Joe Hockey’s first budget marked some important fiscal reforms, yet the treasurer has certainly left himself open to a swathe of criticism from all sides of politics – including his own.
Although “crisis” is a strong word, the Abbott Government undoubtedly inherited a major budget problem, exacerbated by much of Labor’s debts falling due in the Coalition’s first term. Moreover, much of this spending is effectively locked in, limiting the scope for change in some major areas of policy.
Some are quick to deny that Australia has such a problem, pointing to other countries in the OECD to show how relatively stable our economic situation is, but this is a totally misguided approach. Comparing Australia to the OECD is selling ourselves short in a massive way and leading us down an incredibly dangerous path.
Firstly, the introduction of a $7.00 co-payment for previously bulk-billed patients in Budget 2014 is a step in the right direction. If parts of the Australian community do not value a visit to a health professional to be worth $7.00, they should probably reconsider their spending priorities. However, the extent to which private GP consultations are subsidised should also be re-examined.
The redirection of the majority of that revenue to a large medical research fund is bewildering. It reeks of political point scoring, though it’s difficult to see why anyone would value that more than assigning those funds towards other health services, such as hospitals and ambulances. It is a curious reallocation of resources and flies in the face of the government’s agenda to decrease spending.
The indexation of the fuel excise to inflation is again politically unwise and will be felt by many, but somewhat justifiable considering it has generally been immune from increases. Together with the sales of state assets, the government will use this increased revenue to boost infrastructure, largely through public-private partnerships and in coordination with the states. How effectively this will occur, as well as its impact on productivity, is yet to be seen.
Increasing the pension age and looking at changes to eligibility had to happen eventually. When the retirement age was set at 60, life expectancy was 65, giving Australians five years of caravanning around the coast before they were expected to check in at the Horizontal Hilton. This has obviously changed, and with an ageing population the growing government expenditure in this area has been a major cause for concern.
Reducing the public service to the tune of 16,500 and slashing the foreign aid budget by $7.9 billion are also sensible moves and unlikely to be felt by many. As John Roskam, executive director of the Institute of Public Affairs, pointed out on last Monday’s hijacked Q and A, the federal department of health employs 4,500 public servants, and the federal department of education 3,500, despite the fact that health and education are both policy areas belonging to the states. The growing size of the Commonwealth public service has been in need of some redress, which this budget works towards.
Many point to the real pain lying in changes in welfare for low socio-economic groups and youth, but these statements only serve to prove the existence of the mentality of entitlement amongst large sections of the community. Again, the changes are not wholesale, and are designed to get people working rather than simply slashing their handouts for austerity’s sake. Although affecting Liberal heartland, cutting middle-class welfare in the form of Family Tax Benefits, too, is another step in the right direction.
Perhaps the most promising moves in Budget 2014 are the claims to cut corporate welfare while reducing company tax by 1.5 percentage points. This could be further decreased, and the Coalition will undoubtedly continue with some forms of industry assistance, but these are nonetheless a positive indication of the government’s agenda.
New taxes in other areas, particularly the absurd “debt tax”, are poor decisions and redolent of Julia Gillard’s broken promise on the painful carbon tax. Not only is the debt tax a broken promise, it’s an unwise one. All governments invariably break promises made in the monumental pork-barrelling that occurs in the lead up to elections, but they should at least be productive decisions. Further increasing taxes on high-income earners for a three-year period is just another tax grab with no positive policy outcomes.
Ultimately, despite being labelled by some as the most drastic since the Howard Government’s first budget in 1996, Budget 2014 was very slippery. There are certainly some important and positive moves, but these have been paired with some downright silly and contradictory decisions.
If the Abbott Government really wants to fix the debt problem, it must do so by further cutting unnecessary spending, not by raising punitive taxes.