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Roxon's health budget « Previous | |Next »
May 13, 2008

I didn't see Wayne Swan's budget speech. I was in a health budget lockup in Woden in Canberra and I only saw the beginning of Swan's flat and nervous speech at the end of the tedious briefing. I decided that doing a bit of networking was more important than listening to Swan's baptism as Treasurer helping us deal with uncertain economic times. I'd heard too much from the Rudd Government media management machine "behind the scenes" that produces all those leaks and spin. The budget speech was a non-event.

The health section of the budget suggested that the reform is going to be modest---cautious reform step by cautious reform step. Nothing to rock the boat--- no major redirection under a new government. The centrepiece of the health budget is the $10 billion dollars from the huge Budget surplus ($21 billion) being ploughed back into Australia's health infrastructure under a new fund. This fund, which builds on Costello's ideas, was forgotten by Jane Hailton, the Health Department Secretary, and only recalled at the last minute. Instead we got minutiae in the presentation from the various departmental secretaries that downplayed the cuts in spending in mental health especially, without any narrative of what the health budget was trying to do. I just cannot see the Department of Health and Ageing driving reform.

The Health and Hospital Fund is to be to be managed by the Future Fund. No mention was made of a COAG Reform Fund, which will also be set up to channel reform-related payments to the States.The establishment of the health and hospital funds,(along with infrastructure, education funds) gives a good sense of the nation-building intent over the course of several Parliamentary terms.

There was a push towards preventative care (alcohol, smoking and drugs) and cuts to programs without wielding the meataxe---there's a sense of the Razor Gang going line by line through the spending inherited from the Howard Government----and it meet all its election commitments in this Budget in terms of increased funding for hospitals and GP Superclinics. There was the updating of the Medicare surcharge levy:---raising the threshold ($100,0000 for individuals and $150 000 for families) for people who choose not to take out private health insurance. Is that an indication of reform intent re the public/private health mix.

The health budget indicates that Tanner and Swan have cut spending but not so savagely that the budget will not continue to grow slightly in real terms. The savage attack on spending promised by the Government over summer to fight out of control inflation was rhetoric. What has been done----a reduction in real spending growth to 1.1% from the 5%+ growth of Costello’s last Budget---- is probably enough to keep the Reserve Bank from increasing interest rates. The Finance Minister has found $2 billion more in savings than Swan and Rudd are spending.

Swan and Tanner reconcile the need for fiscal restraint to fight inflation while fulfilling the Government’s election promises and not crunching the economy so hard that it risks exacerbating the coming slowdown. So it is politically astute.

I saw Peter Dutton, the Opposition Finance spokesperson, on Lateline saying that this is a true Labor budget because there's high spending, there is high taxation. He gave every impression of not knowing what he was talking about as he tried to spin a line----the Rudd Government is socialist! The implication was "politics of envy"--- soaking the rich to give to the poor. The budget's big tax cuts-- copied from the Liberals during the election--- does not support that interpretation at all.

What Dutton didn't, or couldn't, say was that the tax cuts ($31billion) are clearly inflationary in an economy that is still at full stretch. Much of them will be spent. They are the centrepiece of the Budget, and in the last couple of months of Government decision making the Razor Gang been running trying to undo the effect of those tax cuts by cutting government spending. Chris Richardson from Access Economics says:

I fear that inflation will be worse than Treasury hopes. Remember, an absolute torrent of money is about to be dropped on Australia's economy. It's not just the commodity boom's continuing, it is accelerating, and this is the biggest set of risks we've had in this inflation challenge so far. The Budget helps, but whether it's helped enough, not clear.

He says that though all the headlines are about US recession, market meltdown, highest interest rates. The biggest thing happening to the Australian economy is the massive jump in coal and iron ore revenue.

There's a good position for the Coalition to argue from. Much better than Turnbull's "what inflation?" rhetoric that is at adds with the analyses of the Reserve Bank and Treasury; or is his subsequent defence of big centralized government with his repeated warnings against substantial spending cuts --wielding the machete and inflicting lots of pain ---at a time of a global economic downturn.


| Posted by Gary Sauer-Thompson at 9:31 PM | | Comments (5)
Comments

Comments

Most of Swan's speech had already been leaked so no surprises until the end, when we got the nation building stuff on infrastructure, health and education. And in that there wasn't a lot of detail. Not surprising, since it's all potential funding rather than committed to anything in particular.

Dutton wasn't the only one left looking like a goose. Turnbull evidently doesn't know what the hell he's doing either. You can't credibly tell people there's no inflation, so their message is stuffed from the start.

Lyn
Laura Tingle in the AFR puts it well---the Coalition stumbles and bumbles its way to finding a political attack on which the shadoww frontbench can agree.

Gary,
the significant move in health is the shift in the threshold at which the Medicare Levy cuts in. This shifts the balance between private and public health to the public as fewer people get penalised for not taking out private health insurance.

The effect of this reversal of Howard's push towards private provision is to increase the demand on public health resources in the future as a result, particularly the resources of the public hospital system.

However, Rudd and Roxon addressed this increase in demand in two ways:
1. they put more money into the public provision of health care
2. delivered on first tranches of reform---eg., the increase in aged care beds to free up hospital beds, the construction of GP clinics to take weight off hospital emergency departments, and the smaller reforms re preventative care.

This helps to provide the hospital system with the increased capacity to deal with the consequences of increased consumer demand.

This, then is the beginnings of the reshaping of how private health insurance works in practice. The hysterical reaction of the private health insurance industry to the changes in the Medicare Levy was expected, as this lobby group is one of the most protected in Canberra. It is heavily subsidised----the 30% Private health Insurance rebate; and Lifetime Health Cover premium penalties for those who delay taking out insurance until after age 30 and relies on government subsidy.

You rarely hear the hard headed free marketeers at the AFR call for the removal of this kind of protection for the health industry when they talk about reforming the economy to make it more competitive and efficient.

The funds have long feared that a change of government would mean an erosion of the extraordinary privileges they were granted by Howard and his health minister Tony Abbott. Are Roxon’s administrative correction to the threshold Medicare Levy the thin edge of the wedge?

Nan,
I think that 'shadow frontbench' is misleading - it gives an unjustifiable impression of unity which is clearly not there as Tingle said.

The politics of the thing was fascinating. The whole Labor side of the room was suitably serious and governmenty, which seems to be a Rudd trademark, vastly different from Hawke or Keating, and vastly different from the audiovisuals of the opposition. It's as if the adults are on one side of the room and the unruly kids are on the other.

I also get the sense, though I could be making this up, that the role of Treasurer is being downplayed compared with the Hawke/Keating, Howard/Costello configurations. It's only an impression, but it would give more scope for thinking about other things than we've seen in the past where the emphasis was on economic credentials. If the economy became just one thing among fairly equal others, what's left for the Liberals to bang on about?

Lyn
the budget is no longer a big deal as it once was. Under Rudd it is the underlying policy strands that link all the bits together and give a sense of the direction of governance that is important Possum says

Too often we all seem to expect reform to come in some big-bang document titled ‘Reforming Policy X” where we can all follow the flow chart. A sort of idiots guide to policy change where winners are easily determined and losers are identified in bright red circles.
Undoubtedly there will be some of those in the future - the not quite so root and branch tax review springs to mind, but there’s a whole lot more going on in this budget below the headlines and the PR management. We might all need to start thinking in more complex ways on how government initiatives interact with one another if we are to get to the bottom of the broader sweep of government policy direction - because Kevin Rudd and his government certainly are.

I agree completely.