that she and her mother (aged in her 70s) had not received this information before her mother underwent breast cancer treatment. Her mother died shortly after the operation and our participant believed the death was a direct consequence of treatment.</p>
<p>Breast cancer screening <a href="http://www.cancerscreening.gov.au/internet/screening/publishing.nsf/Content/br-economic-cnt">currently costs</a> an average of A$136 million a year. The expansion of the program is being funded at a cost of an additional A$55 million. The opportunity cost (the forgone benefit of alternative use/s of the money spent) of the expansion is considerable. </p>
<p>All things considered, there may be better ways to address the burden of breast cancer that would be more beneficial and less harmful. Such strategies might include more resources directed towards better information about the benefits and harms of screening, as called for by the independent UK panel, to ensure women are able to make informed choices to screen or not. </p>
<p><a href="http://jnci.oxfordjournals.org/content/early/2013/02/01/jnci.djs649">Deliberative methods</a>, such as citizen juries may also be effective way to proceed. These methods allow evidence on complex health decisions to be presented to communities so they can make informed recommendations about where they feel government funds would be best invested. </p>
<p>Better information and better consultation initiatives are priorities for screening programs now that the harm of over-diagnosis has been confirmed. Or, money could be directed to primary prevention of breast cancer through lifestyle modification, breast cancer research or other health-care priorities.</p><img src="https://counter.theconversation.com/content/14229/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexandra Barratt receives funding from NHMRC for research on the evidence and ethics of cancer screening.</span></em></p><p class="fine-print"><em><span>Kirsten Howard works with the Screening and Test Evaluation Program which is funded by the NHMRC, and receives funding from the ARC.</span></em></p><p class="fine-print"><em><span>Kirsten McCaffery is currently working with the Screening and Test Evaluation Program which has program grant funding from the National Health and Medical Research Council.</span></em></p>A recent article in The Conversation’s Health Rationing series endorsed the government’s decision to extend the BreastScreen program to women aged 70 to 74 (from 50 to 69), based on the results of a 2009…Alexandra Barratt, Professor of Public Health, University of SydneyKirsten Howard, Professor, Health Economics, University of SydneyKirsten McCaffery, NHMRC Career Development Fellow & Associate Professor in Public Health, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/143432013-05-16T20:05:36Z2013-05-16T20:05:36ZAustralia’s choice: keep hiking taxes, or grapple with our spending on health and the aged<figure><img src="https://images.theconversation.com/files/23940/original/5w5zv52d-1368681448.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How to deal with our demographic future of an ageing population? One was is the status quo - hike taxes - but the other requires the courage to grapple funding to health and the elderly.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>More than a decade ago the federal treasury produced the first Intergenerational Report (IGR), warning of the challenges facing the Australian economy due to demographic change. </p>
<p>The IGR warned that the living standards of future generations would depend on the decisions made at that time. Unfortunately budgetary decisions made in the past decade have not begun to meet the challenges of an ageing population, and in most cases have taken us backwards. </p>
<p>We are not, on the current trajectory, headed for a smart, productive workforce enjoying high living standards. Instead we are headed toward the European style long-term malaise, though I would hope that we do not fall so far.</p>
<p>The challenges outlined in the IGR and subsequent updates are pretty simple. With an ageing population, the burden of higher aged care and health costs will be borne by a smaller workforce. </p>
<p>While demographic forecasts are subject to errors, the general trend will be impossible to reverse. The first IGR projected that the ratio of adults not in employment to those in employment would rise from approximately 0.7 to 0.9 by 2042, and continue to rise thereafter.</p>
<p>What can be done about this problem? One option is the status quo. Assuming that GDP continues to grow, a rising welfare and health burden can be dealt with through increasing tax revenues and government expenditure, with living standards still continuing to rise. </p>
<p>In my view this option will see living standards decline dramatically in the coming decades relative to where they ought to be and to our regional peers, so that the opportunities for our children will be far less extensive than they should be. Rising tax burdens stifle innovation and entrepreneurship, and our new competitors in Asia will increasingly occupy spaces that Australians should also enjoy. </p>
<p>Let me first spell out the general directions taken in the past ten budgets, then spell out some different options and directions to be considered.</p>
<p>In the 2003-04 financial year a small budget surplus was projected, with spending of around $177 billion. Social security and welfare accounted for $76 billion (or 42%) of total spending, with health comprising a further A$31 billion (18%) of total spending. Defence, and education spending were each around A$13 billion, or 7% of the budget. If one looks at the budget aggregates it is very clear that in order to limit spending increases, rising health care and social welfare payments are the major issue, with an ageing population leading to increasing pressures in these areas.</p>
<p>If one looks into the details of the social welfare payments, aged care payments are the largest single spending item in the budget. In 2003-04 A$26 billion were payments to the aged, while families with children received A$21 billion. While health spending is not broken down by spending on the health of the aged, the Productivity Commission has reported total health costs of those aged over 75 are more than four times the costs of those aged 35-54.</p>
<p>The 2013-14 budget reports accrual expenses of A$398 billion, and revenue of A$388 billion. Over the past ten years that is an average rise in tax revenue and expenditure of around 15% per year. During the same period nominal GDP grew by 8.5%. </p>
<p>Some of the increase in expenditure and tax revenue is due to different treatment in the budget of GST revenues and associated transfers, but even after taking this out of the budget, spending rises by more than 12% per year, much faster than nominal GDP. </p>
<p>Treasurer Wayne Swan has blamed some of the current deficit on slower than expected nominal GDP growth – one could alternately argue that Australian governments have become far to used to relatively high nominal and real GDP growth, and in particular company tax revenues, and have spent the windfall before they earned it.</p>
<p>Social security and welfare spending accounted for A$138 billion in the latest budget, a rise of nearly 14% per year over the past decade. Assistance to the aged has risen to almost A$55 billion, a rise of 22% per year since 2003-04. Over this same period health care spending has risen to A$65 billion, an increase per year only slightly slower than spending on assistance to the aged.</p>
<p>Despite the warnings in the IGR, we have not gotten close to controlling the two main costs associated with an ageing population. This is perhaps not surprising in a world where the aged vote, our voters are getting older, and our politicians pander relentlessly to the median voter, but this mix is a recipe for an impoverished Australia.</p>
<p>What can be done to control these costs? In regard to both health and aged care spending, government spending must be provided only to those who are in need of assistance. Pension tests are still far too lenient, with many pensioners who receive some assistance clearly capable of caring for themselves. </p>
<p>Anyone who receives any pension also receives very substantial health benefits and other subsidies. Over the past decade the governments share of total health spending has risen. Private contributions to health need to be increasing, not decreasing, in the future.</p>
<p>A further factor is the lack of savings of older Australians. The government is to be commended for increasing the compulsory superannuation contributions over time. However, the government should resist changes to superannuation that make it less attractive, and also ensure that withdrawals from superannuation are managed so that balances are sufficient to the end of what will be very long lives for most people. </p>
<p>Further, it is well to remember that when the government pension was introduced, the average life expectancy for men was still below the pension age of 65. While increases in the pension age to 67 are a good start, the current reality is that the right pension age is probably closer to 75, or even 80, and ought to be increased well above 67.</p>
<p>In this Asian century it is interesting to look at some developments in our Asian neighbours. In most countries in Asia spending on health, on pensions, and on education is a fraction of our spending. Of course it is often the case that we do not want to emulate our neighbours, however there are many cases where we have a lot to learn. </p>
<p>At Narayana Hospital in Bangalore, heart surgery is performed at a fraction of the cost of the same procedure in an Australian or US hospital, with outcomes at least as good in terms of mortality and other indicators. The focus at this hospital is on high scale, efficiency, and low cost. In OECD economies it is this last point that is usually lost.</p>
<p>In education the government has the ambition for our education system to produce students who are top five in the world. Currently Shanghai has the top ranked students in maths and science outcomes according to the OECDs PISA tests. There are some things we would not want to replicate from the Shanghai system, such as the high levels of homework and discipline, but Shanghai has also implemented many effective reforms that have improved weaker performing schools – mentoring, training of teachers, and experimentation with different teaching methods have been very successful. Interestingly, the approach in Shanghai is very decentralised and experimental, which seems to be the opposite direction to the one Australia is taking.</p>
<p>It is telling that we still compare our economy with the mostly weak OECD economies in our budget papers, rather than the more dynamic and diverse economies in our region. In the Asian century we have a lot more to learn from our Asian neighbours than from OECD economies. German Chancellor Angela Merkel was recently quoted in the Financial Times as saying that Europe has 7% of the global population, 25% of global GDP, and 50% of global welfare spending. Welfare spending is far from the only problem in Europe, but the habits of dependence, rather than work, are a major issue.</p>
<p>Fifty years ago Donald Horne referred to Australia as the lucky country. But he also pointed to the fact that we were run by second rate people who shared its luck. Unfortunately luck will not be enough to get us through the next 50 years.</p><img src="https://counter.theconversation.com/content/14343/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Crosby is an Associate Professor with Melbourne Business School.</span></em></p>More than a decade ago the federal treasury produced the first Intergenerational Report (IGR), warning of the challenges facing the Australian economy due to demographic change. The IGR warned that the…Mark Crosby, Associate Professor of Economics, Melbourne Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/141942013-05-16T04:16:05Z2013-05-16T04:16:05ZReliance on 457 visas blunts the vision of the NDIS<figure><img src="https://images.theconversation.com/files/23909/original/tkgj6cdc-1368668097.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The rollout of the NDIS will place considerable pressure on the disability workforce. But are 457 visas the answer?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>With the legislation now through both houses of parliament, The National Disability Insurance Scheme, or DisabilityCare, is law, and will quickly become a defining feature of Australia’s social policy landscape. Gillard’s <a href="https://theconversation.com/increasing-income-tax-the-right-choice-for-a-sustainable-ndis-13578">Medicare-style tax levy</a>, now locked in through the federal budget, will ensure a reliable flow of funds to the Scheme, and with the prospect of sustainable federal funding on the table, most states and territories have signed up for the national roll-out, and agreed to foot a share of the bill. </p>
<p>But with only weeks left before its launch, closer consideration of the detail of DisabilityCare, including how the organisations providing disability services, and their paid employees will cope, is well overdue.</p>
<p>For many years, demand for formal support services has been growing, and providers have struggled to properly resource their responses. De-institutionalisation since the 1980s has seen more people with severe or profound limitations living in the community, and in coming decades, the number of people aged under 65 with core activity limitations will continue to grow. In 2011, services funded under the National Disability Agreement were <a href="http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=10737422878">assisting one in 71 people</a>, compared with one in 94 people in 2006.</p>
<p>In response, the number of workers who provide care and support for people with disabilities is also growing. Between 2012 and 2017, growth in the number of aged and disability carers is expected to be <a href="http://www.cshisc.com.au/media/171360/Environmental_Scan_2013__2.7mb.pdf">about 24%</a>, even before the NDIS rolls out nationally, while the full rollout is expected to require the disability workforce <a href="http://www.budget.gov.au/2013-14/content/glossy/NDIS_policy/download/NDIS.pdf">to double</a>. At the same time, the age structure of the paid care workforce means many workers will retire in the next decade. </p>
<p>In this context, it is no surprise that a large employer is pleading to meet the industry’s growth needs with <a href="http://www.theaustralian.com.au/national-affairs/immigration/plea-for-457s-to-ease-lack-of-disability-staff/story-fn9hm1gu-1226636339534">temporary overseas workers</a>. This avenue is already available for skilled positions such as nursing, special education, and social work, as well as some <a href="http://www.immi.gov.au/skilled/_pdf/sol-schedule1-2.pdf">mid-skill welfare occupations</a>. The use of temporary visas to ensure sufficient supply of lower skill personal carers seems a short-sighted and ill-suited response to real problems of long-term under-investment in the sectors greatest asset: its frontline workforce.</p>
<p>First, the “457 solution” is poorly aligned with the NDIS’ vision of promoting the capacity of consumers to choose their own support staff, and in some cases to employ them directly, because 457 visaholders can only be employed by organisations, not by individuals. </p>
<p>Second, a temporary workforce is less than ideal for people with disabilities and their families. Support is labour intensive, and the personal element of the work means the security and consistency of sustained relationships is the key to quality, as these give the foundation for fostering capabilities, wellbeing and participation of people with disability, and promoting NDIS goals of choice and empowerment.</p>
<p>Third, the nature of disability support work means temporary migrants may be exposed to levels of exploitation over and above that already experienced by the domestic workforce. While staff working in the homes of people with disabilities are vulnerable to isolation, a lack of collegial support and poor union representation, those on 457 visas will face additional barriers in raising concerns over pay, conditions and health and safety, because their visa and residency (as well as employment) depends on employers. The <a href="http://www.sbs.com.au/news/article/1708121/Are-457-visa-holders-being-exploited">limited capacity</a> of the Department of Immigration and Citizenship to monitor employers’ compliance is well known.</p>
<p>Addressing workforce shortages with a temporary overseas workforce would leave intact the underlying structural workforce problems, and risk exacerbating the vulnerability to low pay, insecurity, and under-skilling of this female dominated workforce. </p>
<p>In 2010, more than a third of non-professional disability workers in the non-government sector were casual, and <a href="http://www.csmac.gov.au/admin/documents/Who%20works%20in%20Community%20Services%20Report.pdf">more than half</a> of employers reported their non-professional employees were under-skilled.</p>
<p>Upskilling is far from straightforward, as under the NDIS, it is unlikely that qualifications will be mandatory. <a href="http://www.fahcsia.gov.au/sites/default/files/documents/05_2013/fahcsia_portfolio_budget_statements_2013-14.pdf">FAHCSIA’s portfolio budget statements</a> indicate a commitment to exploring the Scheme’s workforce implications, with DisabilityCare Australia charged with developing a <a href="http://www.budget.gov.au/2013-14/content/glossy/NDIS_policy/download/NDIS.pdf">Workforce Plan</a>. However, it remains unclear whether and how the training required will be paid for or delivered, and whether the cash payments allocated to consumers to direct to their preferred mix of supports will be sufficient to pay decent wages and to backfill while support workers up-skill. Our <a href="http://www.sprc.unsw.edu.au/media/File/Building_an_Industry_of_Choice_Final_Report.pdf">co-authored research</a> underlines how individual funding models can result in financial uncertainty for organisations, and can raise challenges for planning a co-ordinated industry agenda to address recruitment and training needs.</p>
<p>Structural problems of low pay, low status, poor working conditions, and poor access to opportunities for skill development act as disincentives for workers to remain in the disability industry. A strategic, national and collaborative approach to addressing these will be necessary if the high expectations of the NDIS are to be met. </p>
<p>As demonstrated in recent postings on the federal government’s <a href="http://yoursay.ndis.gov.au/topic/what-do-you-look-for-in-a-disability-support-worker-or-service-provider">“Your Say” forum</a> for the NDIS, service users and their families take these problems seriously, frequently pointing to problems of unreliable, inconsistent support, and high turnover.</p>
<p>From July 1, experiences in the NDIS launch sites will be closely scrutinised. As <a href="http://theconversation.com/we-have-an-ndis-but-what-does-this-mean-for-disability-care-13112">others have pointed out</a>, there will inevitably be glitches with an initiative of this scale, and with this level of ambition. </p>
<p>If the NDIS is to deliver on its promise of sector expansion and choice for consumers, problems of workforce shortages, and associated issues of low pay, insecurity, low status, and under-investment in skill development, must be properly addressed. We need look only as far as the recent deals between the federal government, employers and unions in <a href="http://deewr.gov.au/early-years-quality-fund">early childhood</a> and <a href="http://www.livinglongerlivingbetter.gov.au/internet/living/publishing.nsf/Content/Workforce-Compact">aged care</a> to see the value of a more co-ordinated, long-term approach.</p><img src="https://counter.theconversation.com/content/14194/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Natasha Cortis has conducted commissioned research on issues in community services, and the community services workforce, for State and Federal Governments, and non-government organisations. However, this piece has not been funded by any agency.</span></em></p><p class="fine-print"><em><span>Sharni has conducted commissioned research on issues in community services, and the community services workforce, for State and Federal Governments, and non-government organisations. However, this piece has not been funded by any agency.</span></em></p>With the legislation now through both houses of parliament, The National Disability Insurance Scheme, or DisabilityCare, is law, and will quickly become a defining feature of Australia’s social policy…Natasha Cortis, Research Fellow, Social Policy Research Centre, UNSW SydneySharni Chan, Research Officer, Social Policy Research Centre, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/141192013-05-15T20:07:59Z2013-05-15T20:07:59ZDoes the budget make us a clever country?<figure><img src="https://images.theconversation.com/files/23815/original/4v477nsj-1368590246.jpg?ixlib=rb-1.1.0&rect=50%2C6%2C4205%2C2822&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wayne Swan's budget has been disappointing for Labor's education legacy.</span> <span class="attribution"><span class="source">AAP Image/Lukas Coch</span></span></figcaption></figure><p>The last Labor budget has seen the top half of the Education Revolution fizzle. The ideals that powered the 2009 Gillard policies are in fragments. </p>
<p>Demand-driven higher education will survive until the election but at a reduced funding rate, deepening the tension between quantity and quality that bedevils the Australian university sector. </p>
