Budget views

There is heaps of commentary on the Budget on a myriad of different websites – a couple I found of interest are here, here and here.

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.

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16 Comments

  1. Andrew, if only all speeches in our Parliament were so low on spin and high on content. It’s a true shame you won’t be representing the people of Queensland for much longer.

  2. Good on you, Andrew. I echo James: this country (and so many others) deserves representatives who think about issues and options and outcomes, not just party spin and media sound bytes.

  3. Well, any chance for adult discourse concerning the budget has now well and truly evaporated in the wake of the slapdash, infantile responses from the opposition.
    Unfortunately, we must remember that the deterioration in public discourse over recent times has been largely the result of the Howard governments addiction to mendacity and spin on every issue from aboriginals to immigration; ecology to economics. We should not feel surprised that Labor should then feel morally entitled to happily follow the line of least resistance and also hop on the populist spin bandwagon.
    And when you read the latest article by Shannahan of the Oz, trying to feather Nelson’s hard landing, you really wonder why they WOULD have bothered to run a more sophisticated line in explaining their thinking and policies, given the abysmal media commentary of these serious issues.

  4. Good to hear some solid comments amongst all the hype and spin.
    Your broad view is its own reward.

  5. You could almost guarantee that with the departing of the Senator,by some strange imprint,the present lot will exercise their minds in a manner similar.And the rest of us will be none the wiser.Although it is also true the Senator had no hand on the wheel.And Labor and Liberal deserve each others’ company,and then they will understand.Being now regularly shocked by opinions,generally,about people they dont know,on blogs I visit,the politicians have at least a face.I went to the MacQuarie Network last night to hear a Ahmed didnt want pensioners to get anymore assistance. I really wonder sometimes all this confident denial of others needs is directly proportional to not knowing them at all,and favoring that as a requisite, in itself.. that trials others by that limitation,and suggests in doing so,that they also do not know the nature of the person who will deny.So blah blah blah about how hard they work goes on and on and on.Which must also mean to me,maybe their jobs and income,are not necessary for this land to survive.He didn’t seem to be able to present a case,that this need is a falsification.The pensioners themselves,would probably like to say we dont need it either.Where the Ahmed’s fail is distinctly in not doing anything at all,even by suggestion,that would allow his opinion to be valid useful and helpful to pensioners.Convincing the Ahmed’s of Australia to be more resilient and helpful,isnt a task that the Libs or Lab have set.And he maybe a decent person,unwilling to just notice something,about himself and others.

  6. Well said, Andrew. All of it.

    I’m especially pleased that you raised the housing affordability crisis as your first policy point. It’s a scandal that neglect of public housing has reached a point where housing is essentially unaffordable without inheritance. We’re essentially fixing in place a property class divide between “haves” and “have nevers”.

    It’s terrible on that social and economic mobility level which economists love to ponder, but, one has to wonder what this will do for generational motivation in the longer term: why should people devote themselves to their careers if they’ll never be able to afford a family home? If they can’t afford a family home, how many won’t be able to put down their roots and feel secure enough to start families? It’s a national disaster on so many levels.

    Meanwhile, it seems like neither of the major parties is seriously interested in reducing housing prices in any meaningful way. Whether this is because many have investments of their own they want to protect, perhaps they fear the backlash from those mortgage holders who bought up at the bubble’s peak. It’s hard to say. But house prices are unsustainable at current rates without long term repercussions on society.

    Back to your speech though: thank you for writing and presenting it. I hope the parliament’s loss is to your gain in the future.

  7. What gets to me is the sense of entitlement that we have. I am on disability and I don’t think Andrew will argue that I haven’t worked damn hard for no reward for the past 7 years to get a better deal for refugees and imprisoned Australians.

    Indeed if I hadn’t been so angry about the Bakthiyari’s treatment the fact of over 250 Australian’s illegally locked up might never have been found and acted on.

    Why is it that we think we have to have everything? Are we more special than the Palestinians tortured by Israel, or the Tibetans tormented by China, or the Iranians stoned because they are homosexual, or the Iraqis we bombed to bits because that moron Bush said to.

