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Issue #1501      18 May 2011

Federal Budget 2011-12

Lies and deception

The main theme, or more correctly spin, of Treasurer Wayne Swan’s budget speech is “to put opportunities that flow from a strong economy within reach of more Australians.” The “strong economy” referred to is the mining sector. Australia’s gross domestic product (GDP) – an overall measure of the growth of the economy – might look good, but it hides the reality that most other key areas of the economy including manufacturing, tourism and retail are recessed. At a time when the rest of Australia requires an expansionary budget, the government the government responds with harsh austerity measures, not seen since the early years of the Howard government.

Treasurer Wayne Swan delivers his Budget speech.

There is little cheer for the millions of Australians struggling to put food on the table, pay medical bills, or keep a roof over their heads. It is a contractionary and cruel budget in which the nation’s fortunes are left to the whims of the “markets” – the private sector.

The budget rides perilously on the back of China’s development at the same time as Australia plays a central role in the US’s aggressive build-up and military exercises in the Asian region which are aimed at China (see “Talking business, beating war drums”, The Guardian, 04/05/2011). The government ignores the fact that China is moving to decrease its reliance on Australia. It also fails to recognise that the Chinese economy, now heavily integrated into the global economy, could have setbacks.


Swan boasts, “We are on track for surplus in 2012-13, on time, as promised ... .” The hasty restoration of a budget surplus provides the excuse and means of taking the government’s next steps in privatising public services and winding back the so-called welfare state. Its timing, on the eve of the next election, is political with the aim of countering Coalition claims that Labor are poor economic managers.

The government and capitalist commentators in the mass media argue that government debt “crowds out” the private sector.

But it is the public sector that is being “crowded out” by the massive budget cuts and the failure to increase spending on public services and social welfare. So too every cut in corporate taxes, every extra government subsidy to the private sector means less money for vital public services. Privatisation, whether by direct sell-off (eg Commonwealth Bank, Qantas, Telstra) or by stealth such as the “education revolution” or Australia Post’s contracting out and sell-off of post offices is also “crowding out” the public sector. The agenda is privatisation by stealth.

It is time the private sector was crowded out! Look at the mess it has made – the most recent global financial and economic crises, the housing crisis, high unemployment, climate change, etc.

There is nothing wrong with a budget surplus in itself. The issue is what use it is put to and whether the debt is manageable. Expenditure on public health, education, transport and welfare is highly desirable and affordable – failure to do so is not based on economics but on the neo-liberal (economic rationalist) ideology of privatisation and deregulation.

The Treasurer boasts “our public debt is a tiny fraction of that carried by comparable economies, our fiscal position the envy of the developed world. An investment boom is gathering pace ... .” It says something about capitalism that in times of such a “strong economy” the government responds with harsh austerity measures that hit the least well off. We are in a position to carry budget deficits.

Wealth not being shared

The budget makes no provisions for the rest of Australia to share the fortunes of the big mining corporations. Yet these resources, as the government admits, belong to the people of Australia. They are being plundered and the profits mostly sent offshore. The government has not backed off its plans to effectively abolish royalty payments which are based on volumes extracted. The now watered down and renamed mining super profits tax is a joke. It is based on the rate of profit (not volume mined) which is easily cooked. It does not provide for the fruits of “the strong economy” to be shared with the rest of Australia.

“Mining investment will rise to around eight times the level preceding the boom to $76 billion in 2011-12, underpinned by the highest sustained terms of trade in 140 years.” The investment will be by the heavily (taxpayer) subsidised private sector. There is no rational planning for the extraction of these non-renewable resources.

The government should be opening any new mines. They should be owned by the people and the profits flow back into the public purse to increase social spending, infrastructure, etc. Then the government could honestly claim the wealth is being shared with the people of Australia.

The unemployment con

Government figures claiming unemployment is just under five percent are a lie. They are based on a system that calls someone who had one hour’s paid work in the previous couple of weeks employed! The true unemployment rate when underemployment is taken into consideration is closer to 10 percent.

It is scandalous that successive governments have failed to take the necessary measures to meet skill shortages. University and TAFE fees, privatisation, lack of affordable childcare, inadequate income support for students and too few training places have all contributed to the present skilled labour shortage. The budget fails to address these causes. Instead, skills shortages are used as an excuse to bring in thousands of 457 visa workers with the aim of providing the mining and other corporations with cheap, compliant (cop it sweet or be deported), non-union labour. Quite rightly the trade unions have raised concerns over these plans.

Close to $2 billion is allocated for skills training but more than $1.6 billion of this will be redirected from another scheme. This is the pattern of many other areas of the budget. Many of the cuts are in the next two years, whereas much of the “new” spending on programs kicks in over the next four to five years.