<p>Over 2007-2013 Labor has not only failed to complete its much trumpeted tertiary education agenda, in the <a href="https://theconversation.com/mid-year-budget-slashes-499m-from-research-support-10248">October 2012</a> and <a href="https://theconversation.com/federal-budget-2013-big-deficit-to-stay-next-year-14212">May 2013</a> budgets it has reneged on its own prior initiatives. In the last seven months a total of A$3.8 billion has been cut from the forward estimates for higher education and research.</p>
<p>The rationale is the need to fund the <a href="https://theconversation.com/topics/gonski-review">Gonski reforms</a> at school level. The bottom half of the Education Revolution will be funded from the top. This is consistent with Labor’s political strategy in education. Schools have always been seen as a larger electorate than tertiary institutions. Hence schools collected the largess in the Building the Education Revolution program. </p>
<p>But an education policy in which schools are played off against universities makes no sense. A revolution that spins in opposing directions is getting nowhere fast. This contradiction points to the sorry state of the government, boxed in between rebuilding the electoral heartland and placating the markets by minimising the deficit. </p>
<p>In a contest between two variants of political short-termism, any potential for long-term nation-building policy must vanish. Even Gonski is more symbolic than real and aimed squarely at this year’s election. Six year time scales do not get implemented. And the school funding package is scarcely likely to survive Joe Hockey’s first round of spending cuts.</p>
<p>Labor’s failure is especially apparent in research. Amid the euphoria of Rudd’s turn to the intellectuals in the <a href="http://www.smh.com.au/news/national/2020-vision-rudd-summit-to-map-future/2008/02/03/1201973740462.html">National Summit</a>, who would have predicated that Labor would fail to match the Howard government’s <a href="http://www.budget.gov.au/2001-02/minst/html/transp-09.htm">Backing Australia’s Ability (BAA)</a> package of 2001. That is exactly what has happened. </p>
<p>Howard’s BAA doubled <a href="http://www.arc.gov.au/">Australian Research Council (ARC)</a> and <a href="http://www.nhmrc.gov.au/">National Health and Medical Research Council (NHMRC)</a> project funding. The phase-in of BAA was incomplete. However Labor’s record is weaker. ARC and NHMRC project funding remain almost unchanged in real terms after six years. 2009 saw more than A$1 billionin Superscience grants and generous infrastructure funding. </p>
<p>But Treasury avoided ongoing increases in program funding of the BAA kind. The one solid capacity building decision was former research minister Kim Carr’s full research funding plan. But full funding was to be phased in over six years. And it stopped after two years (Gonski supporters take note), frozen at levels well below those of Canada, the US and many other countries. </p>
<p>Nevertheless, Labor has lowered expectations so successfully that there were sighs of relief when <a href="http://www.theaustralian.com.au/national-affairs/treasury/labor-tosses-sector-a-few-sweeteners/story-fni7powo-1226642497224">no further research cuts</a> were announced on Tuesday night. The government agreed to continue funding nationally significant research facilities (A$186 million) and the Future Fellowship scheme for emerging research talent (A$135 million). There was no increase in postgraduate research awards. The 1,650 new postgraduate and enabling places are earmarked for teaching, nursing and Asian languages. </p>
<p>Labor’s final record on undergraduate education will be somewhat more positive. The 2009 reintroduction of near full indexation of subsidies for domestic student places, essential to the integrity of the funding system, has survived. The final Labor budget also retained the open-ended funding of student places, providing A$346 million extra funding, with 30,000 additional places in 2013 and 34,000 more forecast by 2017. </p>
<p>The democratisation of access to university is Labor’s strong point. Yet it has been done on the cheap. Labor refused the <a href="http://www.innovation.gov.au/HigherEducation/ResourcesAndPublications/ReviewOfAustralianHigherEducation/Pages/default.aspx">2008 Bradley Report’s</a> proposal for an immediate 10% increase in the funding of domestic student places, to shore up quality, and shamefully tossed the report of the 2011 <a href="http://www.innovation.gov.au/HIGHEREDUCATION/POLICY/BASEFUNDINGREVIEW/Pages/default.aspx">Lomax-Smith base funding review</a>. </p>
<p>The result is that we persist with a funding structure with discipline relativities at late 1980s pre-IT levels; some students pay over 80% of program costs and others less than 30%; and half the undergraduate student population is enrolled in programs operating below the level of real costs of provision, as calculated by the Lomax-Smith review. </p>
<p>Labor’s mantra is “anything but more public funding for student places”. In 2010, the OECD found Australia spends <a href="http://www.smartestinvestment.com.au/campaign/key-facts/">0.7% of GDP</a> in public funding of tertiary education compared to an OECD country average of 1.1%, a difference of A$6 billion. That gap is about to widen. Tuesday’s budget confirmed a 3.5% “efficiency dividend” off the public funding of student places, including A$85 million in 2013-14 and A$228 million in 2014-15. Universities enrolling more undergraduate students under the demand-driven system will lose money on every one unless the floor of quality drops. </p>
<p>The demand driven system cannot long survive a sharpened quantity/quality trade-off. The coalition has already said it will put quality first. But there may be another round of government funding cuts in 2014, and because Labor has lowered expectations the coalition will have a free choice. It can savage public funding and jump student contributions. </p>
<p>The coalition can claim the mantle of the education party for the first time since Menzies in the 1960s (Tony Abbott could call it the “Education Restoration”). Or it can do nothing and let things slowly slide, blaming it all on Labor.</p><img src="https://counter.theconversation.com/content/14119/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Marginson 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 last Labor budget has seen the top half of the Education Revolution fizzle. The ideals that powered the 2009 Gillard policies are in fragments. Demand-driven higher education will survive until the…Simon Marginson, Professor of Higher Education, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142792013-05-15T20:05:02Z2013-05-15T20:05:02ZSwan’s budget is a lame effort from a dying government<figure><img src="https://images.theconversation.com/files/23808/original/8p9kqx4p-1368589216.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Lame duck, dying swan - headline writers have had fun with the treasurer's sixth budget, but the fact is this budget will be remembered for its fiscal irresponsibility. </span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>It has been pretty difficult to get too excited about the latest budget – it is a lame Swan effort from a dying government. It will mostly be remembered as a monument to fiscal irresponsibility. </p>
<p>The budget deficit will come in at some A$19.4 billion this financial year after the MYEFO forecast a A$1 billion surplus. That is a A$20 billion turn-around in seven months.</p>
<p>So far Wayne Swan has accumulated $191.7 billion of accumulated budget deficits.</p>
<p>The government is wont to quote Lord Keynes arguing that the facts have changed and so too the budget strategy has changed. Yet scrutiny of the budget papers doesn’t support that claim. </p>
<p>When you untangle the impact of policy choices and so-called parameter variations on the budget since 2007 you find that policy choices have driven the deficits. The facts haven’t changed so much as the government has spent too much money.</p>
<p>Over the same period forecast revenue has been over-estimated by A$133 billion. <a href="http://epress.anu.edu.au/apps/bookworm/view/Agenda+-+Volume+19,+Number+2,+2012/10161/davidson.html">This is explained by</a> the difficulties of forecasting revenue from the corporate income tax and the failure of the mining tax to raise any significant revenue. </p>
<p>So while everyone is focused on the spending side of the budget, I want to look at the taxation side and especially the corporate tax side of the budget. We have come a long, long way from the 2010 budget where the government was promising to cut the corporate income tax rate.</p>
<p>There were some significant announcements in the corporate tax area. In the first instance, the budget builds on a policy introduced in the MYEFO just six months ago. Last October it was announced that “large” businesses would be required to remit their tax to the Australian Taxation Office on a monthly basis as opposed to a quarterly basis. That was expected to raise some A$8.3 billion over three years starting in July 2013.</p>
<p>This policy has now been extended – even before being actually implemented – to trusts, superannuation funds, sole traders, and large investors; it is expected to raise an additional A$1.4 billion over two years beginning in July 2015.</p>
<p>This policy was already scheduled to expand from corporates with a turnover of A$1 billion to corporates with a turnover of just A$20 million in July 2016 – expected to be some 10,500 companies. This policy will have, at least, two effects. First it is likely to drain working capital out of the small business sector making it difficult for those firms to continue their operations. It will also massively increase the compliance burden of paying tax.</p>
<p>That increase in compliance – especially for small business – will not actually raise very much additional revenue. According to the ATO’s latest Taxation Statistics the top 4000 corporate entities pay 77.8% of net corporate income tax.</p>
<p>I suspect the extension of this tax policy beyond very large corporates will never actually happen. It is safe to assume the Coalition, in government (a very likely outcome of the September election), will not implement it. </p>
<p>The Coalition is already under pressure from its small business constituency over the decision to increase the superannuation levy from 9% to 12%. It is true the incidence of the levy ultimately falls on employees, but in the short-run it is likely to be paid by employers. Massively increasing tax compliance will lead to some very unhappy constituents, donors and pre-selectors.</p>
<p>The other corporate tax policy that particularly caught my eye related to so-called “thin capitalisation”. This is also called profit shifting. What happens is that foreign subsidiaries operating in Australia are burdened by high levels of debt by their parent company and required to pay interest on that debt. This has the effect of reducing their liability for Australian corporate income tax.</p>
<p>The important issue here is whether this is primarily a tax avoidance mechanism (something that is already illegal the general anti-avoidance provisions of the Tax Act) or whether there is some economic logic that underlies the practice. I am of the view that the economic logic is two-fold. First it is a mechanism whereby foreign investment is facilitated. </p>
<p>It is important to remember that foreign investment is risky and debt provides some security to foreign investors that they would be in a position to recover some of their investment. Then we should consider that debt has good corporate governance characteristics – viable firms with high levels of debt are less likely to squander funds on frivolous expenditure.</p>
<p>All up there are very good reasons why foreign investors are likely to employ high levels of debt. It allows them to have greater control over their foreign operations while reducing the risks that they may face. Reducing taxation is an added bonus.</p>
<p>Increased economic activity is far more valuable to Australians than the marginal increase in taxation that multinational corporations may pay if this policy were implemented. So it sounds good, but will we be better off for it? I suspect not.</p>
<p>Other changes to corporate taxation were also mostly underwhelming. Reducing the eligibility for the research and development tax credit makes me wonder whether it is a good policy at all, while changing depreciation allowances when the mining investment boom looks like it might be ending seems somewhat trivial.</p><img src="https://counter.theconversation.com/content/14279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sinclair Davidson has received funding from the Australian Research Council. He is a senior fellow with the Institute of Public Affairs.</span></em></p>It has been pretty difficult to get too excited about the latest budget – it is a lame Swan effort from a dying government. It will mostly be remembered as a monument to fiscal irresponsibility. The budget…Sinclair Davidson, Professor of Institutional Economics, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142572013-05-15T20:04:56Z2013-05-15T20:04:56ZMiddle class welfare – are we hitting the target?<figure><img src="https://images.theconversation.com/files/23794/original/mdpj3t24-1368581264.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">No more Baby Bonus: Labor has further tightened family payments to rein in expenditure, but the danger is low-income families will feel it most.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>When it comes to welfare spending in the budget, the federal government has given with one hand and taken with another.</p>
<p>Funding for support of disability services (NDIS) and schools the (Gonski reforms) has been locked in - partly at the expense of payments to families.</p>
<p>In this budget Labor has continuing tightening the criteria around family payments - often typified as “middle class welfare”. </p>
<p>Certainly middle income families have benefited from a generous system which was expanded by John Howard. But changes to the indexation of family payments may also have the effect of increasing child poverty in the longer run. </p>
<p>Not proceeding with promised increases in family payments foreshadowed in last year’s budget will save A$2.5 billion. Last night’s announcement abolishing the Baby Bonus and replacing it with a smaller, income tested payment, will save about A$1 billion over four years. </p>
<p>Continuing the 2007 indexation pause for family payment income limits and supplements will save an additional A$1.2 billion. Realignment of the time period for reconciliation of family payments will save over A$500 million.</p>
<p>The abolition of the Baby Bonus and continuing freeze on family payment income thresholds follows the restrictive trend which began in 2008 and winds back the largesse of the Howard government.</p>
<p>Income-tested family payments were extended by the Hawke and Keating governments in the 1980s and early 1990s. But in 2000, to partly compensate for the introduction of the GST, John Howard further increased the payments and reduced the targeting of benefits. The families who benefited most were the “Howard battlers” with family incomes between $40,000 and $60,000 a year. But less tight targeting meant that some of these benefits also went further up the income scale.</p>
<p>The consequence was a large increase in spending aimed at families. By 2004, after the introduction of the Baby Bonus, Australia was spending well over 2% of GDP on family allowances and other cash payments to families – one of the highest levels of expenditure in any OECD country. </p>
<p>More than four in five families received a payment, including substantial proportions in the middle income ranges (that is, in the <a href="http://search.informit.com.au/documentSummary;dn=556711210676386;res=IELBUS">fourth and fifth deciles of family income) </a>paid less in income taxes than they received in cash payments. </p>
<p>Since then, Labor governments under both Kevin Rudd and Julia Gillard have engaged in a long term strategy to wind back “middle class welfare”. From 2008, eligibility for Family Tax Benefit Part B (FTB-B), reserved for families with only one earner, was restricted to families where the main earner earned less than $150,000 per year. </p>
<p>In 2009, indexation of FTB was switched from a more generous earnings index to a lower prices index, while some thresholds were frozen at their nominal rates. If these changes had not been made, the base rate would now be more than $10 a week higher, and the higher income test threshold would be over $100,000 a year rather than just over $94,000.</p>
<p>The projected effect of these reforms can be seen in part in successive Intergenerational Reports produced by Treasury, which project steadily declining public expenditure on Family Tax Benefit as a percentage of GDP.</p>
<p>It is therefore no surprise this progressive restriction of FTB to families on low incomes has continued in the current budget, even to the extent that this involves cancelling of previously announced increases to FTB that would have partially compensated for the cutbacks of previous years. </p>
<p>The SchoolKids bonus partly offsets these effects, although not for all families with children, and if the Coalition abolishes this payment if they win office in September, then a majority of families will fall further behind.</p>
<p>For those who value redistribution as a key function of the welfare state, there are considerable dangers in this move. While family payments are often seen as the epitome of “middle class welfare”, the fact is that Australia has one of the most targeted systems of support for children in the OECD, and also <a href="http://www.oecd.org/social/family/38227981.pdf">one of the most effective for reducing child poverty,</a> particularly for low-income working families.</p>
<p>As fewer families find they are eligible to FTB, the system as a whole is likely to lose political support, especially if the government that succeeds the current one in September offers voters a “choice” of maintaining FTB or lower income taxes. </p>
<p>The result may be, as the <a href="http://acoss.org.au/images/uploads/6121.pdf">Australian Council of Social Services (ACOSS) forewarned </a> in 2009 when the indexation of FTB was changed from earnings to prices, increased child poverty and deprivation. As noted above, if the indexation of family payments had not been changed in 2009, the higher rate of payment - received by families on benefits and those in low paid work would now be more than $500 per child per year higher.</p>
<p>In the long run, indexing family payments only to the CPI will have the same effect on family payments as it has had on Newstart, now almost universally recognised as inadequate. At the moment, Australia can boast that <a href="http://asiapacific.anu.edu.au/news-events/all-stories/stimulus-shelter-gfc-storm#.UZLSpnI0rz8">child poverty did not appear to increase in the years following the Global Financial Crisis</a>. But it may not be able to hold that boast for much longer.</p><img src="https://counter.theconversation.com/content/14257/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gerry Redmond receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Peter Whiteford 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>When it comes to welfare spending in the budget, the federal government has given with one hand and taken with another. Funding for support of disability services (NDIS) and schools the (Gonski reforms…Gerry Redmond, Associate Professor, School of Social and Policy Studies, Flinders UniversityPeter Whiteford, Professor, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142682013-05-15T05:34:47Z2013-05-15T05:34:47ZA budget for citizens — but where is the tax reform vision?<figure><img src="https://images.theconversation.com/files/23810/original/wqgh8ydt-1368589284.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">This year's federal budget failed to provide any hint of meaningful tax reform for businesses and individuals.</span> <span class="attribution"><span class="source">Image from www.shutterstock.com</span></span></figcaption></figure><p><a href="http://www.budget.gov.au">Budget night</a> has come and gone again. For those sad folks (I count myself among them) who follow tax and fiscal policy obsessively, it’s the most glamorous night of the year. </p>
<p>But the budget does matter — for all of us. Decisions passed by Parliament each year define how Australians will be educated, access health care, support the needy, provide overseas aid and fund rail and public technology – and how we will raise the taxes to do it.</p>
<h2>What happens on budget night?</h2>
<p>On budget night, the <a href="http://www.budget.gov.au/2013-14/content/appropriation_bills/html/index.htm">Appropriations Bills</a> for the coming year’s spending are introduced into the Parliament, to be debated and passed or <a href="http://www.naa.gov.au/collection/fact-sheets/fs240.aspx">government stops altogether</a>, as it did for Whitlam in 1976.</p>
<p>Only 20% of annual expenditure is up for decision in the budget bills, as 80% of expenditure is authorised by special legislation – for example, to cover age pensions (see this <a href="http://www.oecd.org/australia/42007191.pdf">for more detail</a>). Still, this is about $80 billion a year, which can make or break new policy or infrastructure decisions.</p>
<p>We also get to see the government’s five-year plan. Australia’s three-year electoral cycle fosters short-sighted governing. The Medium-Term Expenditure Framework requires estimation of revenues and expenditures for five years from 2012-13 to 2016-17. Introduced in 1987 by the Hawke-Keating government, it is a strength of the budget process and keeps our budget on a more even keel than that of many other countries.</p>
