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SA: the politics of the axe « Previous | |Next »
September 15, 2010

The politics of austerity has come to South Australia as we have feared due to the bit of softening up of public opinion for massive budget cuts that has been going on. This austerity is in the context of the chill of global recession, the pace of recovery slowing in developed western nations, and still dysfunctional credit markets.

The high-level leak (of a 300 page document) from within Treasury reveals the full extent of the Sustainable Budget Commission's recommended $1.5 billion cuts to all government agencies ahead of Thursday's horror state budget whilst superannuation contributions for new MPs will rise from 9 per cent to 15.4 per cent of their annual salary.

RowsonM budgetcuts.jpg Martin Rowson

So we have learned that the document is classic wielding of the axe to thousands of program closures and spending cuts. It recommended closing schools and hospitals (country hospitals are earmarked for closure or a downgrade) including the Repatriation Hospital at Daw Park in Adelaide’s inner south and selling off the land, raising mining royalties, close police stations, cut the size of the government's ministry, thousands of jobs lost across the public sector and even to scrap taxpayer-subsidised cars for MPs.

The Treasurer Kevin Foley will tell the public that the (shaky) Rann Government, whose roots are those of social justice, really has their interests at heart. They have rejected "very ugly and seriously unpalatable" spending cuts recommended by the Sustainable Budget Commission due to the losses in government revenue from the ongoing effects of the global financial crisis. There was no alternative etc.

The spin is that the Rann Government, which dreams of a big mining future, will only make $1 billion of cuts across state government agencies and is only cutting hundreds of jobs; that the hard fiscal restraint is a road map to future surpluses so as save the state's AAA credit rating; and there will be no target cuts to major capital works. As they say in the publicity business "slash and burn" is a hard sell.

Those servants who lose their jobs -- estimates range from between 2000 and 5000 -- should take heart that Foley is getting the Rann Government's budget back to surplus as quickly as he can, that SA has a healthy economy, and that the deep cuts to state departments' administrative areas and not front line services. Any doubts they have should vanish when informed that Foley's politics of austerity is responsible economic management for South Australia. Foley is the right man for the job, the deficit hawks enthuse.

Little will be said about the "human cost" that will result from draconian cuts in public sector spending. Unemployment leads to a loss of earnings that is both substantial and long-lasting, especially among younger people. The forced austerity hits them especially hard, as it is more difficult for them to enter the labour market. If you lose your job, you are more likely to suffer from health problems, or even die younger. If you lose your job, your children are likely to do worse in school. There will be more urban decay, few green jobs, the run down of public education and greater illegal economic activity.

What this indicates is a clear rejection of demand-stimulating macroeconomic policies and that neoliberalism is still the only language used by South Australian politicians to confront the crisis and to face the social conflicts that result. The language of responsible economic management is management of austerity measures and repression.The austerity politics risked a deflationary spiral and a deeper jobs crisis. So democracy has become subsumed under, if not quite yet identical with, capital and the state and democracy no longer present an outside to capital that provides a way to counter the market's invasion of all aspects of everyday life.

Treasury's underlying assumption is that South Australia could compensate for the fiscal belt-tightening by selling more goods and services overseas. Treasury assumes belief is that hacking away at public spending will create space for the private sector to flourish. South Australia will cease to be so dependent on consumer spending and the state for its growth; instead, resources will shift to manufacturing and exports, thus reducing both household debt and the size of the budget deficit.

However, there is no argument by the Rann Government as to how this "rebalancing" will happen or provide a new foundation for innovation and growth. South Australia does not have an economic development based on a technology platform; nor does it have many expats returning from Silicon Valley returning home to lay a new foundation for innovation and growth structured around a culture where the start-up ethos is pervasive, risk-taking is expected, and failure is accepted.

The Sustainable Budget Commission had recommended 310 pages of cuts - including closing hospitals, schools and police stations, along with across-the-board cuts in ministerial offices and reducing the number of Cabinet ministers by three. The political reality was that the Rann Government would shy away from many of the tough proposals - especially closing hospitals, schools and police stations.

MacmullinSABudget .jpg

Foley will cut $1.5 billion out of public spending over four years. There are huge cuts in public sector workforce numbers, cuts to their long-held entitlements and a raft of increased fees and charges - along with the removal of a range of subsidies such as those for petrol products in the rural areas.

The public sector bears the brunt and is the centre piece of the budget. The target is 3743 public service job losses, including 138 senior executives across all departments over three years. Public servants will be offered an initial separation package of 20 weeks' pay plus three weeks per year of service - up to 116 weeks' pay. This will reduce after six months of redeployment to 10 weeks' pay plus three weeks per year of service - up to 88 weeks' pay. If the targeted numbers do not accept voluntary redundancy within a year the Government will resort to sackings.

Public sector long service leave rates will also be reduced from 15 days a year to nine days a year for each year of service beyond 15 years to save the budget $90.7 million and public servants will lose permanent tenure. Foley says:

We are ensuring that the pain of cuts, the pain of restraint is internalised as much as possible.The public sector will be more responsive, more efficient, more focused, better quality...if the conditions that apply in the private sector are consistent with what we have in the public sector.The changes were needed to modernise public sector, which was still governed by regulations suited to a "bygone era".

On the other hand, it will maintain infrastructure investment commitments--- Adelaide Oval redevelopment, railway upgrades, hospital improvements and the major South Road expressway project. Nothing to foster the information economy by doubling of the current internet 100-hot spot CityLan scheme.

Water bills will increase by 21% to pay for the desalinisation plant. More revenue raising by traffic fines. Not a word about safety. Extra revenue measures are $479m.

No doubt the deficit hawks will go on about public sector debt, fiscal discipline, the crowding out of private sector borrowing and investment, and reducing pressure on on long-term interest rates. More needs to be done in terms of austerity, as South Australia has become addicted to Canberra dollars.

| Posted by Gary Sauer-Thompson at 8:26 AM | | Comments (2)


we are still waiting for the mining boom to happen at Olympic Dam. So it is increased agricultural export due to the drought breaking.

There is economic growth in SA and rising government revenue so why the job cuts? Why the blowtorch to the public sector?

Is it because the government has accepted the neo-liberal line that the private sector has paid for the excessive public sector growth, and red tape, wasteful spending and layers of bureaucracy have all had an impact on the business environment in SA?