Rather than write my views about it in detail here, I’ll just reproduce a speech I made in the Senate today during a debate (of sorts) about the Budget. I won’t add more to it now, beyond saying that I think that a lot of the rhetoric about the Budget’s impact on wider economic factors like inflation and interest rates is mostly overblown. I was a bit surprised/disappointed that the Budget was so cautious in the area of spending cuts and tax, and I think more could have been invested in the environment, housing, Indigenous issues and overseas aid.
The speech was given in the context of Senate debate on the Budget which almost totally about exchanging political rhetoric, in this around whether the Budget was or wasn’t a ‘high tax, high spend’ Budget, a mantra which I don’t think is very meaningful in this context, as my speech noted.
Reading it again now, it’s not as clear as I’d like in parts and there are a few more issues I’d like to have raised. I gave the speech mostly off the cuff to make some points during one of the rhetoric flinging debates which sometimes happen on Thursday afternoons in the Senate. Still, it’s what’s in the Hansard, so I may as well show it here in its unedited form.
Senator BARTLETT (5.14 pm)—Without in any way indicating disrespect to all the previous speakers, it is debates like this that make me feel somewhat happier that I will be leaving this place in a few weeks time.
Senator Hogg—We didn’t ask for it, they gave us a motion.
Senator BARTLETT—I appreciate that, Senator Hogg. I know why these sorts of debates happen, and that is why I do not mean any disrespect. But, in a way, it is unfortunate. To remind the Senate, and those that are listening: what we are debating is a motion put forward by the opposition, alleging that the first budget of the Rudd-Gillard government is a high-taxing, high-spending old-fashioned Labor budget that is not inflation-fighting.
It is obviously a political rhetorical exchange that people are having, and that is all fine; these things happen. Nonetheless, I think it is not a terribly worthwhile use of anybody’s time, quite frankly. Budgets do not exist in isolation from wider economic policy and from wider ongoing issues and a range of other policy measures. Whilst it is certainly reasonable to criticise the overall impact of a budget and the specific measures within it, it is not reasonable to assess a budget without looking at some of the wider issues and indeed some of the still unanswered questions. For me the big issue of this budget is not only what is not in it but also what is still to happen and what is still not answered by it – although one budget on its own cannot answer all of those things. To simply have a process in this chamber whereby all we are having is each side trying to discredit the other, through fairly shallow talking points that create a nice piece of wrapping paper around their own side’s alleged economic record, does not really serve much purpose in terms of enlightening anybody who is actually interested in the substantial and substantive issues that are involved here.
Even statements like ‘high taxing’ and ‘high spending’ really depend on how you measure things. There is a valid case to say that an overall growth in spending has happened and there is no doubt about that. It is also valid to say that the rate of growth in spending has declined. It is also valid to say that the overall amount of spending as a proportion of GDP has not increased. If you have a growing economy and it is growing faster than the amount of government spending, then, even though your government spending is increasing, it is not increasing by as much as the overall economy so you could allege that the spending is going down. You can end up having economic jargon and different frameworks being used to try to assert competing positions. My view is that blanket assertions, such as whether something is high taxing or whether something is high spending or the opposite, are not particularly helpful in this context. To me, and the Democrats more broadly, the issue is, frankly, what you are spending the money on, where your taxation is being derived from and how your tax system as a whole is working.
Personally, inasmuch as you can take the budget in isolation from everything else, I would give it a rough ‘pass’ and perhaps a six out of 10. It was more cautious than I expected, but that is, in another sense, perhaps not that surprising given what I suspect will be the overall tone that the new government will try to maintain. But I would also say I am not sure if a bare ‘pass’ or a marginally okay ‘pass’ is really good enough given some of the serious immediate challenges that we have and face. To name a few that are huge challenges, ones that are very urgent and impacting now on people in very serious ways, there is firstly the urgency of the housing affordability crisis. There are a few measures in the budget, none of which are new as they had already been announced, that go a little bit of the way to addressing some of the issues involved but they really do not go to the heart of them at all. In the whole area of public housing, particularly given the years of criticism we heard from Labor—very valid criticism – of the coalition government’s serious neglect in the area of public housing, we have seen nothing, not a cent, from the new Labor government to reverse that serious decline. As this is at a time of probably the historically worst ever crisis in housing affordability and availability, I think this is a serious omission even in the context where there has been a clear attempt to try to constrain spending at least to some extent.