<p>In this budget, the Gillard-Swan government tries to take an even longer view, projecting funding for the next seven years for the major education and DisabilityCare programs. It’s an interesting attempt to take the focus long term, as called for by our <a href="http://www.treasury.gov.au/PublicationsAndMedia/Speeches/2012/A-decade-of-IGR">intergenerational reports</a>.</p>
<h2>Don’t worry about the deficit</h2>
<p>All the <a href="http://www.afr.com/p/national/budget/swan_bold_retreat_in_face_of_political_y0YLsFTLo9w1eYVL7rFlmK">reports</a> are saying this not a typical election year budget. What they mean is that it’s short on handouts that we usually see every election year. That’s a good thing.</p>
<p>That headline figure of the deficit — $18 billion — does focus our attention, as citizens, on the cost of government. Politically, the deficit or surplus has become a symbol of bad or good government. Balanced budgets are important: we need to raise adequate taxes to fund public goods, infrastructure and the welfare state. Ongoing deficits are ultimately funded by increased government debt or future taxes.</p>
<p>But the deficit in any particular year does not tell us whether the government’s policies are smart or sustainable. Australia’s deficits are small relative to the size of the budget, and Australia’s government debt is <a href="http://stats.oecd.org/Index.aspx?DatasetCode=GOV_DEBT">among the lowest in the world</a>.</p>
<p>If the government is spending that $18 billion on education, health and infrastructure, that is probably a better investment than cutting spending.</p>
<h2>So what about taxes?</h2>
<p>The budget papers include some good tax increases – and a few needed tax fixes. But we are missing a real vision in tax reform that could build a consensus for the future.</p>
<p>It was the right decision for the government to enact an additional 0.5% tax as a top up of the Medicare Levy to help fund <a href="http://www.ndis.gov.au/">DisabilityCare</a>.</p>
<p>This levy will receive general public support. It also has the advantage that it increases the top marginal rate to 47%. Lowering top tax rates has been a <a href="http://andrewleigh.org/pdf/TopIncomesAnglo.pdf">major cause of rising income inequality</a> in Australia and other countries since the 1980s. It’s time to reverse that trend. At the bottom end, the Medicare threshold will be lifted, at least for low-income families.</p>
<p>But this government has failed - again - to build on the broad and far-reaching <a href="http://www.taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_12.htm">Henry Tax Review recommendations</a> about our core income tax base in Australia.</p>
<h2>Why cap education expenses – but leave rental property losses standing?</h2>
<p>One example of incoherent tax policy is the government’s proposal to <a href="http://www.treasurer.gov.au/wmsDisplayDocs.aspx?doc=pressreleases/2013/048.htm&pageID=003&min=wms&Year=&DocType=0">cap individual self-education expenses</a> at $2,000 each year. We should review work-related deductions across the board, along with an examination of how we treat investment income, gains and other expenses in the personal income tax. This proposal does not do that. </p>
<p>The self-education expense cap will hurt Australian students and universities. (I must acknowledge my own interest here.) The target is luxury travel and gold-plated professional conferences. But an individual working for a community organisation who wants to do a Masters in social work part-time and coughs up the dollars to do it is also going to be directly hit. That seems short-sighted.</p>
<p>And if we are capping tax deductions, why is this government not brave enough to cap rental losses being used to reduce tax on salary income? ATO <a href="http://www.ato.gov.au/content/downloads/cor00345977_2011CH2IND.pdf">taxation statistics</a> show that rental deductions consistently exceed rental income. In 2010-11, 67% of rental investors made tax-deductible rental losses of $7.8 billion. It’s bad tax policy and bad housing policy. </p>
<h2>Business tax fixes but no big picture</h2>
<p>The budget proposes <a href="http://www.treasurer.gov.au/wmsDisplayDocs.aspx?doc=pressreleases/2013/065.htm&pageID=003&min=wms&Year=2013&DocType=0">some corporate tax fixes</a>, to prevent undermining the Australian tax base mostly by tax planning involving debt.</p>
<p>The business community and profession has been aware of these issues for years, and has even told the government about them. The ATO has recently lost some cases, such as <a href="http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2013/363.html?stem=0&synonyms=0&query=title%28resource%20capital%20%29">RCF</a>and <a href="http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/2012/51.html?stem=0&synonyms=0&query=title%28mills%20%29">Mills</a>, in which courts have applied the law and found it does not work as the government expected.</p>
<p>Last year’s Treasury Working Group on Business Tax failed to agree on tax reform without substantial cost to revenue. Australia, and other countries in the G20, are struggling to come to grips with <a href="http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2013/Taxation-of-Multinational-Enterprises">global profit-shifting and international tax co-operation</a>.</p>
<p>It’s good that the government has decided to reform thin capitalisation rules, reducing the basic debt ratio from 3:1 to 1.5:1 to ensure that businesses cannot deduct high ratios of interest on debt against Australian taxable income, while effectively shifting profits offshore. </p>
<p>The government will also fix a flaw in our capital gains tax, to make sure that mining companies cannot avoid tax on sales of Australian mining rights by allocating more of the price to the mining information than to the mining rights. It will examine the offshore banking unit regime that enables low taxation of some Australian bank profits. And it will undertake a review on the cross-border arbitrage that can happen when Australia taxes corporate debt or equity differently from other countries.</p>
<p>These tax fixes will plug some leaks. But the bigger challenge is to build a vision and political consensus to enact long-term reform of our business and personal tax system.</p>
<h2>Does Australia’s budget process need fixing?</h2>
<p>Business Council of Australia CEO Jennifer Westacott has called for <a href="http://www.abc.net.au/am/content/2013/s3706999.htm">“a comprehensive audit of the scope, size and efficiency of government”</a>.</p>
<p>We certainly should audit government accounts. It might also be possible to have an independent review of revenue forecasts or policy costings. And perhaps we could do a stocktake of government functions — for example, whether there is overlap in what federal and State government agencies are doing – and aim to eliminate that overlap.</p>
<p>But what does it mean to “audit” the scope, size and efficiency of government? Who would do it? Budgeting is a political process and the size and scope of government comes down to us: the citizens.</p>
<p>Australia is not in a fiscal crisis. But our decision-making processes for taxing and spending are under stress from short-term pressures (such as the global financial crisis) and long-term structural changes including globalisation, an ageing population and climate change. </p>
<p>Budget reform should focus on improving processes to build a political consensus among diverse interests - Australian individuals, businesses, the social sector, labour representatives. Only this can achieve sustainable tax reform.</p><img src="https://counter.theconversation.com/content/14268/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miranda Stewart receives funding from the Australian Research Council.</span></em></p>Budget night has come and gone again. For those sad folks (I count myself among them) who follow tax and fiscal policy obsessively, it’s the most glamorous night of the year. But the budget does matter…Miranda Stewart, Professor and Director of Tax Studies, Melbourne Law School, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142812013-05-15T05:17:44Z2013-05-15T05:17:44ZAustralia’s ‘carbon budget black hole’: fact or political fiction?<figure><img src="https://images.theconversation.com/files/23817/original/yvryjqkx-1368592525.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is the falling carbon price as dangerous as everyone is saying?</span> <span class="attribution"><span class="source">caribb/Flickr</span></span></figcaption></figure><p>Discussion of the federal budget has featured much doom-mongering. This is exemplified by forecasts of a A$6-8 billion <a href="http://www.liberal.org.au/latest-news/2013/05/08/australias-tax-system-now-hostage-international-carbon-price">black hole</a> in 2015-16, when the carbon tax switches to an emissions trading scheme linked with Europe. The government estimates revenue will be A$2.5 billion lower than previously forecast, thanks to revised projections for European carbon prices included in the forward estimates.</p>
<p>The Coalition is framing the election <a href="http://www.liberal.org.au/latest-news/2013/05/08/australias-tax-system-now-hostage-international-carbon-price">as a referendum</a> on the carbon tax, and emphasising this so-called “carbon budget black hole”.</p>
<p>Should we take these forecasts and related claims about the near-collapse of the European carbon market seriously?</p>
<h2>It’s been high before; it can be high again</h2>
<p>How quickly we forget that two years ago the EU carbon price was above A$20 per tonne (and well above this price in 2006 and 2008). <a href="http://www.smh.com.au/national/greens-seek-higher-carbon-price-than-labor-20110414-1dfzd.html">Around the time</a> it was A$20 per tonne the government was negotiating a starting carbon price. The updated Garnaut Review <a href="http://www.theage.com.au/environment/climate-change/garnaut-calls-for-carbon-tax-of-up-to-30-a-tonne-20110317-1by6p.html">recommended</a> a starting price of $20 to $30 a tonne, and a price towards the lower end was agreed by the multi-party climate change committee.</p>
<p>When the Australian carbon price package was initially negotiated, no one forecast the current price, or a major market crash. (Although as the package passed our Houses of Parliament late 2011 some analysts were warning that the market could crash in the near-future.)</p>
<p>Previously, Treasury modelling projected a European price of A$29 in 2015-16. Consequently, in the legislation, the Australian carbon price has been scheduled to move towards this price in the lead-up to linking with Europe.</p>
<p>Now – with the European carbon price at A$3-$4 a tonne – some experts are <a href="http://www.theaustralian.com.au/news/breaking-news/tax-cuts-to-go-because-of-carbon-price/story-fn3dxiwe-1226637281920">confidently telling us</a> that the price will remain around current levels or continue falling to <a href="https://theconversation.com/europes-rollercoaster-carbon-prices-set-to-hit-australia-13551">closer to A$2</a>. </p>
<p>According to a <a href="http://www.businessspectator.com.au/article/2013/5/15/carbon-markets/ripple-effect-carbon-price-hack">Reuters poll</a>, most experts think it will be A$8.50. Treasury’s latest forecast is slightly higher, forecasting a price around A$12 a tonne in 2015-16.</p>
<p>All these forecasts express the current zeitgeist. They project forwards the current pessimism about Europe and its carbon market.</p>
<h2>Reasons to be sceptical: human biases and political motivations</h2>
<p>Forecasts are shaped by the interpretations and biases of whoever made them. Psychological <a href="http://claytoncritcher.squarespace.com/storage/Risen_Critcher_GW.pdf">studies</a> have revealed many cognitive biases that affect how we predict the future.</p>
<p>Harvard’s Daniel Gilbert calls one set of biases “presentism”, because imagined futures often look “so much like the actual present”. How we feel now affects how we view the past and imagine the future.</p>
<p>A <a href="http://claytoncritcher.squarespace.com/storage/Risen_Critcher_GW.pdf">striking example</a> is that by manipulating the temperature of the room peoples’ views on global warming are influenced. Similarly thirst levels <a href="http://claytoncritcher.squarespace.com/storage/Risen_Critcher_GW.pdf">impacted forecasts</a> of drought and desertification. Our brains have evolved to focus on near and immediate events or threats. Some scientists suggest natural selection played a role in developing such traits.</p>
<p>“<a href="http://futuresavvy.net/">Zeitgeist bias</a>” explains that forecasts often tell us more about the time they were created than the future they were intended to shed light on. It’s hard to see and think beyond current issues and preoccupations.</p>
<p>For these reasons management practices like <a href="http://hbr.org/2013/05/living-in-the-futures/ar/1">scenario planning</a> try to break the mental habit of thinking the future will look much like the present. Sometimes it will, often it won’t.</p>
<p>Political commitments and ideologies are perhaps also at play. Australian economist Paul Frijters <a href="https://theconversation.com/do-we-really-want-to-hand-control-of-our-carbon-price-to-europe-9172">argues</a> the Australian Treasury made a serious mistake by relying on “the politically-motivated projections” of the European Commission. Now, vested interests and politicians opposed to the carbon tax enthusiastically promote forecasts of budget “black holes”.</p>
<p>It is also commonly argued that political interference shapes modelling and forecasts, particularly those of the Australian Treasury. That is, “he who pays the piper calls the tune”.</p>
<h2>Reality checks</h2>
<p>In early 2011, no one forecasted the recent market crash. Similarly no one knows what the European carbon price will be in 2015-16.</p>
<p>While the media loves an uber-confident pundit, this misses the reality that the future is not yet written and is still uncertain.</p>
<p>Many factors contributed to the price crash, including a surplus of emissions permits and a range of economic factors. The European carbon price peaked pre-GFC and has since declined, as the slump slowed industrial activity and contributed to depressed prices. The perilous state of the EU economy also complicates political processes to reform the EU Emissions Trading Scheme.</p>
<p>Similarly, many factors will influence the future price of carbon permits. For example, we know politically there are plans to reintroduce legislation to address the over-supply of permits. This is intended to be a precursor to more fundamental reforms (see <a href="http://ec.europa.eu/clima/policies/ets/reform/docs/com_2012_652_en.pdf">options being considered</a>). The economic recovery process will also shape demand-side factors.</p>
<p>There are limits and risks to basing a decision or policy on a particular forecast. This lesson was learnt long ago in the business world. It should be learnt in Canberra. The Gillard Labor Government, instead, has tended to turn shaky projections into solemn promises.</p>
<p>If Australia’s carbon price is not repealed, policy-makers face a choice. They could “wait and see”. Or instead they could modify legislation and policies so they have more flexibility.</p>
<p>Commentary on the European carbon price is mostly politically opportunistic. We simply don’t know if the planned linkage with Europe will generate a budget “black hole”. Those saying it’s a certainty have political motivations. In fact, a Coalition Government <a href="http://www.businessspectator.com.au/article/2013/5/2/policy-politics/special-report-australias-carbon-budget-hole">may have a larger carbon budget hole</a> to deal with if it wins office.</p><img src="https://counter.theconversation.com/content/14281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen McGrail 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>Discussion of the federal budget has featured much doom-mongering. This is exemplified by forecasts of a A$6-8 billion black hole in 2015-16, when the carbon tax switches to an emissions trading scheme…Stephen McGrail, Lecturer, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142132013-05-15T04:20:27Z2013-05-15T04:20:27ZMore money for the classroom - or for bureaucrats?<figure><img src="https://images.theconversation.com/files/23703/original/ph7jj2z3-1368503882.jpg?ixlib=rb-1.1.0&rect=0%2C14%2C9656%2C4987&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We're understanding more about how the school funding reform will work, but there is one important question that goes unanswered.</span> <span class="attribution"><span class="source">Money image from www.shutterstock.com</span></span></figcaption></figure><p>Last night’s federal budget had few big spending items, but one standout area was the <a href="https://theconversation.com/explainer-what-is-a-gonski-anyway-13599">A$9.8 billion school funding reform</a>.</p>
<p>With most states still <a href="http://example.com/">yet to sign on to the package</a>, the <a href="http://www.budget.gov.au/2013-14/index.htm">budget papers</a> reveal where the funding will be coming from, namely through reforms to the family payment system, closing tax loopholes and cuts to the <a href="https://theconversation.com/high-stakes-in-higher-ed-campus-evolution-more-likely-than-revolution-13666">higher education sector</a>.</p>
<p>But it also showed that the bulk of the money would be delayed with <a href="http://www.theage.com.au/business/federal-budget/funding-kept-to-a-trickle-under-gonski-20130514-2jl2f.html#ixzz2TJzdNokT">only A$473 million in extra money</a> coming from the Commonwealth next financial year.</p>
<p>With all the talk of money amidst the proposed <a href="http://www.betterschools.gov.au/review">Gonski report</a> implementations the most vital question has not been asked: how will this money be dispersed to classrooms?</p>
<p>In the whirlwind of political spin, television press and the media foray, one would be forgiven for getting sucked into the vortex of big figures. However, it would be dangerous not to consider the most vital part of increased funding, and that is, ensuring that additional funds reach the classrooms, and not bureaucratic pockets.</p>
<p>In their press release on April 14, the <a href="http://ministers.deewr.gov.au/gillard/resourcing-all-our-kids-classrooms-and-teachers-future">Labor government advised</a> that when it comes to funding dispensation, “school education authorities” will distribute money to schools. It is unclear whom or what “education authorities” they are referring to, but it does go on to state that:</p>
<blockquote>
<p>Government and non-government education authorities will have flexibility to implement their own needs-based school funding systems, reflecting their own priorities and circumstances.</p>
</blockquote>
<p>In other words, “education authorities” will be free to fund schools as based on their own “priorities and circumstances”. This sounds like a slippery slope from the proposed fair and equitable funding model. Indeed, Gillard’s proposed “SRS” funding model (Schooling Resource Standard), with the multiple funding sources, seems similarly opaque to Howard’s “SES” funding model (Socio-Economic Status).</p>
<p>The lack of discussion regarding funding dissemination is an important issue to address. Before the Gonski report days, there was another major research report that drove political reform - the “<a href="https://mckinseyonsociety.com/how-the-worlds-best-performing-schools-come-out-on-top/">McKinsey report: How the World’s best performing school systems came out on top</a>” (2007). </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23700/original/ry8wx3yx-1368502651.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The McKinsey Report (2007)</span>
</figcaption>
</figure>
<p>This report was supposedly so inspiring that it fuelled Kevin Rudd’s “Education Revolution”, and then-education minister Julia Gillard was frequently found to substantiate <a href="http://ministers.deewr.gov.au/gillard/leading-21st-century-schools-engage-asia-forum">“evidence-based” reforms</a> by referring to this report. </p>
<p>The major reforms that the Rudd and then Gillard governments pushed under the guise of this research was <a href="http://www.mceecdya.edu.au/verve/_resources/Rewarding_Teacher_Quality-Final_Report_-_GDA_2009.pdf">the improvement of teacher quality</a>, in spite of the additional systemic approaches that the Report advocated for.</p>
<p>The selective hand-picking of the McKinsey report is being replicated in the proposed Gonski reforms. In all the political banter about money, the matter of how funds will be distributed and whether it will reach the classroom, remains invisible and uncertain. It is important to remember that previous research stresses <a href="http://www.learningforward.org/docs/pdf/crow301.pdf?sfvrsn=0">increased funding</a> “won’t guarantee improved performance”. The most important aspect of funding to remember is this: funding must reach the classroom, in order to make a difference.</p>
<p>The United States of America is an excellent example of high expenditure, but low results. Both McKinsey and Gonski demonstrate that the US spends <a href="http://www.oecd.org/pisa/pisaproducts/pisa2009/pisa2009keyfindings.htm">more per student than most countries in the OECD</a> (developed countries that are included in ranking systems):</p>
<blockquote>
<p>For example, Estonia and Poland, which spend around US$40,000 per student, perform at the same level as Norway, Switzerland and the United States, which spend over US$100,000 per student. Similarly, New Zealand, one of the highest performing countries in reading, spends well below the average per student.</p>
