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Costello's budget politics « Previous | |Next »
May 11, 2005

Costello's good news 10th budget, which was sold as being about the future, is primarily about a new round of tax cuts for 9 million Australians worth $21.7 billion over four years. That largess to the top end of the salary range results from a windfall arising from a resources boom and mining company profits. As the government has collected far more revenue from the minerals boom than it had anticipated, so it is giving some of it back.

How will the Reserve Bank judge that in terms of the inflationary presssure on interest rates? With a bit of belt-tightening?

Is not the assumption by the economists one of limitless economic expansion in a finite world, and the unleashing of boundless human desire upon a dwindling resource base?

The other face of the Costello budget is that of welfare reform:


As the leaks indicated it is sticks and carrots to cajole those going onto welfare in 2006 into casual unskilled work, with few measures tossed in to improve their job skills and ease them into a job. Are the jobs there in the regions?

Or will those on Newstart (unemployment benefit) after 2006 go out the front door of the Job Network agencies and round to the charities?

The scenario is a very simple one: the disabled and mentally ill trip on the rules and are automatically breached under a tighter compliance regime; they find they have no money coming into the bank account; and so they go around to the soup kitchens for food, and to the charities for help to pay the rent and electricity bill until they can get back on Newstart. Then they will be assessed, trained, offered pre-vocational assistance (for their bad backs and depression)and managed in a rudimentary way by the private sector employment agencies in the Job Network. To avoid losing the dole for 8 weeks with repeated breaches they could try and access a new training place to help them get back to work.

The lack of giving back here ($3.5billion) does make Costello and Howard look mean. They are basically cutting the welfare bill by moving the 700,000 on the disability support pension into work. But where will the 300,000 or who are over 55, with bad backs and unemployed for a year find work? Who will employ them? What are they being trained for? Hospitality, tourism, supermarkets? The problem here is less older workers being shirkers reluctant to supply their labour and more that employers are reluctant to employ those with a disability.

Tim Colebatch says that the government is not doing those on welfare a favour by ordering them "to start looking for jobs while doing nothing to help them tackle the shortfalls in basic skills, qualifications, attitude, whatever stopped them having a job in the first place." He says that true welfare reform is expensive as any savings from pushing some new applicants for disability or sole-parent benefits onto the cheaper unemployment benefit are far outweighed by the cost of support measures with which the Government plans to help them back into work, rising to $250 million a year by 2008-09.
He adds:

Australia's welfare safety net has not been acting as a springboard because we have not invested the money to make it work that way. In its small way, this welfare reform is a breakthrough, and hopefully a step to a new future where we will train our own workers rather than leaving 15 per cent of prime working-age men without a job and pinching skilled workers from poor countries.

Costello and Howard's basic politics is about addressing the concerns of the middle class--Menzies' forgotten people. But they lacked the courage to resolutely address the long-term structural reforms needed to deal with a slowing world economy, burgeoning current account deficits, capacity constraints and slowing economic growth.

What then is Costello doing to make the Australian economy more productive, more resilent to future overseas shocks, better able to deal with the problems of an aging population and more ecologically sustainable?

| Posted by Gary Sauer-Thompson at 8:58 AM | | Comments (3)


I think the answer is... precious bloody little!

Gary, You wrote;

What then is Costello doing to make the Australian economy more productive, more resilent to future overseas shocks ...

How can a government make the Australian economy more productive? Surely that has to do with business investment in productivity enhancing technologies. We are in an era of cheap credit already. If businesses having been investing, it cant because of the access to cheap credit and capital.

What policies do you think would help there? Same with making the economy more resilient to ovreseas shocks, what would you like to see there?

I'm due to catch a plane back to Adelaide shortly so my comments are brief.

I guess I'd like to see us move beyond the political spin of the commentariat that the task of government is limited to progressively providing for healthy, competitive environments for economic growth and prosperity.This means:

*reducing the tax rate for high income earners
*reducing the corporate tax rate to ease the company tax burden
*Australian economy is showing signs of fatigue and imbalance
*implementing significant reform to lock in prosperity in workplace relations, tax and business regulation reform and infrastructure.

This emphasis on a competitive market and a light regulatory framework is advocated by Hugh Morgan, President of the Business Council of Australia, that the government has failed to lay out a reinvigorated and comphrensive program of economic reform to take advantage of its control of the Senate.

This kind of political spin does not address the need to shift to an information economy; a highly educated economy; or to an ecologically sustainable economy.