There is also the crisis, one which has been widely acknowledged by all sides, in respect of Indigenous Australians: the huge and disgraceful ongoing life expectancy gap between Indigenous and non-Indigenous Australians. There are many other areas of inequality whether they be as to housing, education, other areas of health, social engagement or life opportunities in general. As I raised in question time yesterday with a question to the Leader of the Government in the Senate, I do not think there is anywhere near enough extra new investment in the area of Indigenous Australia given the clear need that all sides now acknowledge is there. In addition to that, there is the looming major crisis with regard to climate change. Whilst there are some measures as to that in the budget, I do not believe they are anywhere near enough, in both scale and content, to what is needed.
That brings us to one of the other big question marks of this budget. It is one of those things that just sit to one side as a huge unknown even in the context of what we are allegedly talking about here today, which is whether this is actually a big spending budget. I refer to these new funds that have been set up—in a move building on the mechanism that was originally used by the previous government—on top of the Future Fund. We have now got funds being set up—and the funds in them being set aside—for infrastructure, education and health. There is a valid debate to be had about whether or not that is a good way of doing things. I think there are certainly issues with regard to accountability, including accountability to this parliament, as to the budgetary process when you get taken off budget for a while huge chunks of money that will be spent down the track and that cannot be scrutinised in a more formal sense by the parliament. The label of ‘slush fund’ is not completely inaccurate with regard to that, but it is probably to some extent a bit unfairly pejorative. The issue is not that the money is there. The issue is what it is spent on and whether the mechanisms that are used in making the decisions on that spending are, firstly, transparent and, secondly, credible and reasonable. It may well be that significant amounts of the earnings from those funds—or even of the capital of those funds, if that is what is spent down the track—are spent on dealing with some of the problems that I have mentioned. I do not know how tightly the parameters will be around, for example, the infrastructure fund and whether money could be put into areas like public housing or other types of affordable housing as part of infrastructure in areas of extreme need at the moment in, for example, regional Australia, particularly where it is linked to major capacity constraints on the resources industry.
Similarly, it may well be that significant parts of the health fund or the education fund may be directed towards the serious and, if you are going to rank needs, greater needs for Indigenous Australians that I referred to earlier. It is possible that the framework is being put in place for those great needs to be addressed, but we really do not know. That is why I think it is premature to make blanket condemnations or, frankly, blanket praising of this budget. If you want to talk about it in terms of its macroeconomic impact and whether the so-called high-taxing, high-spending budget is a plus or minus for inflation, from my knowledge of these issues there is some merit in saying that this budget does not match the prebudget rhetoric about ‘slaying the inflation dragon’ and ‘fighting a war on inflation’. I think it is fair to say that. It is fair to say that it is not irresponsible with regard to further fuelling the risk of inflation and it is fair to criticise the final few budgets of the previous government for doing just that, but the prebudget rhetoric about the ‘war on inflation’ is not matched by this budget. The budget is far more cautious than what is suggested by that sort of rhetoric.
Similarly, it is fair to say that the prebudget rhetoric about ‘taking the meataxe to government spending’ and the Robin Hood rhetoric about ‘slugging the rich and giving to the poor’ has, again, not been matched by what is in the budget. This is a matter of whether or not the spin matches the substance—but then we are just debating whether or not the spin is right, which, frankly, does not help anybody. What we should be debating is whether what is in the budget is good or bad, what else needs to be done and what is best for the Australian community, the Australian economy, the Australian environment and groups within our society, particularly those most in need. So, whilst there are a few headline measures that clearly do target Australians who are better off, they are not on a scale that could be equated to Robin Hood. I do not know what a micro-version of Robin Hood would be, but these are very far below things that would be seen as Robin Hood measures. There are one or two that I am not opposed to. In fact, the change in the threshold for taxing people who haven’t out private health insurance, in particular, is a very positive move. Ironically, that is actually one measure that the opposition opposes, even though, if they are criticising the budget for high taxing, it actually gives some tax relief. Yet the coalition says they oppose it. This shows the problem with making single swinging blanket assertions about entire budgets. You quickly end up with inconsistencies when you try and match those assertions with the range of different and individual measures contained within a budget.