</blockquote>
<p>In spite of their high expenditure, the United States continually fall behind in <a href="http://www.oecd.org/pisa/">literacy, mathematics and science test results (PISA)</a>, whereas their lesser spending Kiwi neighbour consistently achieves higher outcomes. It is not the expenditure that is the problem for the United States, but more so, how <a href="http://www.learningforward.org/docs/pdf/crow301.pdf?sfvrsn=0">the expenditure is distributed</a>:</p>
<blockquote>
<p>America tends to tie up more of the resources in administration. There are more layers of administration and therefore less money getting into the classrooms in schools in many system… The place you really want to spend the money is as close to the classroom as possible.</p>
</blockquote>
<p>In all the talk of cash facts and figures, how the money will reach the classroom is missing in action when it comes to current reform debate. The Gonski report argued for the establishment of a “National Schools Resourcing Body” (Recommendation 35), a centralised institution that will maintain and review funding of Australian schools, whilst also managing all quality assurance procedures. </p>
<p>Although this runs the risk of imposing additional bureaucratic processes to an already overloaded system, it is apparent that “governance and regulation” of Australia’s funding mechanisms “require a more sophisticated approach” and indeed,</p>
<blockquote>
<p>The effectiveness of the [new funding] arrangements rests on confidence in the independence and transparency of the process for setting the schooling resource standard.</p>
</blockquote>
<p>We run the danger of impersonating the United States, if we do not closely examine the question of distribution. Unless the funding is injected directly into classrooms, and not into bureaucratic machines operating under the label of a one-dimensional “teacher effectiveness” slogan, we will experience minor differences in systemic achievement levels. </p>
<p>In order to considerably “revolutionise” our gaps between low and high achievers, it’s vital to ensure funding gets to where it’s needed and straight to the classroom.</p><img src="https://counter.theconversation.com/content/14213/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Emma Rowe 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>Last night’s federal budget had few big spending items, but one standout area was the A$9.8 billion school funding reform. With most states still yet to sign on to the package, the budget papers reveal…Emma Rowe, Lecturer/PhD Candidate in The Faculty of Education, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142662013-05-15T04:14:45Z2013-05-15T04:14:45ZHas Labor’s tax aversion left them on the verge of electoral defeat?<figure><img src="https://images.theconversation.com/files/23802/original/3v8cspmx-1368587053.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Small tax, or Big Picture? Labor wants to be seen as low taxing, but are actually big spending reformists.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Regardless of the result of the next election, the ALP will hold an inquiry into what went wrong. How on earth, they will ask, could a government presiding over low unemployment, low inflation, low levels of public debt and a triple A credit rating be seen as poor economic managers at a time when the rest of the major economies are struggling?</p>
<p>And the answer they will find is a simple one. The government simply didn’t collect enough tax. </p>
<p>Last night’s budget papers make clear that if the proportion of national income collected as tax (the so-called tax/GDP ratio) had remained at the 23.7% the Rudd Government inherited from the Howard Government, then last night’s budget would have been comfortably in surplus even after the expensive Gonski and NDIS announcements.</p>
<p>Similarly, if the government had simply maintained the Howard-era level of tax it wouldn’t have had to cut payments to single mums last year, it wouldn’t have had to scrap the buyout of coal-fired power stations and it wouldn’t have had to cut funding to universities.</p>
<p>Much was made last night by the political commentators of Wayne Swan’s attempts to “booby trap” the budget for an incoming Abbott government. But it was Rudd, Gillard and Swan who walked into John Howard’s booby trap. In fact, so effective was Howard’s trap that many in the ALP don’t even see that they are in it.</p>
<p>Last night the treasurer bragged that “if we were taxing Australian families and Australian businesses like our predecessors did, we’d have an extra $24 billion in taxes in 2013-14 and be comfortably in surplus every year of the forward (estimates)”.</p>
<p>That’s right, that was the Labor Treasurer bragging that he was much better at lifting the “burden” of tax on Australian families and businesses than his neo-liberal counterparts.</p>
<p>The fundamental problem for Labor, however, is not that some of them want to be low taxing neo-liberals; it’s that most of them want to be big spending reformists. Gonski, NDIS, hospital reform, public transport and homemade submarines all cost serious amounts of money. And while a country as rich as Australia can easily afford them, it can only afford them if it’s willing to collect the requisite amount of tax.</p>
<p>So, how did Labor wind up with a strong economy and a weak budget? The same way it wound up with the Pacific solution: John Howard set them up to fail.</p>
<p>In the lead-up to the 2007 election the economy was booming and revenue was flooding in. Howard and Costello had used that revenue to fund substantial income tax cuts and for the 2007 election campaign they promised even more. The Labor party promptly promised almost identical tax cuts which it implemented in the years following Kevin Rudd’s election win.</p>
<p>Those tax cuts have had a big impact on the current budget. Along with those Howard and Costello made in their last three years in office, these cuts are now costing the budget $40 billion a year. </p>
<p>Costello was able to keep the budget in the black because of the cyclical increase in revenue from the boom. But this increased revenue was always going to be temporary. With that temporary windfall gain they funded a permanent cut to income taxes. This was always going to be unsustainable; when the economy returned to more normal economic conditions the structural budget problems were revealed.</p>
<p>These income tax cuts have made the budget unsustainable by creating a structural hole in the ability of the government to collect revenue. Last year’s budget lost a quarter of the income tax it could have collected because of the tax cuts. Such a big change to the ability of the budget to generate income was always going to have an impact when the boom slowed down.</p>
<p>The income tax cuts were also heavily skewed to high income earners. Over the past seven years they have cost the budget $169 billion, of which 43% or $71 billion went to the top 10% of income earners. This was more than the total benefit of tax cuts to the bottom 80%, who together received only $63 billion.</p>
<p>The income tax cuts mainly increased the threshold at which the top marginal tax rate applies. In fact, this threshold was increased so much that as of last year only 2.7% of taxpayers faced the top tax rate.</p>
<p>Of course, it isn’t just the income tax cuts that have prevented the Gillard government from achieving its big reforms and cherished budget surpluses. There was the mining tax - designed to appease miners rather than collect revenue - and the carbon price that came with such generous compensation it runs at a loss.</p>
<p>Australia is one of the richest countries in the world, living at the richest point in world history. The idea that we can’t afford to invest in excellent health or education is ridiculous; the claim that we can’t afford to provide more help to poor countries is appalling.</p>
<p>Australian governments can afford to do anything they want, but they can’t afford to do everything they want. Especially when they want to brag about how little tax they collect.</p>
<p>One day soon the ALP is going to have to decide if it wants to chase the Liberals down the low tax/fend for yourself American path or talk honestly with the public about the fact that tax is the price we pay to live in a civilised society. Hopefully the party chooses the latter. And hopefully it hurries up and actually makes a choice, because the current farce is as destructive to public debate as it is to policy development.</p>
<p><em>Richard Denniss is the Executive Director of The Australia Institute, a Canberra based think tank. Matt Grudnoff is The Australia Institute’s Senior Economist</em>.</p><img src="https://counter.theconversation.com/content/14266/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Denniss is the Executive Director of The Australia Institute, a Canberra based think tank.</span></em></p>Regardless of the result of the next election, the ALP will hold an inquiry into what went wrong. How on earth, they will ask, could a government presiding over low unemployment, low inflation, low levels…Richard Denniss, Adjunct professor, Crawford School, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/141482013-05-15T04:12:23Z2013-05-15T04:12:23ZSmall tilt toward health equity in the federal budget<figure><img src="https://images.theconversation.com/files/23800/original/vrbtfcbf-1368584864.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Last night's budget edges closer toward equity but a broader view of health is required if we are to make real progress.</span> <span class="attribution"><span class="source">winnifredxoxo/Flickr</span></span></figcaption></figure><p>Health took a back seat in this year’s federal budget. While the proportion of money being spent on health is increasing in 2013-14, the bulk of it is due to spending commitments made in previous budgets.</p>
<p>Headline grabbers include additional money to expand screening for breast and bowel cancer, as well as other new funding to improve cancer research and support services. And there are some additional funds for the mental health nurse incentive program. </p>
<p>While such investments may well produce health benefits, it would be interesting to understand the process that informed the decision to invest in these areas and not others. </p>
<p>Were the decisions based on estimates of the relative value of a range of alternative investment options? Do they align with the public at large, or more so with the mass media? And it’s always interesting to have an insight into the relative influence of alternative lobby groups.</p>
<h2>Private health insurance rebates</h2>
<p>Despite the introduction of means testing for the private health insurance rebate, the government is still spending $5.4 billion on these subsidies. </p>
<p>The means testing to be introduced in July will remove support for high earners. It’s predicted this will lead to savings of $149 million in 2013-14 and rise to $279 million in 2016-17. </p>
<p>Such small changes are unlikely to affect uptake of private insurance, and hence population health outcomes will remain the same at lower cost to the government. A coalition government would remove means testing, while a (less likely) Greens government would scrap the rebate completely. </p>
<p>All this leads to the question: how far should or could the government go with respect to reducing what it is still spending in this area? What would the consequences of further means testing be on the uptake of private health insurance? And what else could the government be funding with this money, so what associated benefits are we missing out on?</p>
<p>Indeed, why should the search for equity stop at the private health insurance rebate? The government is reviewing some Medicare-subsidised items and the Coalition has indicated that it would also do the same.</p>
<p>And while savings are being made by the decision to delay indexed increases in Medicare item fees, the whole system of Medicare funding for inpatient services is a subsidy for higher earners, who are more likely to use private inpatient services. </p>
<p>The government might be spending less on such services than if they were wholly provided (and funded) by public hospitals, but could the Medicare fee levels be reduced with limited impact on private health insurance uptake? In the United Kingdom, private health care is not subsidised at all.</p>
<h2>Pharmaceuticals</h2>
<p>Over $10 billion will be spent on pharmaceuticals over the next year, and this figure excludes a large proportion of pharmaceuticals prescribed in public hospitals. </p>
<p>Despite cited savings in the pharmaceutical budget due to expected price reductions for some existing drugs, spending on new drugs is expected to eclipse these savings. A net pharmaceutical budget increase of $143 million is predicted for 2013-14.</p>
<h2>A broader view</h2>
<p>An important area that was not addressed in any significant manner is the issue of variation in clinical practice, which has been shown to have a large impact on both health service costs and patient outcomes. </p>
<p>It’s likely that dollars spent reducing variation in clinical practice will produce greater benefits than dollars spent funding new drugs and services.</p>
<p>This is an internationally recognised area of importance, and countries such as the United States and the United Kingdom are spending large sums to tackle the issue head on. Of course, Australia can learn from the experiences of these countries, but the Australian health system is unique in many ways and overseas solutions may not be transferable. </p>
<p>Solutions are complex, involving better data collection, negotiation, and potentially regulation. It’s time to switch funding priorities from new technologies with marginal benefits to informing actions so we can improve the use of existing technologies and services.</p>
<p>Overall, looking at the new announcements, the 2013-14 federal health budget is relatively balanced. But previous funding announcements have loaded considerable additional costs onto this year’s budget and beyond. </p>
<p>A deeper analysis of the health budget requires consideration of not only alternative funding options within the health sector, but the broadly defined value of funding options outside of the health sector. By broadly defined, I mean the direct effects on individual quantity and quality of life, as well as the long-term sustainability and equitable distribution of societal well-being.</p><img src="https://counter.theconversation.com/content/14148/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Karnon 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>Health took a back seat in this year’s federal budget. While the proportion of money being spent on health is increasing in 2013-14, the bulk of it is due to spending commitments made in previous budgets…Jonathan Karnon, Professor of Health Economics, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142412013-05-15T02:23:10Z2013-05-15T02:23:10ZGovernment takes a punt on rubbery forward estimates, while ignoring tax reform agenda<figure><img src="https://images.theconversation.com/files/23759/original/ssqb7t6v-1368534146.jpg?ixlib=rb-1.1.0&rect=10%2C112%2C988%2C738&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Despite the notorious unreliability of forward estimates, the government has included projections for a 10-year period in this year's federal budget.</span> <span class="attribution"><span class="source">Image from www.shutterstock.com</span></span></figcaption></figure><p>When assessing some of the assumptions underpinning Wayne Swan’s 2013 federal budget, two things spring to mind: the <a href="http://www.taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm">Henry Tax Review</a> and the notorious inaccuracy of forward estimates.</p>
<p>History shows it might be foolhardy to rely on the accuracy of forward estimates. And meanwhile, the repercussions of failing to undertake structural economic reform by amending our taxation system will continue to weigh on our economic fortunes.</p>
<p>So what is the link between the Henry Review and the forward estimates? One was timely but ignored; the other has time against it. </p>
<h2>Henry Tax Review</h2>
<p>Despite Treasurer Wayne Swan’s earlier promise to return to surplus for the 2012-13 year, a deficit of A$19.4 billion has now been announced. As such, this year’s budget represents an absolutely critical one for Australia as it makes especially visible the underlying structural deficit that has faced Australia now for many years.</p>
<p>In the five years to 30 June this year, Australia will have had budget deficits totalling in excess of A$190 billion. Moreover, the less-than-expected receipts from the mining and carbon taxes and increased spending on, for example, the National Disability Insurance Scheme and the Gonski education reforms will have future budgetary impacts. The current budget therefore highlights the need to examine decisions made to address the underlying structural deficit.</p>
<p>The Henry Tax Review’s 138 recommendations effectively represent a blueprint to guide reform. Given Australia’s current budgetary position, it would seem timely to examine budget measures in the context of the review’s recommendations. However, the government has chosen — to a very large extent — to ignore the report.</p>
<p>Given the effort and cost that went into the report’s preparation, it seems logical for the government to provide a comprehensive statement on whether the review’s recommendations will be seriously considered and how its recommendations will be implemented.</p>
<p>The current version of the mining tax serves as a stark example. It was not set up as envisaged by the Henry Review, and its ineffectiveness in raising tax revenue has now become obvious.</p>
<h2>Accuracy of forward estimates</h2>
<p>For many years now, the Commonwealth budgets have included estimates for the ensuing financial year and for three further forward estimate years. Given that a budget surplus was not delivered for 2012-13 as originally promised, and given the revised commitment to return the budget to balance in 2015-16 and surplus in 2016-17, it is worth examining the accuracy of forward estimates provided in budgets.</p>
<p>The latest year for which we have an actual budget outcome figure is the 2011-12 financial year. If we examine the budget released in May 2008, the forward estimate was for an A$18.9 billion surplus for 2011-12. </p>
<p>A year later, in May 2009, the forward estimate for the 2011-12 year had turned around by the not inconsiderable amount of A$63.4 billion to become a A$44.5 billion deficit. This was then revised to a lower deficit of A$13 billion in the May 2010 budget, followed by a revision to an increased deficit of A$22.6 billion in the May 2011 budget. The actual outcome, released in September 2012, was a deficit of almost A$44 billion.</p>
<p>Another example from last night’s budget is the estimate that the budget deficit for 2012-13 is now expected to amount to A$19.4 billion. The earliest budget that contained a forward estimate for 2012-13 was released in May 2010, where the estimate was for a surplus of A$5.4 billion. This therefore represents a forecast error of some A$25 billion. </p>
<p>The surplus was revised down to A$1.5 billion in last year’s budget, and a forecast error of over A$20 billion has arisen over the space of one year.</p>
<p>These examples point to the notorious unreliability of forward estimate figures — not just for estimates four years into the future, but also for periods as short as one year.</p>
<p>It is interesting to note the government has included certain significant projections in the budget for a ten-year period. A chart in the budget papers presents “long-term savings”, totalling A$121 billion for the ten-year period through to 2023-24. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=256&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=256&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=256&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=322&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=322&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23796/original/3nqv96t8-1368582062.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=322&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">Federal Budget 2013-14</span></span>
</figcaption>
</figure>
<p>Another chart presents projections for the level of net government debt through to 2023-24, showing the paying down of net debt to nil over that period.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=386&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=386&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=386&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=485&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=485&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23798/original/kywrrsjh-1368583202.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=485&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>
</figcaption>
</figure>