Sleight of hand

In the health area, Swan allocates funding of $717 million over five years that will “expand access to diagnostic imaging services and make new medicines and immunisations more affordable.” He doesn’t mention the cuts in the pharmaceutical benefits scheme (PBS) and virtual freeze on the addition of new life-saving medications (see Guardian Editorial 20/4/2011 for details).

The allocation of $1.5 billion for new and long overdue initiatives in mental health over the next five years is very welcome. But just over one third of the funding is being taken from another important, primary area of mental health Medicare refunds for consultations with psychologists under the Better Access scheme.

The Greens succeeded in gaining a small step towards increasing public dental services. The government has backed off earlier commitments for its Denticare scheme and is still persisting with its attempts to abolish a Howard scheme which gives people with chronic illness access to Medicare refunds for dental services.

The cruellest budget measures are in the welfare sector where the program of income management, first trialled on Indigenous Australians, will be further extended into non-Indigenous areas. Welfare recipients will be hit by even harsher participation requirements, in particular disability support pensioners and unemployed youth.

Public education needs more resources and teachers. Instead, the government is boosting spending on school chaplains by $222 million in 1,000 more schools and allocating $425 million for bonuses for “best teachers”. The teacher bonus system is based on competition between teachers and undermines the collaborative and cooperative way in which teachers work. Neither parents nor teachers support it.

This additional spending is being more than funded by cuts to other programs such as the building of trade training centres in high schools and the Digital Education Revolution project.

In his 2010-11 budget speech, Swan emphasised investment in renewable energy as one of the key budgetary aims. Since then the government has quietly pulled back on its few limited measures to address climate change, leaving it all to the private sector through an emissions trading system. The 2011-12 budget continues this process. His budget speech makes no mention of the environment, of climate change, let alone any serious measures to address these issues.

The cutbacks in environmental programs will be used to assist the private sector in exploring for sites to store carbon underground. The coal mining corporations win again – at the expense of the planet. The transport initiatives focus on coal not public transport. There is a 30 percent cut to heritage spending.

Indigenous Australians failed to gain even a token mention in the budget speech.

Military gets all it can handle

Defence allocations have always been a sacred cow. Over recent budgets there have been massive injections of funding to expand Australia’s role as US deputy sheriff and further integrate Australia in the US military. The headlines for the 2011-12 budget suggest that even the military are copping cuts of $2.7 billion over four years. Not quite true. It is the previously forecast increases that have been reduced over those years. They have been deferred, in part because the military are in such a mess they cannot spend the money at the rate the government is throwing it at them. They are embarrassingly returning $1.7 billion of unspent funds from last year!

Spending on military operations in Afghanistan, East Timor and the Solomon Islands will increase by $1.1 billion next financial year – an increase of more than 100 percent.

Foreign aid hoax

A quick glance at the budget figures suggests that foreign aid will rise by almost half a billion dollars next financial year. A closer examination reveals that much of this increase will be used by the Australian Federal Police, offshore immigration processing and in assisting Indonesia to prevent “people smuggling”.

While the government is getting even tougher and crueller in its treatment of asylum seekers who arrive by boat, ASIO will save money by cutting back on security checks of visa applicants who arrive by plane!

As far as rural and regional Australia are concerned, independents Tony Windsor and Rob Oakeshott achieved more than the National Party would have got out of a Coalition government. This is in accordance with their agreement to support Labor. It is one of the few areas receiving significant extra funding. That is not to say it in any way meets the needs of rural and regional areas for jobs, education, health services or infrastructure. It is a start in the right direction.

Big business winners

The budget is really all about the private sector. It is littered with tax concessions for the corporate sector and of course the next round of corporate tax cuts will go ahead.

The welfare and other cuts are only a small part of the story; the budget fails even more for what it does not do to address the pressing needs of the overall economy and Australian people.

Where is the money for equal pay in the community sector? Where is the extra assistance for full-time carers, for those with severe disabilities? Where are the programs for public transport, for the research and development of renewal energy? Where is the funding for public hospitals, for public housing? The answer to these questions is there isn’t.

Treasurer Wayne Swan told the National Press Club in Canberra on May 14, 2010: “The [2010-11] Budget assumes the biggest transformation of the role and responsibilities of the federal government, in the pattern of our federation, for well over sixty years.” He was right.

That budget built on the process of destroying the so-called “welfare state” and a radical overhaul of the role of government commenced by previous Howard, Keating and Hawke governments.

It involves a gradual shift from the state taking responsibility for the collective well-being of society to one of individual self-provision and reliance on dog-eat-dog market forces. There is greater emphasis on the involvement of the private sector and privatisation. Universal provision is being replaced by means testing. The 2011-12 budget continues that process.

The budget is based on lies and deception: the biggest lie is that it will “put opportunities that flow from a strong economy within reach of more Australians”.

See Federal Budget 2011-12 – When giving is taking away and coming issues of The Guardian for further budget coverage and an alternative, people’s budget.  

Next article – Editorial – Labor’s core values

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