Graham Matthews
The Coalition's 11th budget delivered on May 9, which gave tax cuts to all, was an attempt to distract us from the Australian Wheat Board scandal, Work Choices, and rising fuel and mortgage costs. But of the $36.7 billion to be doled out over four years, the largest tax cut will go to those on the largest incomes. For low-wage workers and families, there were only a few crumbs.
The budget also made further big spending increases on the military and spies, but public infrastructure was virtually ignored. There was some new expenditure on mental health, but funding for education fell as a proportion of government spending and little was done to improve access to child care. New superannuation arrangements mean that the very wealthy will benefit doubly, while most workers will be forced to work until they are at least 60 years old.
Tax cuts for the rich
Workers on very low incomes received some tax relief (the threshold for the marginal 30% tax rate was raised from $21,600 to $25,000 and the low-income earners' rebate was increased from $235 to $600), but the main winners were high-income earners. While workers on $25,000 per year will receive $19.44 per week in tax relief, someone on $150,000 will receive a tax-break of almost $120 per week, and it goes up from there.
The increases in family tax benefits are also rather limited. The income threshold of the Family Tax Benefit part A (the family income at which point the benefit is reduced) was increased from $37,500 to $40,000, benefitting by $40 per week families earning a combined income within this narrow range, but useless for families on lower incomes already receiving the full benefit.
For those families earning a little more than the ceiling, the benefits will be withdrawn at a rate of 20 cents for each additional dollar earned. This means that the income of a parent returning to work (often the woman) is effectively hit with an extra 20% tax. Given the prohibitive cost of child care and the rising cost of petrol, women wanting to return to the work force are not helped by the Family Tax Benefit change.
Treasurer Peter Costello's tax cuts do little to improve the situation of most wage earners. The May 11 Sydney Morning Herald compared the effect of increased fuel prices and the May interest rate rise (and the likelihood of another in September) against the budget tax cuts and found that those earning less than $90,000 per year are worse off. Those struggling on $20,000 per year or less could be more than $35 per week worse off.
More military
The biggest increase in actual government spending was on "defence". With troops deployed in Iraq, Afghanistan and the Solomon Islands, and poised to interfere in East Timor and Fiji, the military received a $1.4 billion funding increase, taking it to $19.6 billion for the 2006-07 year.
The increase will pay for almost 1500 more military personnel and for keeping more troops on active readiness. A further $2 billion will be used to purchase four C-17 transport aircraft, allowing the Australian military to more rapidly move its hardware into neighbouring countries.
The defence budget has increased almost $10 billion over the 10 years of the Howard government and now outstrips federal funding for education. This trend is set to worsen with a 3% increase in defence funding promised in successive budgets.
Spending on Australia's spy agencies and "border protection" was also increased, by $1.5 billion over five years. This brings the total funding increase for "security" to $8.1 billion over the last five years.
In contrast, funding for education was increased by just over $1 billion — only half the military spending increase in percentage terms and falling behind inflation.
At the same time, in further moves towards privatised tertiary education, the loan available to full-fee-paying students was increased from $80,000 to $100,000 and a cool $4.5 million was allocated towards building a new medical school at the private Bond University.
Costello claims to have helped working women by removing restrictions on government funding for family day care and after-school care. He claims this will allow "the market" to provide a further 25,000 childcare places by 2009. But Adele Horin pointed out in the May 10 Sydney Morning Herald: "Unfortunately 30,000 vacancies already exist in family day care. The program's organisers cannot find enough women who will mind children at home for a relatively small sum and working women are voting with their feet, eschewing family day care for long day care centres."
The Liberals' plan to fund more childcare places bolsters the corporatisation of the childcare sector and does nothing to address the need for more non-profit, low-cost centres.
"It seems the federal budget was not an attempt at finding solutions for child care but removing responsibility from the government for finding solutions", Robyn Munro-Miller, president of the National Association of the Outside Hours Care, told the Australian Financial Review on May 11.
Work until you drop
The budget abolishes the 15% tax on superannuation lump sums and the Reasonable Benefit limit — which currently taxes all lump-sum payments over $648,000 at 38%. This will benefit most those on larger incomes, with larger lump sums. They will also be able to salary-sacrifice up to $50,000 per year to a superannuation fund, thereby paying 15% tax on that income, rather than the marginal rate (possibly 45%). For the rest of us, whose superannuation consists only of the 9% compulsory contribution, the changes will have limited benefit.
The budget also makes any pension paid to a person under a superannuation scheme tax-free, but only for those 60 years or older. The government's message is: work until you drop, or pay more tax.
In other areas of social policy, funding to Australia's international aid program increased by only $300 million, from $2.64 to $2.94 billion, all of it accounted for by the relief of Iraqi debt to the tune of $334 million.
"It's a shame our struggling neighbours will have to wait another year", Tim O'Connor from AID/WATCH told 91×ÔÅÄÂÛ̳ Weekly. "Australia remains towards the bottom of the international donor table, allocating just 0.30% of our GNI [gross national income] on aid in 2006-07. The international average amongst OECD nations is now 0.47% of GNI."
'Opposition' response
The ALP response to Costello's budget was in line with its current efforts to make itself a "small target". While criticising the composition of the tax cuts for favouring the rich, Labor leader Kim Beazley offered no alternative. While criticising spending on the Iraq war, Beazley failed to promise defence cuts.
Beazley did present a limited plan to pay some TAFE fees for apprentices and those doing childcare courses (but not to fund the abolition of fees altogether), and to make broadband internet available to all homes. Beazley also promised funding to build 260 new childcare centres. In a nod to the One Nation constituency and the nationalist 91×ÔÅÄÂÛ̳ of the labour movement, Beazley also promised to ban foreign apprentices.
For a far more serious opposition response to the budget, presented to federal parliament by Greens Senator Christine Milne on May 11, visit .
The Howard government's 11th budget tax cuts ensure that the windfall from the booming economy is returned to its wealthy constituency, while its increased "security" spending will help maintain a feeling of insecurity among the majority of Australia's people. However, among low- and middle-income earners threatened with rapidly rising living costs, and declining wages and job security through Work Choices, this budget is unlikely to stem rising discontent.
From 91×ÔÅÄÂÛ̳ Weekly, May 24, 2006.
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