<p>Given the past unreliability of four-year forward estimates, one wonders how forward estimates for a ten-year period can be taken seriously — especially given the forthcoming September election and at least three further elections within that timeframe.</p><img src="https://counter.theconversation.com/content/14241/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>When assessing some of the assumptions underpinning Wayne Swan’s 2013 federal budget, two things spring to mind: the Henry Tax Review and the notorious inaccuracy of forward estimates. History shows it…Graeme Wines, Professor in Accounting, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/141202013-05-15T02:18:53Z2013-05-15T02:18:53ZOn academic efficiency and the 2013 federal budget<figure><img src="https://images.theconversation.com/files/23785/original/7q82hyqd-1368579076.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Are we seeing an education revolution or counter-revolution?</span> <span class="attribution"><span class="source">James Bowe</span></span></figcaption></figure><p>As you may have noticed, the <a href="http://www.budget.gov.au/2013-14/content/speech/html/speech.htm">2013 federal budget</a> is out and, despite his best efforts, Euromoney’s “<a href="http://www.euromoney.com/Article/2897778/Finance-minister-of-the-year-2011-Swan-confounds-his.html">2011 Finance Minister of the Year</a>” Wayne Swan has missed his earlier predicted budget surplus by almost A$20 billion. </p>
<p>The treasurer is paying the price of introducing the <a href="https://theconversation.com/weve-gained-a-mining-tax-but-lost-a-rare-opportunity-4442">mining tax</a> but ending up in a virtual minefield, and coming out <a href="https://theconversation.com/mining-tax-shortfall-the-experts-respond-12105">almost empty-handed</a>. </p>
<p><a href="https://theconversation.com/company-tax-and-the-limits-of-politics-10309">Company tax</a> receipts are down, and the traditional pre-election budget full of sweeteners wasn’t possible without a monster deficit – so the axe has been wielded.</p>
<p>One of the casualties is the university sector.</p>
<h2>The efficiency dividend</h2>
<p>In an incredibly cynical manoeuvre, the government has labelled its <a href="http://www.gupsa.org.au/vice-chancellor-ian-oconnors-statement-on-the-latest-federal-cuts-to-university-funding/">3.25% cut to future university budgets</a> an “efficiency dividend”. </p>
<p>These cuts are on top of <a href="https://theconversation.com/should-universities-suffer-to-pay-for-school-funding-13472">earlier ones</a> already announced, and <a href="http://www.universitiesaustralia.edu.au/page/media-centre/2013-media-releases/universities-and-students-hit-hard-despite-modest-new-spending/">Universities Australia</a> estimates the total cost to Australian universities will be more than A$3.5 billion.</p>
<p>It’s sobering to remember the Labor was elected in 2007 on the back of an “<a href="http://www.smh.com.au/news/national/rudd-vows-education-revolution/2007/01/22/1169330827940.html">education revolution</a>”. A more fitting name for the cuts might have been the “education counter-revolution”.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23789/original/hwjc42yy-1368579837.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&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">papadont</span></span>
</figcaption>
</figure>
<p>Efficiency is a very nice word, and it would seem that Labor (and I’m sure the Coalition) would love universities to be as ruthlessly efficient as the free market.</p>
<p>In the free market, competition drives down price. To survive, companies are constantly demanding more from their staff, rewarding those who put in long hours and promoting those who make sacrifices to positions of power and influence.</p>
<p>CEOs are expected to demonstrate total commitment, burn the midnight oil and thrive in the pressure-cooker environment that will drive the company to glory.</p>
<p>Of course, this approach has been <a href="https://theconversation.com/australian-firms-trail-world-for-women-in-top-roles-11008">a disaster for working women at senior levels</a>, particularly those attempting to combine motherhood with careers. In 2012 there was a grand total of <a href="http://www.abc.net.au/news/2012-11-27/women-still-excluded-from-executive-ranks/4394368">12 female CEOs</a> in charge of ASX500 companies.</p>
<p>Is this what the government wants for academia?</p>
<p>The logic behind “efficiency dividends” is that, in tough times, you trim the fat and find new ways to become more efficient, mirroring the demands of the free market.</p>
<p>The reality is that it’s hard to be innovative when you have a shrinking funding base. Initiatives require new money, and without it universities lose their competitiveness. </p>
<p>Universities will be forced to either reduce the quality of their degrees or quantity and/or quality of their research. This will ultimately make them less competitive, lowering their world and region <a href="http://en.wikipedia.org/wiki/College_and_university_rankings">rankings</a> and and reducing demand for their services.</p>
<h2>Good news?</h2>
<p>On the plus side, the government will resume the highly successful Australian Research Council’s <a href="http://www.arc.gov.au/ncgp/futurefel/future_default.htm">Future Fellowship scheme</a>. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23788/original/td4kzq6z-1368579524.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&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">Broken Piggy Bank</span></span>
</figcaption>
</figure>
<p>Announced in 2008 and implemented a year later, the scheme, which awards fellowships to mid-career researchers, is one of the best opportunities for young and <a href="https://theconversation.com/we-want-to-work-but-research-funding-cuts-will-hobble-us-11719">mid-career researchers</a> in Australia to establish their research careers with four-year positions.</p>
<p>Another positive is the <a href="http://www.theaustralian.com.au/national-affairs/treasury/labor-tosses-sector-a-few-sweeteners/story-fni7powo-1226642497224">money</a> to support research infrastructure through the <a href="http://ncris.innovation.gov.au/Pages/default.aspx">National Collaborative Research Infrastructure Scheme</a>, although that’s only for the next two years. The sector desperately needs a long-term plan for maintaining research infrastructure, and this isn’t it.</p>
<p>So let’s hold the confetti. The cost of these two schemes is much less than the cuts universities are being asked to absorb, and so the net effect of the budget is a major negative for the university sector.</p>
<h2>The vision</h2>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1130&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1130&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23787/original/pyv83v2d-1368579380.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1130&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">katkarp72</span></span>
</figcaption>
</figure>
<p>In 2008, the Review of Higher Education <a href="http://www.innovation.gov.au/HigherEducation/Documents/Review/PDF/Higher%20Education%20Review_Executive%20summary%20Recommendations%20and%20findings.pdf">recommended</a> reaching a target of 40% of 25-34 year-olds with a degree by 2020, up from 29% at the time of the report. </p>
<p>It doesn’t take a Nobel economist to predict the cost of this, in terms of implementation, staffing, infrastructure and administration, will be huge – and without a proper tax base it is simply unaffordable. </p>
<p>Fundamentally, what you can teach and examine for in someone with a Tertiary Entrance Rank (<a href="http://www.vtac.edu.au/pdf/publications/bulletins/bulletin2-09.pdf">TER</a>) of 60-70 is very different from teaching and examining someone with a TER of 90+. But, as the push for higher student numbers increases, so will the pressure on universities to square this (already wonky) circle. </p>
<p>To put it bluntly, there will be an inevitable tension in the system to push some institutions away from research, especially those catering to the lower TER students. </p>
<p>The cuts now on the horizon might accelerate that dichotomy.</p>
<p><strong>Further reading:</strong> <a href="https://theconversation.com/topics/federal-budget-2013">Federal Budget 2013</a></p><img src="https://counter.theconversation.com/content/14120/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Bailes 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 you may have noticed, the 2013 federal budget is out and, despite his best efforts, Euromoney’s “2011 Finance Minister of the Year” Wayne Swan has missed his earlier predicted budget surplus by almost…Matthew Bailes, Pro-Vice Chancellor (Research) , Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142552013-05-15T02:07:16Z2013-05-15T02:07:16ZBudget defers renewable energy development when it’s needed most<figure><img src="https://images.theconversation.com/files/23792/original/h9hf9rhk-1368580698.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Federal Budget has attempted to fill a A$6 billion revenue hole left by the collapse of the EU carbon price - but has cut into renewables as a consequence.</span> <span class="attribution"><span class="source">John Goodridge</span></span></figcaption></figure><p>The decision to link the Australia’s carbon price to the European Union emissions trading scheme has wiped A$6 billion from the federal budget. Treasurer Wayne Swan has dealt with that loss of revenue by reducing industry assistance to deal with the carbon price - a reasonable move - but he has also deferred funding for important renewable energy development.</p>
<p>The carbon price estimates for 2015-16 have been revised from A$29/tonne to A$12.10/tonne to reflect the <a href="https://theconversation.com/learning-from-europes-carbon-price-crash-we-need-a-carbon-bank-13860">collapse</a> in the European carbon price. Given that the European Emission Allowances are currently <a href="http://www.eex.com/en/Market%20Data/Trading%20Data/Emission%20Rights/EU%20Emission%20Allowances%20%7C%20Spot">trading</a> at €3.30/tonne (A$4.30/tonne), with no recovery in sight, this may still be an optimistic revision.</p>
<p>So key components of the Clean Energy Future package have been revised to reflect the changing prices. These aim to “better match spending with the collection of revenue from the carbon price”. </p>
<p>Industry assistance for adjusting to the carbon price has been reduced by around A$3.9 billion over the forward estimates. This seems a prudent decision given the lower carbon-related costs the industries will face (though arguably, this “industry assistance” was <a href="http://www.theage.com.au/opinion/political-news/coal-bags-carbon-profit-20130219-2eplx.html">excessive</a> in the first place).</p>
<p>Less welcome is the cut to the budget of the Australian Renewable Energy Agency (<a href="http://www.arena.gov.au/">ARENA</a>) over the next four years. ARENA has a total of A$3.2 billion in funding guaranteed in legislation until 2020, and this total has remained unchanged. However, A$370 million in funding has been “rephased” to beyond the forward estimates. This places ARENA squarely on the expenditure deferral <a href="http://www.businessspectator.com.au/article/2013/5/14/policy-politics/what%E2%80%99s-budget-chopping-block">merry go-round</a>, potentially paving the way for a future “return of unallocated funds”.</p>
<h2>What is ARENA for?</h2>
<p>ARENA was created to consolidate the existing government programs for renewable energy into a single body. ARENA provides a critical link to accelerate the research, development and deployment of renewable energy technologies.</p>
<p>Some have argued the reduction in funding is “<a href="https://theconversation.com/federal-budget-2013-expert-reactions-14211">warranted</a>”. They believe government spending on renewables is not justified, given the carbon price and the Renewable Energy Target (RET) policies. </p>
<p>However, it is exactly the renewable technologies that are not supported by these policies which are assisted by ARENA. Supplementary support schemes, such as those administered by ARENA, are intended to address carbon policy failures and other “market failures”.</p>
<h2>Carbon policy failures</h2>
<p>The purpose of carbon pricing is to internalise the cost of greenhouse gas emissions from fossil fuel combustion (and extraction), and through this cut pollution. </p>
<p>The current carbon price and carbon price package has emerged from a complex political negation process. The price is a political compromise and below what would be considered “cost reflective”. The European Union’s emissions trading scheme has also emerged from a political negotiation and has similarly not been set at an “efficient level”.</p>
<p>ARENA, along with other supplementary support mechanisms, helps address some of the carbon policy shortfall and other market failures such as technology or knowledge spill over (whereby knowledge gained by investing in R&D and deployment are diffused to others, including competitors). </p>
<p>The pending linkage to the flailing EU market further increases the importance of such additional mechanisms such as ARENA. Because the carbon prices are likely to be low for some time investors are unlikely to invest in renewable energy technologies without such complementary measures.</p>
<h2>Diversity is key</h2>
<p>It is widely acknowledged that a range of technologies is required to meet the clean energy challenge. As the Grattan Institute <a href="http://grattan.edu.au/static/files/assets/a8778779/Building_the_bridge_report.pdf">reported</a>, failure to develop a suite of low‐emissions technology options is likely to produce far higher costs in the long run.</p>
<p>The Renewable Energy Target and the carbon price currently do not encourage a diversity of technology options. By design, the RET and carbon price only support the lowest-cost renewable technology, which in the short term, without support for ARENA, will remain wind power. </p>
<p>Additional development and deployment of important technologies is necessary if we’re to make the necessary deep cuts in emission. Concentrating Solar Thermal is one such important technology, recently identified in AEMO’s <a href="https://theconversation.com/zero-emissions-power-is-possible-and-we-know-what-it-will-cost-13866">100% renewable energy modelling</a> as critical to a renewable energy system. Developing these options today will result in lower costs in the long run.</p>
<p>With the carbon dioxide concentration in the atmosphere recently crossing the <a href="https://theconversation.com/as-carbon-dioxide-hits-a-new-high-theres-still-no-planet-b-14074">400 ppm</a> mark, efforts to accelerate the development and deployment of renewable energy technologies are sorely needed. A Nature <a href="http://www.nature.com/nature/journal/v493/n7430/full/nature11787.html">paper</a> earlier this year concluded political choices delaying mitigation have the largest effect on the cost–risk distribution.</p>
<p>Deferring A$370 million in expenditure is in contradiction to the accelerating rate of atmospheric carbon dioxide emissions and the commensurate need to develop and deploy renewable energy technologies. It is difficult to see how ARENA can simultaneously achieve its <a href="http://www.arena.gov.au/_documents/ARENA-Draft-INVESTSPLAN-20130424.pdf">objective</a> of “accelerating the commercial deployment of renewable energy” and have funding deferred until a later date.</p><img src="https://counter.theconversation.com/content/14255/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dylan McConnell 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 decision to link the Australia’s carbon price to the European Union emissions trading scheme has wiped A$6 billion from the federal budget. Treasurer Wayne Swan has dealt with that loss of revenue…Dylan McConnell, Research Fellow, Melbourne Energy Institute, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142402013-05-14T20:06:28Z2013-05-14T20:06:28ZSurplus hopes pinned on heroic assumptions<figure><img src="https://images.theconversation.com/files/23756/original/k38vc2p6-1368533492.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>As a <a href="https://theconversation.com/australian-governments-face-a-decade-of-budget-deficits-13616">recent Grattan Institute report showed</a>, Australian governments face a decade of deficits unless governments make tough decisions to both reduce expenditure and increase taxes. How does the 2013-14 budget measure up?</p>
<p>A key budget aim appears to be getting to a rounding error surplus in 2015-16, and therefore at least appearing to deal with the long-term deficit.</p>
<p>There are some heroic assumptions to get to this result. Personal income tax is projected to jump from 10.3% of GDP this year, to 11.5% in 2015-16 – about an extra $20 billion in 2015-16. The new medicare levy, the deferral of the carbon tax cuts and other minor changes add to about $5 billion, and bracket creep will help as well. But still, it would amount to the highest level of income tax since as a percentage of GDP since 2000.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=458&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=458&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=458&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=576&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=576&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23757/original/6655z4kh-1368533589.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=576&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Grattan Institute</span></span>
</figcaption>
</figure>
<p>Meanwhile, on the expenditure side there are equally optimistic forecasts. Overall real expense growth is happily constrained to 2.2% in 2014-15, 1.4% in 2015-16 and 2.1% in 2016-17. This would be a radical change from the last 15 years. </p>
<p>Through the ups and downs of the financial crisis, long-run expenditure growth was 3.4% year on year. The last time real expense growth was less than 2.5% was the Costello “tough budget” in 2002-03. If expense growth is closer to historical trends – and there are not obvious savage cuts in this budget to change things materially - expenses could be much worse than forecast in 2015-16.</p>
<p>However, there are some improvements to the underlying budget position. Policy measures in the last three budgets introduced spending cuts that will roughly equal the policies that increase spending for the 2015-16 year. The bottom line has been substantially improved by tax measures that increase revenues by about $22 billion per year in 2015-16. This is a material step in the right direction towards structural budget repair.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23749/original/9sbmd48s-1368532313.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"></span>
<span class="attribution"><span class="source">Grattan Institute </span></span>
</figcaption>
</figure>
<p>Nevertheless, eliminating the structural deficit will require much more of this. From the optimistically balanced budget in 2015-16, future budgets will have to absorb a series of hits. </p>
<p>Most of the spending for DisabilityCare - $9 billion per year – will start after 2015-16. Many believe that the carbon and mining tax will raise $6 billion per year less than the already-reduced forecasts. Expenses could be $14 billion per year higher if growth is closer to historic trends than forecasts. </p>
<p>And of course, if minerals prices are lower than forecast, the budget hole could be even bigger. A future Commonwealth Treasurer may have a lot of work to do, both reducing spending and increasing revenue.</p><img src="https://counter.theconversation.com/content/14240/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Daley 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>As a recent Grattan Institute report showed, Australian governments face a decade of deficits unless governments make tough decisions to both reduce expenditure and increase taxes. How does the 2013-14…John Daley, Chief Executive Officer , Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142012013-05-14T10:36:51Z2013-05-14T10:36:51ZFederal budget 2013: The slow road to the black<figure><img src="https://images.theconversation.com/files/23723/original/k9tp7jhk-1368525378.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wayne Swan delivered his sixth budget.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>What is almost certainly the Gillard government’s last budget delays the attack on the deficit and concentrates on entrenching “legacy” programs, for which Labor hopes to be remembered.</p>
<p>Dealt a difficult hand in revenue write-downs and a continuing high dollar, the budget expects virtually no improvement in the bottom line between this financial year and next.</p>
<p>What was supposed to be a surplus in 2012-13 is expected to be a deficit of AU$19.4 billion – with a A$18 billion deficit to follow in 2013-14.</p>
<p>Burnt by previous unequivocal and upbeat projections, Treasurer Wayne Swan spoke of “a responsible pathway back to balance in 2015-16” – when the budget is projected to be in the black by A$800 million – followed by a surplus by 2016-17 (A$6.6 billion).</p>
<p>After the previous record, who knows whether these figures will be anything near the mark.</p>
<p>The savings are limited in the early period – around $2 billion in 2013-14. But they build up in the later years of the budget period to about A$16 billion in 2016-17, and a total of about A$43 billion over the whole forward estimates.</p>
<p>There was a note of defensiveness in the Treasurer’s speech, anticipating those who would say that much more effort should have been made to tackle the deficit faster.</p>
<p>“Just because the global economy took an axe to our budget, does not mean we should take an axe to our economy,” he said.</p>
<p>“Just as we shielded Australia from the worst during the GFC, we will continue to follow the responsible middle course,” he said. “Because of our deep commitment to jobs and growth we have taken the responsible course to delay the return to surplus … The alternative, cutting to the bone, puts Australian jobs and our economy at risk.”</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=829&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=829&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=829&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1042&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1042&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23733/original/bknpd6yy-1368528540.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1042&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>The political debate will now become whether an Abbott government would seek to move faster to surplus, with tougher short-term cuts.</p>