One of the areas flowing on from the failure of the budget and the federal government to date in meeting their prebudget rhetoric about bringing the meataxe to government spending is that there is clearly more to be done. Here is another question mark. A significant review of the tax system is flagged. It is not a root and branch review; there are areas that are excluded. It is probably politically very wise to exclude the GST. People can make decisions about the GST that can be quite damaging for their particular party from time to time, so I can see why the government might want to leave the GST right out of it. Purely from a policy perspective, I think it makes much better sense to include the GST in the overall review of the tax system. It has been in place for some time now, and it would be a good time to examine it. But even without that, there are significant aspects of the tax system that would benefit from a more comprehensive review. It may well be that the tax review process can move things further forward in trimming some of the unnecessary, inefficient, non-progressive components that are in place in our tax system.
When we talk about taking a meataxe to government expenditure, that can include—indeed it should include and has included in its own small way in this budget—some of those changes that deal with tax expenditures. Some of those still very much need to be wound back, far beyond what has been done in this budget. Some things were floated, have not been done and still, very justifiably, can be done—means testing the first home owners grant, for example. Dealing with the preferential fringe benefits tax treatment for company cars is certainly one that is not only justified but very much needed. There are a number of other areas, including the broader issues of the existing exemptions and discounts on capital gains tax, the taxation treatment of trusts vis-a-vis companies, the entire treatment of negative gearing. If those sorts of things are examined in a comprehensive way in the tax review, and if its findings are taken on board by the government, some of the unfinished business from its first budget could actually be done down the track in the second and third budgets.
I should point to the contrast to the previous government, who announced an examination of the issues with regard to first home owners—an inquiry by the productivity commission. When that was put on the desk of the former Treasurer Mr Costello, he rejected every recommendation—which related to tax and examining issues to do with negative gearing and capital gains tax, I might say—that dealt with the federal level. That failure to act not only meant a refusal to examine some of the federal drivers of the housing affordability crisis that are now much worse, but it also meant distortions in the tax system which are not particularly helpful or equitable were left unaddressed as well. Not only have they become further embedded but they have become larger in their distorting impact. I would not say it is meaningless to use labels like ‘high taxing’, but it is not particularly useful, unless you are going way out of the ballpark.
If you just want to look at blanket assertions about that, there is no doubt that the previous government was in a gross sense – in the economic sense of the word — the highest taxing government in Australia’s history. Whether that is a good or a bad thing, in my view, really depends both on where those taxes were derived from, whether they were derived in a fair and efficient way and where and how the revenue was spent. I think the whole high-taxing, high-spending mantra is really not much use in this context. We have good taxes and bad taxes; we have good spending and bad spending. What we need to do on both sides of the ledger is to get less of the bad and more of the good.
The total amount is a valid issue to debate but, frankly, it is nowhere near as big an issue, unless you are really getting way out of proportion. In the current economic context, as has been pointed out already, on the one hand people were arguing that we cannot have cuts that are too tough because people will suffer but, suddenly, afterwards they are arguing, ‘The cuts weren’t tough enough.’ On both sides, really it would be just a few billion dollars, although I do accept that that can have a big impact on individual people. However, when we are talking about the overall impact on our macroeconomic factors, it is really pretty marginal.
This debate is focused on the wrong area. That being the case, it probably does not matter that basically it is just a lot of rhetorical back and forth of no great consequence. But it does mean that the real issues of substance—not just about the overall state of the economy but some of those discrete issues of great significance to the Australian people—are not being properly examined.
Finally, one other area of the budget that I do think is a positive one but that also needs to be dealt with properly by other corresponding measures is the increase in the migration intake, not just the skilled migration intake but also the corresponding increase in family migration—skilled workers have families as well—and, indeed, a small increase in the humanitarian stream. That, I think, is valuable to Australia. It will be helpful in dealing with some of the capacity constraints within our economy at the moment, but only if adequate infrastructure investment that is properly spent, in the right way and at the right time, goes alongside of it—that question is also still there—as well as proper settlement assistance for people when they first arrive.
The other aspect I point out just quickly regards those in the Australian community who are most in need. That is where I think the Robin Hood rhetoric again is really quite overblown. Sure, there were tax cuts focused more at the lower end, and that is welcome and I do not oppose that. However, there are many people, particularly those on income support, to whom tax cuts are really of marginal benefit. Of those, pensioners and carers in particular have been pointed to. However, a whole lot of people more broadly are on very low incomes and income support and there is really not enough there. I know that Minister Macklin has made further statements about examining that issue and there is a review about that. That is a complex area and one that is in need of review, but it is another area where the best you can say is that it is still unfinished business and the question mark is still there. That is why there needs to be ongoing scrutiny and more reasonable, valid and rational debate about some of the issues in play here.