    Why do we think we are entitled? What on god’s earth did we do to deserve it? Our ancestors stole a country, murdered the natives, committed cultural genocide, stole their children and still refuse to think about compensating them.

    We keep out those we don’t like, we have joined more wars to kill more people than any of us have ever had hot breakfasts and still we pretend we are all Paul and Paula purehearts.

    Humbug.

  8. Perhaps,if I smile, and keep my nose clean,Daddy Iemma will think the recent drug busts in Blair Athol,a suburb of Sydney seems like a oppurtunity to give me a house.There would be enough witnesses at the Senator’s posts here to say, I am not McMansion adverse.I would live with Ahmed,if he had a problem,paying rent, or council rates!? Unfortunately,I would be competing for Iemma’s affection,with Police themselves,a few Prosecuting lawyers,and all the rest of us gaggle of really nice citizens of N.S.W.!? I could let Morris stay overnight occasionally,to avoid his own home’s electricity bill!?! Oh! I forgot the nice people at the N.S.W. Electoral Commission!

  9. Sunday!Bloody Sunday! And a slight use of memory,some peripheral understanding of human beings,and even a sense of well apportioned cynicism,of why Swan says, what he says, and, on what TV programs,means they haven’t learnt anything.Then,by sheer hanging around the SMH site I find powerful evidence that Budget estimates will never be the same as people’s real problems,and how they are treated and paid.Aboriginal Health problems in Queensland.Queensland is home also of some of the best and wisest of Alternative Health Professionals,and even inventions that stand out.Like Negative Ion Generators, found in Nexus Magazine.Always at least 500kph ahead of anyone else is Duncan.. Editor of that Mag.Its a pity some Private Health Insurers cannot ask their clients would they forgo some of their alternative treatment rights for substitute Aboriginals! Something that should of been experimented with and encouraged ,rather than have to believe Swan or Coopers Waterhouse got the figures right.And I am liking Bob Brown this morning by not being part of the ALP Rock Band singing ‘Tax Them Alcopops, its a better thing, than Coke and Hiphop. Sling your head back ,quickly ,yeah.Us old ancient farts should use the fermented stuff on our heads and in our hair.We all knows memory and how life works,are all the psychic stuff ,of knowing each other’s minds work,in universal unison,and by high motivated means,allowing only the beautiful..to drink and achieve their dreams”.Electrified Plonk bottle,playing in the background by blowing across its top,and sometimes in,sounding like a trapped Fly. Next verse,is about Libertarian Leftists,Velcro,and the eye of a storm… before the elbow!

  10. yes indeed a good speech, however as phil so perceptively pointed out such speechesaer alwasy gfreat fro thsoe wihtout the levers to control.

    Welcome back Paul – the return of erudition, it must have been a long party, although somehwat surpirsed with the becasue they did it it oK if we do it approach – hope thats not going to extend to dare i suggest lying?

  11. Fantastic speech. Shame the Democrats have been wiped out at the last federal election. More Senators like Andrew are greatly needed. I still think the GST killed the Democrats and all its associated infighting. Great speech anyway. Couldnt agree with you more.

  12. My social worker friend thinks it’s too soon to expect very much for the aboriginal peoples and other concerns e.g. help for the disabled, and provision of public housing for the poor and lower income earners – since it’s only the first budget, with inflation still knocking vigorously at the front door.

    She thinks Andrew will be more greatly pleased by subsequent budgets.

    I won’t be holding my breath on that one.

  13. Well the new Government is still in there Honeymoon phase basically so they can really get away witha first tough budget.

  14. Lorikeet:

    I think you social worker friend is just wishful thinking. When you have the suplus you use it. Rudd and Swan keep saying that they wont be looking at pensions again until the end of next year. With and economy on the verge of a recession who knows what will happen then

    Tony

  15. Tony:

    I think Labor and the Liberals are tarred with the same brush in many ways.

    They look after “middle Australia” – double income families – and to hell with anyone in lesser circumstances, because that’s where most of the votes are.

    Do we see anyone on TV extolling the virtues of staying home and looking after children and or contributing to the community? No.

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