<p>On the spending side, the centrepieces of the budget are the Gonski school funding program and the disability insurance scheme, as well as infrastructure, road and rail projects.</p>
<p>The education and disability initiatives are social reforms which the government is trying to entrench. It should be successful with disability, because it has all states except Western Australia signed up and the scheme has bipartisan support, including to an increase in the Medicare levy.</p>
<p>The Gonski funding is another matter. It hangs in the balance because it is not clear how many states will sign up or what a coalition government would do with the outcome it had inherited.</p>
<p>The multi-billion dollar infrastructure spending is directed to a range of road and rail projects and tied into the themes of improving productivity and creating jobs.</p>
<p>On the savings side, the government has continued pruning “middle class entitlements” and finally confronted the expensive Baby Bonus. This would be abolished from next year with the Family Tax Benefit-A being increased for newborns.</p>
<p>The “pause” in the indexation for family payments for the upper income levels under the system is also being extended. (These measures are in addition to the earlier announced cancellation of an increase due this year to the Family Tax Benefit.)</p>
<p>The budget night changes are sensible and will be another test for the opposition. Shadow treasurer Joe Hockey has frequently criticised the “entitlement” mentality. If the opposition attacks these measures, it will be an exercise in hypocrisy. If it goes along with them, some useful savings work will have been done for it if it becomes the government.</p>
<p>Faced with escalating health costs the government is also making several savings in the health area, including changes to the timing of the indexation of the Medicare benefits schedule.</p>
<p>The government will close various corporate tax loopholes, yielding several billion dollars over the forward estimates, but business has not been hit with major new tax imposts.</p>
<p>The mining tax is performing even worse than expected with an estimate that it will yielding only about $200 million in 2012-13 although it is estimated to rise than more than $2.2 billion in 2016-17. If there’s an Abbott government we’ll never know whether this is an heroic assumption.</p>
<p>The budget is where reality has hit the government’s climate change program. It dramatically revises down the carbon price for 2015, when the trading scheme begins, to around $12 a tonne. The proposed 2015 tax cuts have been deferred – as announced before the budget – “until the carbon price is estimated to be above $25.40. This is currently projected to occur in 2018-19.”</p>
<p>Nobody should expect these tax cuts are being anything but scrapped forever.</p>
<p>The picture Swan presents is one of the relatively strong economic outlook for Australia. Growth next financial year is forecast to be 2.75% rising to 3% – on trend – in 2014-15. The unemployment rate is forecast to rise a little – from 5.5% this year to 5.75% next financial year.</p>
<p>While the government has made some economic mistakes, and would be in a much better position if it has wound back spending faster after the huge stimulus injection, it is also true that circumstances have been against it. There is a big contrast between the world that former treasurer Peter Costello faced in his latter budgets and that faced by Swan.</p>
<p>For all the problems that beset the government, the Australian economy has done and is still doing well, in comparison with other advanced economies.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1761&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1761&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1761&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=2213&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=2213&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23734/original/chrdgb2b-1368528588.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=2213&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><img src="https://counter.theconversation.com/content/14201/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan 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>What is almost certainly the Gillard government’s last budget delays the attack on the deficit and concentrates on entrenching “legacy” programs, for which Labor hopes to be remembered. Dealt a difficult…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142112013-05-14T10:31:35Z2013-05-14T10:31:35ZFederal budget 2013: expert reactions<figure><img src="https://images.theconversation.com/files/23697/original/c9v44d84-1368500260.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Federal treasurer Wayne Swan's election year budget has to reconcile huge revenue writedowns with spending promises for schools and the disability insurance scheme.</span> <span class="attribution"><span class="source">AAP Image/Lukas Coch</span></span></figcaption></figure><p>Australian Federal Treasurer Wayne Swan has handed down his sixth <a href="http://budget.gov.au/2013-14/index.htm">budget</a>, facing an almost impossible task: how to reconcile an enormous revenue shortfall with big spending promises, all while keeping the voters happy in an election year?</p>
<p>Everyone has an opinion, but we have gone straight to the academic experts for insight into what the 2013 budget means for the economy, health, the environment, science and politics.</p>
<p><strong>Further reading:</strong> Michelle Grattan covers the breaking budget news <a href="https://theconversation.com/federal-budget-2013-big-deficit-to-stay-next-year-14212">here</a>. Phil Lewis, Professor of Economics at the University of Canberra, joined Michelle in the budget lock-up and shares his insights <a href="https://theconversation.com/a-long-slide-towards-debt-leads-to-waynes-budget-swansong-14202">here</a>. </p>
<hr>
<h2>Economy and business</h2>
<p><strong>John Quiggin, Professor, School of Economics at the University of Queensland</strong></p>
<p>Facing virtually certain defeat, the Gillard-Swan government had the chance to set out a bold alternative vision that would have represented a challenge to its likely successor, and offered its disillusioned supporters a reason to return.</p>
<p>Such a vision would have started with bold ideas like the <a href="https://theconversation.com/topics/ndis">National Disability Insurance Scheme</a> (NDIS) and the <a href="https://theconversation.com/topics/gonski-review">Gonski</a> scheme, but would have presented Australian voters with the inescapable fact that, if we want such benefits, we have to pay for them through higher taxes.</p>
<p>Instead, the government has robbed Peter to pay Paul.</p>
<p>The students who benefit from the Gonski reforms at school will pay the cost in the form of larger classes and fewer course options when they reach university.</p>
<p>The <a href="https://theconversation.com/topics/ndis">NDIS</a> is, at least, partly paid for through the <a href="https://theconversation.com/medicare-levy-boost-to-pay-for-disability-insurance-scheme-13861">higher Medicare levy</a>, but much of the cost has been shoved on to the already impoverished states.</p>
<p>Overall, the government projects a reduction in the ratio of expenditure to GDP, even as these expensive commitments are added.</p>
<p>What was needed here was a challenge to voters to make a clear choice between better services, funded by higher taxes, and continued public austerity, allowing more private spending. The way to make this explicit would have been to raise top marginal tax rates and offer the states an increase in the rate of GST.</p>
<p>Instead, we have more of the same, most of which will either not pass Parliament or be repealed when the Coalition returns to office in September.</p>
<p><strong>David Willis, Senior Lecturer in Economics and Finance at Queensland University of Technology</strong></p>
<p>I don’t see this as an election budget at all, there are no general sweeteners in there – they’re not giving anything away to buy your vote.</p>
<p>But there are some good structural changes that really should have started last year to try and get the budget to move into surplus. For example cutting the <strong>baby bonus</strong> and looking at other income measures.</p>
<p>The <strong>infrastructure</strong> spend that has been announced is capacity building for the future. So when the economy does start moving in a positive way, we’ll be ready to take advantage of that. The education and disability reforms are also positive.</p>
<p>But the <strong>deficit</strong> is rather large – probably more than anyone would have accepted or expected; just short of <strong>A$19 billion</strong>. Some of this is about lack of revenue but some of it is lack of structural discipline in the years previously. But they have started on those changes now.</p>
<p>The budget relies on many assumptions – on the value of the dollar, the revenue that the government may or may not get in. Whether or not this future proofs the economic growth and reasonable levels of employment, if we assume all of those, then it’s not a bad start. But they are large assumptions and as we’ve seen over the last 12 months previously how those assumptions can be quite wrong.</p>
<p>But on Swan’s ten year forecasting, it’s really hard to project for more than a couple of years out with any degree of certainty. So a ten year plan is not necessarily financially anywhere near prudent or realistic.</p>
<p><strong>Neville Norman, Associate Professor in Economics, University of Melbourne</strong></p>
<p>On the expenditure side, this is philosophical and more like a traditional Labor government. If it wanted to do this responsibly, it should have lifted tax rates, especially GST. A hoist of the GST rate from 10% to 15% as the Brits commonly do would have been the responsible way to traverse to surplus. Lifting income taxes, which includes the medical levy uplift, just provoke tax escaping.</p>
<p>The carbon price should either be full to market at all times or drop it. Fix-pricing carbon is dumb.</p>
<p>On super changes, some of the changes are sensible and roll back the overly generous Costello super-handout changes to the oldies announced in 2005.</p>
<p>The entire impact of the budget is over-shadowed by the spectre of a dying government struggling to explain and crawl out of its own fiscal hole. I don’t want to be political, but the only credible return to surplus will come with a change of government. And there my fear is that they might do a UK Cameron Government and overdo it!</p>
<p>There is now every temptation for Mr Hockey or whoever reads out the 2014 Budget to slash and burn their way to an immediate surplus: no election in sight, and every chance to prove they can get to surplus quickly.</p>
<p><strong>Arusha Cooray, Senior Lecturer in Economics, University of Wollongong</strong></p>
<p>The positives to this budget is that the government is on its way to reducing the size of the <strong>budget deficit</strong>, which is lower than last year.</p>
<p>But disappointing is the fact that the increased funding to schooling has come at the expense of lower funding for universities. This could have negative impacts on the quality of university degrees, quality of teaching staff and exclude students from lower income groups from access to tertiary education.</p>
<p>The abolition of the <strong>baby bonus</strong> could affect lower income groups adversely by contributing to an increase in income inequality.</p>
<p>The decision to defer long term <strong>aid</strong> commitments and cuts on aid to <strong>asylum seekers</strong> reduces Australia’s commitment to humanitarian program. This, however, could be in an attempt to win votes.</p>
<p><strong>Ben Spies-Butcher, Lecturer in Economy and Society, Department of Sociology at Macquarie University</strong></p>
<p>The Budget highlights an ongoing challenge for Labor, which has tried to pursue a sort of “low tax” social democracy. Australia has tried more than any other country to target assistance, promoting equity with very low taxes, but I think we are now seeing the limits of that strategy. We can have decent services or very low taxes – not both. The ongoing deficit is a sign of Australia’s low tax base.</p>
<p>It is important Labor has committed to important new spending in education and <a href="http://budget.gov.au/2013-14/content/glossy/NDIS_policy/html/NDIS_overview_01.htm">DisabilityCare</a>, and its welcome Medicare levy will increase marginally to support that spending. There have been some small moves to claw back the grossly inequitable tax concessions for superannuation and business.</p>
<p>But given the failure of the mining tax and without broader changes to increase the tax base the government is forced into a series of bizarre decisions, such as “winning the education race” by cutting higher education spending. And the deeply disappointing decision to leave Newstart so far below the poverty line – especially given more unemployed people are unemployed for longer.</p>
<p>The other trend is for governments to lock in their opponents through the budget. Howard locked Labor into expensive and inequitable tax cuts that have caused the structural deficit. Labor is now locking in spending for education and disability insurance – fortunately reforms that at least add to productivity and equity.</p>
<h2>Foreign aid</h2>
<p><strong>Stephen Howes, Director, Development Policy Centre at the Australian National University</strong></p>
<p>I think it was a good outcome for the aid budget, in terms of the quantity of aid — an increase of <strong>half a billion dollars</strong>. But mine is a minority view. Most in the aid sector aren’t happy with the outcome because of the government’s <strong>deferral of its target</strong> to get aid to 0.5% of Gross National Income (GNI) by another year. The government deferred that target last year by one year to 2016, and they’ve now deferred it again to 2017. People have also been upset by the fact that the government is going to continue to <strong>tap the aid program to fund asylum seeker support</strong> to the same extent of $375 million a year</p>
<p>In my opinion, the 0.5% target was never a credible target; it would have required massive increases of about $1 billion a year, year-on-year; I don’t think we have the political support for that. And you can criticise the funding of asylum-seekers, but that was a decision made last year.</p>
<p>Overall, I think it’s a good outcome for the Australian aid budget to have a <strong>10% increase</strong> in what is a tight fiscal environment. It takes our aid program up to some <strong>$5.7 billion</strong>. Looking at it over the longer term, some 10 years ago, our aid program was about $2 billion. So we have had a massive increase in aid; we are now probably about the sixth biggest aid donor in the world. That’s an achievement.</p>
<p>What I’m more worried about is the uncertainty around the future of aid, because we don’t have a firm target anymore. Since the government has kept delaying the 0.5% target, we don’t really know whether it is committed to it. And the Opposition has already said that they’re not prepared to attach a date to the achieving the 0.5% target. </p>
<p>All that makes it very hard to plan for the future of aid. Aid projects require multi-year funding and therefore they need a level of predictability. The current uncertainty around the aid program’s future is going to damage effectiveness.</p>
<h2>Education</h2>
<p><strong>Simon Marginson, Professor of Higher Education at the University of Melbourne</strong></p>
<p>The budget is focused on short-term politics rather than long-term nation-building. This is inevitable, the sign of a government in trouble and an election four months away.</p>
<p>Even the two headline reforms – <a href="http://budget.gov.au/2013-14/content/glossy/gonski_policy/html/gonski_overview_01.htm">school funding</a> and <a href="http://budget.gov.au/2013-14/content/glossy/NDIS_policy/html/NDIS_overview_01.htm">disability support</a> - have been chosen so as to maximise the Government’s reach across the electorate on 14 September. Both affect very large numbers of Australians. These are good and necessary reforms. Yet they have not been properly funded (a 10-year implementation is not authentic), and for this reason they are especially vulnerable to a change of government. The school reforms, in particular, are unlikely to survive under the Coalition.</p>
<p>If the government had put the reforms first, it would have funded them over a three- or four-year timescale and they would have been that much harder to remove.</p>
<p>Instead, its primary concern was to minimise the deficit, again for short-term political reasons. Yet, is there are fundamental economic or political difference between a deficit of $18 billion and one of $24 billion?</p>
<p>In tertiary education, it is fortunate that there were no further cuts to <strong>research funding</strong>. And that the government continues to fund growth in university places through the demand-driven system. </p>
<p>However, the previously announced <strong><a href="https://theconversation.com/university-cuts-help-pay-for-gonski-school-reforms-13471">$2.6 billion in higher education funding cuts</a></strong> (the “efficiency dividend”) were confirmed in the budget. This is a terrible decision. It ignores the expert advice provided by the <a href="http://www.innovation.gov.au/HigherEducation/ResourcesAndPublications/ReviewOfAustralianHigherEducation/Pages/default.aspx">Bradley review</a> of higher education in 2008 and the <a href="http://www.capa.edu.au/submission/2011/base-funding-lomaxsmith-review">Lomax-Smith base funding review</a> of 2011. Both recommended substantial increases in the financing rate of government-funded student places.</p>
<p>The government now seems unable to treat higher education funding as an investment in national infrastructure, with spending targets determined by long-term national needs. Instead, it is following the previous Howard government, in treating higher education as a source of short–term fiscal savings.</p>
<p>The cynical politics underlying this is that there are less votes in the universities than in the schools or disability. Meanwhile, East Asia and Singapore, and most of North West Europe, are increasing their public outlays on higher education and research. We will fall behind.</p>
<p>The public funding of tertiary education in Australia at 0.7% of GDP (2011) is well below the OECD average of 1.1%. The difference is $6 billion per annum. Now we are to cut further.</p>
<h2>Health</h2>
<p><strong>Stephen Duckett, Director, Health Program at the Grattan Institute</strong></p>
<p>This budget contains mostly small changes here and there from a health perspective. The funding of DisabilityCare is a major initiative and represents a significant step forward for equity. </p>
<p>The slower indexation of <strong>Medicare rebates</strong> could result in access problems for consumers if doctors increase their fees ahead of the rebate changes.</p>
<p>This budget does not future proof Australia. A number of decisions have not been taken to eliminate waste from the system, such as addressing the excess prices in the Pharmaceutical Benefits Scheme</p>
<p>There are small increases in highly targeted research programs in <strong>cancer and aged care research</strong>. The <a href="http://www.mckeonreview.org.au/">McKeon proposals</a> to prioritise relevant health services research have not been pursued, which is a disappointment. </p>
<p><strong>Hal Swerissen, Professor of Health Policy, La Trobe University</strong></p>
<p>The budget delivers on funding for the NDIS, the government’s major policy initiative. It also includes funding for <strong>dental health</strong> reform and has there is money for <strong>cancer</strong> prevention, new <strong>pharmaceutical listings</strong>, <strong>rural incentives</strong> program for GPs, and <strong>aged care</strong> reform.</p>
<p>The budget makes sensible savings by removing <strong>double dipping on Medicare by GPs</strong>, removing the net medical expense tax offset, increasing the general threshold of extended Medicare Safety Net and realigning of <a href="http://www.medicareaustralia.gov.au/provider/medicare/mbs.jsp">Medicare Benefits Schedule</a> indexation arrangements.</p>
<p>Overall, apart from the NDIS, the budget continues health policy directions already in place. As with social services, significant real growth in the health budget is projected over the forward estimates to deal with population growth, population ageing and health inflation.</p>
<h2>Politics and Society</h2>
<p><strong>Carol Johnson, Professor of Politics at the University of Adelaide</strong></p>
<p>In removing the Howard sweeteners, Labor has been left with few sweeteners of their own. </p>
<p>This is very much a post-Howard budget – there was always the problem that Howard failed to invest the benefits of the mining boom. If only Australia had set up a <strong>sovereign wealth fund</strong> like countries such as Chile, we’dbe potentially in a much better situation than we are now. But Howard and Costello chose to spend a lot of the mining boom revenue on things Labor sees as <strong>“middle class welfare”</strong>. However, removing things like the Howard government’s Baby Bonus means they are running out of sweeteners themselves.</p>
<p>When it comes to returning to surplus, it’s very hard to assess whether that will happen. Budget forecasts have been so wrong. During the Howard years Treasury tended to underestimate revenues, so the government got nice surprises, but during the Gillard government they have been over-estimating revenue, so its very hard to trust even Treasury projections, never mind government spin.</p>
<p>I think what voters will remember is that the government was unwise enough to say “no ifs, no buts, we’ll deliver a surplus”. This government was basically making a promise any sensible person must have known in the current economic climate they could not deliver on.</p>
<p>What the government could have been doing was preparing the electorate for the reality that we are now living in very difficult economic times and they might have to run a deficit. This government has singularly failed to do that – it was a very basic strategic mistake.</p>
<p>On the other hand, the public will like education expenditure and the National Disability Insurance Scheme; some people will recognise the need for more infrastructure spending.</p>
<p>But I don’t think the things the public like about this budget will be enough to get them back into office.</p>
<p><strong>Clive Bean, Professor of Political Science, Queensland University of Technology</strong></p>
<p>I think it was unlikely this budget was ever going to save the government.</p>
<p>In some ways, the government may have done the best job it can. By that, I mean I think that they abandoned usual election year strategies of spending and proposing new measures that are attractive to voters.</p>
<p>Instead, the government is showing it is fiscally responsible and restrained but I don’t think it can really work in its favour. It is an unusual strategy, not one that is likely to win over a huge number of voters. It is not going to turn around the fortunes of the government.</p>
<p>The <strong>deficit</strong> is pretty substantial and not withstanding the fact that we knew there would be one, it is even larger than predicted so that’s a fairly significant feature of the budget. It can’t be seen in a positive light.</p>
<p>On the <a href="https://theconversation.com/topics/mrrt">mineral resources rent tax</a>, the government got the revenue from it wrong, not specifically in this budget but overall and particularly in terms of the original predictions of revenue compared to the current realities.</p>
<p>The <strong>NDIS</strong> scheme will be a positive for the government but that was well foreshadowed, so will not bring a major additional boost via the budget.</p>
<p>Surprisingly, the abolition of policies such as the <strong>baby bonus</strong> may be good political strategy and, although it will not be welcomed amongst some voters, the broader view was that it was an overgenerous policy and abolishing it could be seen as a clever strategy to make some budget savings.</p>
<p><strong>Zareh Ghazarian, Lecturer, School of Political and Social Inquiry at Monash University</strong></p>
<p>Out of his six supply bills presented to the House of Representatives, the <a href="http://budget.gov.au/2013-14/content/overview/html/overview_key_initiatives.htm">2013/14 Budget</a> was perhaps the most difficult one for Treasurer Wayne Swan to prepare. The government faced a unique set of challenges, both in terms of the economic situation and the political climate it operated in.</p>
<p>On the economic side, the government had to somehow manage the need to keep spending on important policies while having less income than it planned for. The Treasurer’s approach of outlining a ten-year plan was bold. Doing so gives the Labor Party’s flagship policies of <a href="http://budget.gov.au/2013-14/content/glossy/NDIS_policy/html/NDIS_overview_01.htm">DisabilityCare</a> and school funding reforms the best chance of long-term survival even if the government loses the September election.</p>
<p>The spending on <strong>infrastructure</strong> programs, while cutting back on some social welfare programs (such as the baby bonus), suggests the government and Department of Treasury still want to pump-prime the economy and stimulate growth in an uncertain global economy.</p>
<p>The other problem the government faced was a political one. After laying out plans for a surplus last year, the government has presented a deficit. The problem here is that it makes Prime Minister Gillard and Treasurer Swan easy targets for the opposition. Indeed, the Coalition will highlight this as yet ‘another broken promise’ and tie it into their broader narrative that the government can not be trusted.</p>
<p>The Budget is an opportunity for the government to reclaim the political debate. The prime minister and key ministers will be out selling their vision over the coming days.</p>
<p>The pressure will now be on opposition leader Tony Abbott to outline the Coalition’s stand on economic policies when he takes the floor to respond to the Budget on Thursday night.</p>
<h2>Environment and climate change</h2>
<p><strong>Paul Burke, Research Fellow, Crawford School at the Australian National University</strong></p>
<p>The forward estimates are showing the effects of the decision to link Australia’s <strong>carbon price</strong> to the EU emissions trading scheme. The alternative model of a predictably rising carbon tax would provide better results in terms of both emissions reductions and government receipts.</p>
<p>It is welcome news that the government is cutting <strong>industry compensation for the carbon price</strong>. It is very hard to argue that compensation of the coal industry is the best possible use of public funds. The lower estimated future carbon price means that industry assistance is even less justified than it was when initially planned.</p>
<p>The reduction in spending on renewable energy is perhaps a warranted saving. The idea of policies like a carbon price and the <a href="http://www.climatechange.gov.au/government/initiatives/renewable-target.aspx">Renewable Energy Target</a> is they provide the private sector with the incentive to invest in low-carbon energy. If so, it isn’t clear that large government spending on renewables is justified.</p>
<p>Given the challenging fiscal outlook, there are some obvious missed opportunities in this budget. One is the failure to relink the rate of <strong>petrol excise</strong> to inflation. Petrol excise is a shrinking tax, making it more challenging to fund things like transport and other infrastructure. Another missed opportunity is in not reducing <strong>fossil fuel tax exemptions</strong>.</p>
<p><strong>Lin Crase, Professor of Applied Economics, La Trobe University</strong></p>
<p>A minority government was always destined to struggle with promoting the notion of a budget surplus on the one hand whilst trying to appease disparate interests on the other. It is also easy to see how the current political climate favours “ticking a box” on plans or schemes, as opposed to seeing them through to fruition.</p>
<p>Perhaps this is no more apparent than in the case of the much acclaimed, but now largely forgotten, <a href="https://theconversation.com/topics/murray-darling">Murray-Darling Basin Plan</a>. The federal government can justly take some credit for managing to put in place a plan for restoring some environmental balance in Australia’s most productive river system. However, it has done so at a significant cost to taxpayers, far greater than what was actually required.</p>
<p>Low cost options for taxpayers, like simply buying water rights, were deliberately stalled in preference to subsidies for irrigation farmers. The budget shows that these are set to continue with a price tag of about <strong>$1.8 billion</strong> being added to the billions already spent.</p>
<p>There is also a penchant for trying to engineer environmental outcomes and this also receives support in the budget. The idea behind these subsidies and so-called “works and measures” is that the chagrin of farmers would be kept in check while an opportunity was provided to test if the additional water made a difference to the environment.</p>
<p>However, in a peculiar twist, very little money will be on hand to actually undertake these tests. About <strong>$2 million per year</strong> is set aside to ensure the ‘best available science’ is available to support the use of environmental water. This is occurring at a time when NSW and SA have both indicated they will reduce funding to the Murray Darling Basin Authority, the body that sponsors most of the science in the basin.</p>
<p>It’s hard to see how the sums available from the Commonwealth will be adequate given the size and diversity of the basin. Accordingly, there is a real risk that the unseemly and uninformed debates about how much water is required for the environment will be repeated and there will be no means of adjudging if the current water holding is being well used.</p>
<p>Taxpayers might feel justifiably duped by these arrangements – with such a large amount of money passing to a small number of irrigators, the least taxpayers could expect is some reasonable scientific assessment of the so-called environmental benefits.</p>
<h2>Infrastructure</h2>
<p><strong>Cameron Gordon, Associate Professor of Economics at the University of Canberra</strong></p>
<p>Infrastructure, if done right, is generally a long-term investment which generates a return in the future that is beyond what is spent today. </p>
<p>Infrastructure Australia has advised in the past that such spending should be done strategically, focusing on important network investments such as key rail and road corridors and communications hubs, increasing the impact and reach of spending through efficient funding mechanisms, such as public-private partnerships, and be tied with governance and regulatory reforms that allow for efficient use of any facilities ultimately built.</p>
<p>Past Commonwealth budgets have tended to take more of a piecemeal approach than this, funding projects but not necessarily tying them into a larger program or strategy. Such projects tend to be local, of varying size, and meet pressing needs, such as remediation of black spots on highways. There are a couple of exceptions, such as the National Broadband Network (NBN) or the stimulus spending, the latter now unwinding, and some policy frameworks with little money attached.</p>
<p>This budget seems largely in step with that past pattern, with the greater share of funding going to expenditures that economists might term as current consumption.</p>
<p>A headline number was provided by the Treasurer in his address tonight – <strong>$24 billion on new infrastructure investment</strong> – but most of the talk was about spending on health, education and human services.</p>
<p>The <strong>headline health number (around $64 billion</strong> according to the Treasurer’s <a href="http://budget.gov.au/2013-14/content/speech/html/speech.htm">address</a>) is, for example, three times the headline infrastructure number.</p>
<p>This is not to say that this spending has no return. There is just much more of an emphasis on “human capital” rather than “physical capital”. </p>
<p>Urban road and rail were specifically mentioned, and the benefits of investment to lower urban congestion were claimed as the main reasons for such spending.</p>
<p>There are a couple of <strong>big projects</strong>, “transformational projects” as Swan termed it, like Brisbane’s Cross River Rail and Melbourne’s Metro. There is thus a bit more transit than is normally in a federal budget. </p>
<p>But much of the list consists of road projects in various cities that are not tied together into an overall network plan or with an overarching strategic vision. </p>
<p>Also a good portion of the infrastructure spending remains on the continuing rollout of the NBN. There was an explicit mention of private participation but no details.</p>
<p>Overall, there are not many surprises in the budget with respect to infrastructure. The Commonwealth has generally left much of the heavy lifting here to the States, which is a pattern that has prevailed for much of recent history.</p>
<h2>Science and Research</h2>
<p><strong>Matthew Bailes, Pro-Vice Chancellor (Research), Swinburne University of Technology</strong></p>
<p>I think the overall message is that the government is running out of money. It is having to make cost savings and universities are a soft target.</p>
<p>It’s good to see the government putting some money back into the <a href="http://ncris.innovation.gov.au/Pages/default.aspx">National Collaborative Research Infrastructure</a> schemes. It’s increased, although it’s a shame that it’s coming through in dribs and drabs and there is no long-term plan for maintaining research infrastructure. </p>
<p>There are various bits of other research infrastructure that are in danger of becoming rundown. The government gives us money to fund facilities but not for long-term upkeep.</p>
<p>I think the Australian economy is still one of the strongest in the Western world. But to take money from tertiary education and give it to high schools would appear short sighted.</p>
<p>Any time you cut education, it’s hardly clever. It might help you plug a short-term budget hole, but in the long term, the only thing that will separate us from the rest of the world is the quality of our education and research infrastructure.</p><img src="https://counter.theconversation.com/content/14211/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Spies-Butcher is an unpaid office bearer for The Greens.</span></em></p><p class="fine-print"><em><span>Arusha Cooray, Cameron Gordon, Carol Johnson, Clive Bean, David Willis, Hal Swerissen, John Quiggin, Lin Crase, Matthew Bailes, Paul Burke, Simon Marginson, Stephen Duckett, Stephen Howes, and Zareh Ghazarian 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>Australian Federal Treasurer Wayne Swan has handed down his sixth budget, facing an almost impossible task: how to reconcile an enormous revenue shortfall with big spending promises, all while keeping…Stephen Howes, Director, Development Policy Centre, Australian National UniversityArusha Cooray, Senior Lecturer, Economics, University of WollongongBen Spies-Butcher, Lecturer in Economy and Society, Department of Sociology, Macquarie UniversityCameron Gordon, Associate Professor of Economics, University of CanberraCarol Johnson, Professor of Politics, University of AdelaideClive Bean, Professor, Political Science, Queensland University of TechnologyDavid Willis, Senior Lecturer in Economics and Finance, Queensland University of TechnologyHal Swerissen, Professor of Health Policy, La Trobe UniversityJohn Quiggin, Professor, School of Economics , The University of QueenslandLin Crase, Professor of Applied Economics, La Trobe UniversityMatthew Bailes, Pro-Vice Chancellor (Research) , Swinburne University of TechnologyPaul Burke, Research Fellow, Crawford School, Australian National UniversitySimon Marginson, Professor of Higher Education, The University of MelbourneStephen Duckett, Director, Health Program, Grattan InstituteZareh Ghazarian, Lecturer, School of Political and Social Inquiry, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/142022013-05-14T09:53:22Z2013-05-14T09:53:22ZA long slide towards debt leads to Wayne’s budget swansong<figure><img src="https://images.theconversation.com/files/23718/original/j5c7phkq-1368519712.jpg?ixlib=rb-1.1.0&rect=19%2C19%2C4236%2C2809&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Treasurer Wayne Swan has unveiled an $19.4 billion deficit, but promises to be back in surplus by 2016-17.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>How did the Australian economy, which boasts the best performance of the major advanced economies, end up with an estimated budget deficit of A$19 billion this year and an estimated debt of $178 billion?</p>
<p>The answer, of course, is quite simple – the failure of successive governments to live within their means.</p>
<p>Last week <a href="https://theconversation.com/howards-end-how-the-coalitions-last-budget-created-the-ground-for-the-current-deficits-13848">I pointed out</a> how in the latter years of the Howard government, the Costello budgets included a raft of tax cuts and handouts which eroded the healthy surplus. This was due to exceptional falls in unemployment, jobs growth and wages growth which greatly increased tax receipts while somewhat eroding the tax base.</p>
<p>Rudd’s two-and-a-half year leadership of the Labor government was characterised by high spending, high debts and ill-fated economic policies. There were also a large number of policy back-flips and policy failures. The period was also dominated by the global financial crisis (GFC) and Australia was not alone in having to recalibrate its economic strategies to respond to what has been a significant, world-wide phenomenon.</p>
<p>While the idea of stimulus spending was generally supported, the amount and form of the spending has been the subject of considerable debate. Rudd took office in 2007 with net government saving of almost $45 billion and left office in June 2010 with an estimated net debt of almost $42 billion.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23720/original/87hn6p3p-1368523897.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&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">Commonwealth of Australia</span></span>
</figcaption>
</figure>
<p>Far from addressing the budget deficit Swan has delivered more budget deficits through failing to curb spending and/or widen the tax base, despite the Minerals Resource Rent Tax and the Carbon Tax.</p>
<p>Among the expenditure cuts and tax savings is the axing of an $1.8 billion increase in family tax benefits, due to start on July 1, which would have been worth between $300 to $600 a year for families. The Baby Bonus will now be paid as part of the means tested Family Tax Benefit A payments.</p>
<p>An income tax cut proposed for 2015-16 will be deferred. The tax cut was part of the carbon scheme compensation package and would have increased the tax-free threshold from $18,200 to $19,400. Savings of $900 million will be made over four years from changes to superannuation tax arrangements by taxing earnings of more than $100,000 on superannuation pensions and annuities will be taxed at 15%, instead of being tax-free.</p>
<p><a href="http://www.abc.net.au/news/2013-05-12/government-to-cut-580m-from-public-service/4684404">Public service cuts over the next four years</a>, including job cuts, will save $580 million, but it is well-known that meaningful savings in government expenditure come from cutting programs rather than public servants.</p>
<p>Although the government needs to pay for its additional expenditure promises there is also the need to address the underlying structural problem of reducing existing expenditure. All this is at a time when the carbon tax, Minerals Resource Rent Tax, and just about every tax, is not raising the expected revenue and Treasury’s forecasting performance is not looking good.</p>
<p>Massive revenue write-downs have been made to tax receipts, with a shortfall of around $17 billion this financial year, more than $20 billion the following year and $60 billion over the next four years. There are $43 billion in savings promised through a range of cuts.</p>
<p>A number of big ticket expenditure items are likely to blow out from original estimates. The National Broadband Network (NBN) is a very costly project for which no one knows the eventual true cost with any accuracy. The new tax (sorry Medicare levy) will only meet 40% of an estimated cost of DisabilityCare, (formerly the NDIS) which will inevitably blow out (if the experience of the rest of healthcare is any guide). The Gonski recommendations may very well be excellent, but few really understand them.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=363&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=363&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=363&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=456&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=456&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23719/original/h79hzkhw-1368523883.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=456&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">Commonwealth of Australia</span></span>
</figcaption>
</figure>
<p>No one trusts the estimates and most think that the government won’t be around much longer to implement even short-term measures, never mind the “the savings to fully fund priority investments for 10 years and beyond” described by the Treasurer.</p>
<p>According to Swan we are an economy in transition. And how is this transformation to occur? The resources boom moves from its investment phase to production (if prices hold up). Our region is the fastest growing in the world providing opportunities for Australian farmers, manufacturers and service industries. This will require a highly skilled, educated workforce (hence Gonski reforms - although it would seem the more highly skilled university students can fend for themselves with $2.3 billion to be cut from universities).</p>
<p>As Swan put it,</p>
<blockquote>
<p>“You don’t want to find yourself in the fastest growing region in the world, with yesterday’s economy.”</p>
</blockquote>
<p>Excuse me, but haven’t we been in the fastest growing region for some time now? Shouldn’t this investment have been done years ago?</p>
<p>And,</p>
<blockquote>
<p>“Cutting to the bone puts Australian jobs and our economy at risk, something this Labor government will never accept.”</p>
</blockquote>
<p>No one is asking for drastic cuts, but simply for government to live within its means.</p><img src="https://counter.theconversation.com/content/14202/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Lewis 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>How did the Australian economy, which boasts the best performance of the major advanced economies, end up with an estimated budget deficit of A$19 billion this year and an estimated debt of $178 billion…Phil Lewis, Professor of Economics, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/141752013-05-13T20:50:52Z2013-05-13T20:50:52ZThe ‘Alice in Wonderland’ budget<figure><img src="https://images.theconversation.com/files/23666/original/tyfbqzs6-1368433334.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Today's budget will not be a typical big-spend budget.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Softening up voters for harsh measures, <a href="http://www.smh.com.au/data-point/taxing-times-20130503-2iyho.html">Julia Gillard observed</a> a fortnight ago that “Tuesday 14 May will be no old-fashioned pre-election budget night”. The budget would not be a “political pamphlet” but an “economic program,” she said.</p>
<p>She might have added: It will be a budget that breaks promises and raises taxes. It will have deficits when its centrepiece was meant to be the first surplus in years.</p>
<p>Presumably, there will be some (fresh) attractive good news, kept for the night. But if there is, it is hard to see how that can offset the bad.</p>
<p>In political terms, the conventional budget cycle usually works on a certain pattern. Do the really tough things in the first year after the poll. Consolidate in the second budget. Strut your stuff to the voters in the pre-election one.</p>
<p>John Howard, his back to the wall in 2001, started an electoral revival with a budget appealing to older voters. In 2007 he spent (and promised in the campaign) like a fiscal mad man - but to no avail. Indeed, <a href="http://www.abc.net.au/lateline/content/2007/s2091167.htm">Kevin Rudd</a> made a virtue of restraint with his line that “this sort of reckless spending must stop”.</p>
<p>It is possible to turn restraint into a positive strategy. Throwing round a lot of money is not necessarily a political winner. But other things have to be going in the right direction to make a virtue of straitened times. Rudd, who was talking from opposition, was already headed to victory. On the evidence, Gillard is headed out the back door.</p>
<p>Also, while people might accept that some pain is needed for the country’s good, when they are hit individually, it’s different. Many who support higher tax to part-fund the NDIS will complain about actually paying it.</p>
<p>In a sense, this is the Alice in Wonderland budget. It is being framed and discussed as a fiscal blueprint for the next financial year, but with most people on both sides of politics assuming that much of it will be unpicked by a new government.</p>
<p>The challenge for Treasurer Wayne Swan is to have tonight’s document judged credible. That means the assumptions about revenue (and other parameters) must look reasonable - when Treasury has a very poor recent record.</p>
<p>It means the path he is promising back to surplus has to be more convincing than last year’s road - which ended abruptly in a dead end.</p>
<p>And it means the cuts in total, including presumably some still to be unveiled, need to be enough to show the government is fair dinkum about belt tightening - while it says it won’t sacrifice jobs.</p>
<p>It is vital for the budget to be believable, even though it almost certainly won’t have to be believed for very long.</p>
<p>The government has followed the not-unusual practice of getting out bad news early. But this year there is so much of it, involving such big numbers and so many broken commitments. The family tax benefit rise due on July 1 won’t be delivered; the 2015 tax cuts are gone; the Medicare levy will increase to help pay for the disability scheme. All three involve big dollars and breach undertakings. As does another delay in meeting the foreign aid target.</p>
<p>The government finds it harder and harder to get out key positive and reasonable messages. These are that the economy is strong and that its reform initiatives, especially the disability scheme and Gonski, are potentially big changes with important benefits.</p>
<p>Tempers are fraying. After Business Council of Australia president <a href="http://www.afr.com/p/national/end_budget_chaos_business_0s7qzVZNnjfmtt7CiTZo4M">Tony Shepherd</a> was quoted saying there was alarm that “the reform agenda has just died”, Climate Change minister <a href="http://au.businessinsider.com/combet-hits-back-at-business-leaders-who-lamented-labors-lack-of-vision-in-the-afr-2013-5">Greg Combet</a> yesterday lashed out: “What’s his vision again?” The point is less who’s right or wrong than that the relationship with business has frayed beyond repair. Business is basically just sitting the government out.</p>
<p>One had to feel a little sorry for <a href="http://www.brw.com.au/p/business/budget_swan_turning_ready_hockey_gFP3MO3rZ86Zd1sqhU5gVL">Wayne Swan</a>, flayed and ridiculed by Laurie Oakes in his pre-budget interview. Trying to defend himself over his non-existent surplus, Swan said “I’ll take my medicine; I’ll accept the politics of this are very uncomfortable”. A lot more than that, probably.</p>
<p>In the unreal mood of the times, budget eve was full of play acting. The cameras were invited into the cabinet room to hear Gillard say the budget would be putting jobs and growth first, and Swan assure colleagues that it would chart a course back to surplus. Reality for the government is dire, but they continue to attend carefully to the visual spin.</p>
<p>Over in the opposition party room, <a href="http://www.liberal.org.au/latest-news/2013/05/13/little-book-big-labor-waste">Tony Abbott was releasing</a> “The Little Book of Big Labor Waste”, replete with shock-horror newspaper stories. Reality for the opposition appears to be all on the upside, but it is still thought important for the leader to be pictured clutching what looks like a brightly-coloured kid’s book.</p>
<p>And, by the way, Abbott confirmed in answer to questioning that yes, he did intend to move, before too long, that no confidence motion he foreshadowed a few weeks ago.</p>
<p>No confidence motions go to a government’s life or death. If one is passed a government falls. But no one is taking this one too seriously, not even the opposition. It’s more part of the psychological warfare than based on an expectation that Labor, now on the cusp of the election, will be swept away prematurely.</p>
<p>The opposition has its lines written before it opens the budget today. Whatever the figures, it will declare them wrong. Not that Abbott doesn’t have a few problems of his own. Some of the colleagues are still trying to tear away at his paid parental leave scheme. He won’t abandon it but could it be trimmed, or delayed?</p>
<p>The critics will have noted yesterday’s <a href="http://essentialvision.com.au/category/essentialreport">Essential Research</a> poll, showing 34% prefer the government’s less generous scheme (already operating) to 24% who back Abbott’s plan.</p>
<p>At the end of his news conference yesterday Tony Abbott stood close to Joe Hockey and declared: “We are absolutely on the same page here. The number one priority for an incoming Coalition government has got to be to restore the nation’s finances.”</p>
<p>On all the probabilities the next budget will the first of a new Coalition government. Expect it to follow the old cyclical orthodoxy. It would be very amazing if there were not lots of nasties.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=683&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=683&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=683&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=858&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=858&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23667/original/ysk68bhk-1368433731.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=858&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Photo: AAP/Alan Porritt</span></span>
</figcaption>
</figure><img src="https://counter.theconversation.com/content/14175/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan 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>Softening up voters for harsh measures, Julia Gillard observed a fortnight ago that “Tuesday 14 May will be no old-fashioned pre-election budget night”. The budget would not be a “political pamphlet” but…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/138182013-05-12T20:08:12Z2013-05-12T20:08:12ZOn budget night, humans will trump other species, again<figure><img src="https://images.theconversation.com/files/23500/original/k2f9zb7x-1368160155.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">If you're a family or a business, you'll get a look-in on Budget night. But what if you're a Western Swamp Turtle?</span> <span class="attribution"><span class="source">Sascha Grant</span></span></figcaption></figure><p>Last year the Australian governments (federal and state) spent <a href="http://grattan.edu.au/static/files/assets/ff6f7fe2/187_budget_pressures_report.pdf">AU$6.23 billion</a> on the budget line “climate change and environment”. This probably seems a reasonable amount to most taxpayers, compared to that spent on arts and sport (AU$3.33 billion) or aged care services (AU$12.95 billion). The AU$6B makes up about 1% of combined federal and state budgets; it is dwarfed by welfare (30%), health (16%) and education (9%).</p>
<p>Of course, the problems faced by the environment are huge. We humans are decidedly winning our battle with the other species which share this country. In the <a href="http://www.environment.gov.au/cgi-bin/sprat/public/publicthreatenedlist.pl?wanted=fauna">Australian list of threatened species</a> there are 445 fauna species; 55 are already extinct, 45 critically endangered, 141 endangered and 198 vulnerable. For plants, there are 41 species extinct among the list of 1,240 <a href="http://www.environment.gov.au/cgi-bin/sprat/public/publicthreatenedlist.pl?wanted=flora">variously threatened</a>.</p>
<p>Throwing more money at the problem will not fix the damage done by human civilisation. We can only do that by acknowledging the way our pursuit of economic growth drives other species’ decline. </p>
<p>Look at the 20 <a href="http://www.environment.gov.au/cgi-bin/sprat/public/publicgetkeythreats.pl">key threatening processes</a> under federal law: the rapacious <a href="https://theconversation.com/rabbits-and-biological-control-two-unexpected-christmas-presents-11399">rabbit</a>, the cunning <a href="https://theconversation.com/is-it-too-late-to-bring-the-red-fox-under-control-11299">fox</a>, the poisonous <a href="https://theconversation.com/the-toad-we-love-to-hate-11521">cane toad</a>, the wallowing feral pig and the browsing goat. True we admit a faint stamp of human ingenuity by listing land clearing (most of the best lands well cleared by now anyway), <a href="https://theconversation.com/bycatch-the-real-concern-as-super-trawler-heads-for-australia-8994">fishing by-catch</a> and <a href="https://theconversation.com/field-of-nightmares-gamba-grass-in-the-top-end-12178">introduced grasses</a> in northern rangelands. Nowhere does legislation highlight Homo sapiens and its economic tentacles as the primary driver of the decline in our fellow species.</p>
<p>Defending this institutional myopia is an art form in itself. The Environment Protection and Biodiversity Act - the main federal act protecting the environment - allows for applications for new threatening processes. An <a href="http://www.acfonline.org.au/sites/default/files/resources/EPBC_nomination_22-3-10.pdf">application in 2010</a> by the Australian Conservation Foundation to list population growth as a threatening process appears to have failed the policy test. The Yellow Crazy Ant threat on Christmas Island sailed through. The ACF application reviewed the population growth spurts underway in the coastal wetlands of South East Queensland, the Mornington/Western Port biosphere in Victoria, the Fleurieu Peninsula in South Australia and the Swan Coastal Plain in Western Australia. While the drivers for population growth and land settlement outcome varied for each of these case studies, in no region was a positive prognosis for threatened communities and species assured.</p>
<p>While money for conservation matters, Homo sapiens conducts its species war on many fronts. Take just one fauna species critically endangered by population growth and related impacts, the <a href="https://theconversation.com/australian-endangered-species-western-swamp-tortoise-11630">Western Swamp Tortoise</a>. The tortoise lives on a narrow strip of the Swan River floodplain in Western Australia. A preferred diet morsel for the wily fox, the tortoise is a diffident breeder whose habitat has been overwhelmed by a cascade of land use change since the mid 1800s and now survives surrounded by humans. </p>
<p>The tortoise recovery team’s aim is “to have four or five secure, viable populations, rather than the one that currently exists. Threat abatement activities include habitat improvement, water supplementation, predator control, captive breeding, public education and fire management”. More Federal and State budget dollars will see this recovery plan endure. But multiply this effort by the 395 fauna species alive on the list and you’ll understand why ecologist’s eyes tend to glaze over during The Treasurer’s well crafted budget delivery.</p>
<p>Altering Australia’s population trajectory by reducing immigration rates (Immigration and Customs budget $4.04 billion) to give other species a chance probably won’t make the shortlist of budget highlights. After all, population growth provides a vital boost to economic growth due to great multipliers of value adding from building and renting houses. Changing our obligations in international trade (Foreign Affairs and Trade budget $6.77 billion) might be another consideration. Sydney University’s <a href="http://theconversation.com/globalisations-dark-side-how-shoppers-consume-threatened-species-6824">trade and biodiversity</a> study released last year showed our export activities affected 158 endangered species while our imports had an impact on 135 species abroad, mostly in developing countries. </p>
<p>The World Trade Organisation’s <a href="http://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#articleXX">Article 20</a> of the World Trade Organisation’s General Agreement on Tariffs and Trade has the legal framework to apply border tariffs or import constraints on production chains that damage the environment. However, only a really foolhardy treasurer would wage a trade war on behalf of threatened animal species when his revenue base seems to be dropping like a stone. Where is <a href="https://theconversation.com/profiles/ken-henry-11262/profile_bio">Ken Henry</a> when <a href="https://theconversation.com/whats-happening-to-the-southern-hairy-nosed-wombats-7234">hairy nosed wombats</a> and many other species need him?</p>
<p>So the battle between humans and the rest of Australia’s species is unlikely to alter its pace and intensity based on the most recent budget numbers and the self-interest evident in Australian consumers and voters. Perhaps keeping current recovery programs viable is a modest hope. Any bigger initiatives require the budget headspace provided by increasing GST to 15 or 20% along with obvious savings highlighted by the recent <a href="https://theconversation.com/australian-governments-face-a-decade-of-budget-deficits-13616">Grattan Institute report</a>. </p>
<p>Doing real things about species protection and recovery requires substantial changes to population growth rates, settlement patterns, personal consumption and the composition of international trade, both inwards and outwards. I’ll not be expecting much for other species, apart from a bit of tinsel and fairy floss, on this budget night.</p><img src="https://counter.theconversation.com/content/13818/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In the past Barney Foran has received funding from a variety of commonwealth, state and business organisations. He currently receives no research funding relevant to this article.</span></em></p>Last year the Australian governments (federal and state) spent AU$6.23 billion on the budget line “climate change and environment”. This probably seems a reasonable amount to most taxpayers, compared to…Barney Foran, Adjunct Research Fellow, Institute for Land, Water and Society, Charles Sturt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/140792013-05-12T20:07:41Z2013-05-12T20:07:41ZOn budget night, Wayne Swan, give us a strategy for creating jobs<figure><img src="https://images.theconversation.com/files/23398/original/46z2x6b2-1368066056.jpg?ixlib=rb-1.1.0&rect=30%2C1097%2C4010%2C2599&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>How will we know whether or not Treasurer Wayne Swan’s federal budget is a good one? The popular test used to be pretty simple: deliver jobs for all or face the axe. Even when the old Keynesian-style full-employment formulae no longer worked, people still expected the free market economic reforms to deliver on jobs.</p>
<p>In this pre budget discussion, however, we have heard very little about jobs. Yesterday <a href="http://www.abc.net.au/news/2013-05-12/government-to-cut-580m-from-public-service/4684404">significant cuts to the public sector</a> were announced, but the big budget question seems to be rather how close to the bone should the government cut?</p>
<p>A likely explanation for the silence on this issue might be the widely held conviction among many senior economists that we are already at full employment – more or less – so there is “no problem”. </p>
<p>April’s <a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/6202.0Media%20Release1Apr%202013">unemployment rate in Australia is currently 5.5%</a> (down slightly from March’s 5.6%), and the idea policy might push it back to the 1% or 2% which prevailed for three decades from the 1940s is simply never part of the polite discussion in these circles.</p>
<p>Between the conversational lines, the sense appears to be that in a “modern knowledge economy” there is likely no room for the unintelligent and unskilled; and indeed if they were to be included they would only lower productivity and lift the rate of inflation. But should we be satisfied with employment the way it is, or see in these attitudes a potentially dangerous complacency?</p>
<p>It is completely true that more than two decades of welcome uninterrupted economic growth sees Australia with a current unemployment rate among the lowest in the OECD. But remember these were the economic good times and yet, according to the ABS, there are still 686,900 Australians who want to work but can’t get a job, while a further 784,000 Australians are underemployed - they’ve got a job but want to work more hours. </p>
<p>At the Brotherhood of St Laurence, we see the human consequence of the statistics of those who are locked out of the labour market. At our work and learning centres, purposely located near public housing in Victoria, those who seek tailored help with their job search uniformly express a strong desire to work.</p>
<p>Meanwhile, we face more straitened economic circumstances with Professor Ross Garnaut talking of the need for <a href="http://www.theaustralian.com.au/opinion/columnists/hold-on-tight-our-economy-is-heading-for-the-biggest-of-falls/story-e6frg74x-1226630292612">“shared sacrifice”</a>. So, what will happen with employment? Garnaut’s view is linked to a widely-held judgement of the policy failure of historic proportions in not capturing the benefits of the mineral boom to contribute to an economic growth strategy. If this is indeed the main economic story then we ought to bring back the “jobs test” as the key to budget success or failure.</p>
<p>In my upcoming book, <a href="http://www.allenandunwin.com/default.aspx?page=305&book=9781743311301">Inclusive Growth in Australia</a>, co-edited with John Buchanan, we use the concept of “employment portfolios” to reflect on potential employment scenarios in Australia. The concept is a powerful one, if you think that in the post-war period the relative affluence of ordinary Australians resulted from an economic strategy which capitalised on the post-war boom in manufacturing to deliver decent jobs for ordinary Australians. </p>
<p>However the shift from manufacturing into the service economy has not been accompanied by any comparable expansion of good jobs for low and middle income earners. Their living standards have been propped up by welfare and the growth of two-income households, but where is the growth engine for more and better jobs after the boom?</p>
<p>From this perspective, debating budget success or failure primarily on the relative size of deficits seems material for Alice in Wonderland. If our first priority is the welfare of all Australians, then we need to shift our focus to jobs. Show us the strategy for more and better jobs. When we see that then we can truly judge budget success and failure.</p><img src="https://counter.theconversation.com/content/14079/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Smyth is Professor of Social Policy at the University of Melbourne, and General Manager of the Research and Policy Centre at the Brotherhood of St Laurence. This joint position involves leading research and the development of policy around partnership solutions to Australia's social problems. His work combines policy development and research at the Brotherhood with teaching and research at the university.</span></em></p>How will we know whether or not Treasurer Wayne Swan’s federal budget is a good one? The popular test used to be pretty simple: deliver jobs for all or face the axe. Even when the old Keynesian-style full-employment…Paul Smyth, Professor of Social Policy at the University of Melbourne, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.