Wednesday, May 13, 2009

‘Mixed Bag’ Budget – but still better than Conservative hypocrisy and myopia

The Swan Budget of 2009 is a mixed bag: including some welcome measures: and some certainly unwelcome.  Now is the right time to look at the Budget more closely – and your comments at ‘Left Focus’ are also welcome.


To begin with, Treasury estimates the Federal Budget will remain in deficit until 2016.    Furthermore, the 2009 Federal Budget deficit has come in at $56.7 billion.,28124,25470703-643,00.html

Swan, however, has been eager to place these figures in the context of a global recession of proportions unseen since the Great Depression over 75 years ago. 

The government has rightly argued that a strategy of austerity would simply feed into a vicious recessionary spiral. 


That being the case, the short term stimulatory measures – cash payments from late 2008 to early 2009  – provided relative economic buoyancy while infrastructure measures were being 'brought into reality’. 

According to the 2009 Budget statement, the government is now poised to invest $22 billion in infrastructure projects – including ports, roads and rail.

Further investment is to include $5.3  billion for Tertiary research and innovation.

Meanwhile, rollout of ‘Fibre-to-the-Home’ broadband is set to gather pace this year.   If anything, the schedule could be more ambitious.

Now is certainly the time to take action.  Some of these initiatives will benefit the nation for decades to come.

But there are those who argue Labor’s stimulatory measures do not go far enough. 


Ken Davidson, writing for ‘The Age’, argues that this is a “deflationary Budget”.  

While Swan’s rhetoric in support of stimulus ‘makes the grade’, and there is genuine stimulus, the predicted 8.5% unemployment rate is still unacceptable – especially while the unemployed suffer austerity.  

Davidson predicts that,

“The economy needs to grow by 3 to 3.5 per cent a year in order to stabilise unemployment at the present level of just over 6 per cent.”

Drawing on the budget papers, the veteran economic commentator further estimates that:

“ net debt will move…to a deficit of $54 billion in 2009-10 and $188 billion in 2012” – but under such circumstances “interest on the debt will be only 0.6 per cent of GDP.”

Under such circumstances – and with hundreds of thousands of jobs at stake - there is definitely room for further measures.  Such stimulus ought involve extra strategic expenditure on infrastructure - as part of a plan for future prosperity.  The key is to pick projects of real and lasting economic and social value.

Bob Brown, speaking on behalf of the Australian Greens, condemned Labor policy, arguing that: “ A single coal project in the Hunter Valley will receive almost the same amount of money as the entire $1.5 billion Solar Flagship program over the next six years."

Certainly here would be a good place to start in ramping out research, development and construction of renewable energy projects.  Such initiatives could include more ambitious targets for micro-renewable energy.  

Further - The National Broadband Network could be prioritised as a fully-public project: fast-tracking construction, and avoiding the long-term pitfalls of private monopoly, inaccessibility for the disadvantaged, and profit-gouging.

And Karen Churchill – commenting at the Crikey! website - argued that public housing projects could be taken much further.   According to Churchill, “low income people have to wait up to six years for public housing and two or three for “crisis” housing.”   

Strong investment in public housing, here, could also produce a long-term correction to Costello’s disastrous ‘housing bubble’ – which placed home ownership and even rental affordability - out of the reach of so many Australians.

Pension reform – for the most vulenrable 

On the ‘pensions front’ there is relatively good news for some.

For Disability, Carers and Aged Pensions, payments will be

“pegged to CPI with  a new pensioner cost of living index or 27.7 per cent of male average weekly earnings”  (MATWE),  “whichever is the highest.”,21985,25470871-662,00.html

Peremenant Carers will also receive “an [additional]...supplement of $600 a year”  with “an extra $600 a year for carer allowance recipients for each person in their care.”

These figures mark a genuine improvement – comprising a lift in the formula for determining pensions.  Previously, for instance, the Single Aged Pension was locked in at 25% of MATWE.

The increase of $10.14 a week for Aged Pension couples, however, was probably at least $5/week too little, given the combined cost of living for these people.

Also on the bad side: there are many groups who have had their needs ignored for the sake of ‘meeting the budget bottom line’. 

Sating the prejudices of some of the more cynical layers of the community might also be a factor in this equation.

To be specific, the Budget provided nothing for sole parents and the unemployed. 

Eva Cox has condemned this move to exclude “less marketable” groups, and to forego more muscular measures aimed to redistribute wealth between the genuinely privileged, and those struggling on lower incomes.

The ever-multiplying ranks of jobseekers, here, are expected to survive on $454/fortnight: with a “a $147 per week gap between the these and the top income support payments.”

To compare: the full Single Aged Pension, in contrast, will rise to $673.36 per fortnight.

And while the $32.50/week is a welcome improvement, Charmaine Crowe - the Policy-Coordinator of the Combined Pensioners and Superannuants Association (CPSA) - has suggested that the most vulnerable “will be under-whelmed.” 


She argues that:


 “The 1.5 million pensioners on the maximum rate of the pension are, and always have been, the group desperate for a boost.”

In summary, the Budget fell short of this writer’s aim of a formula of 30% Male Average Total Weekly Earnings (MATWE) base rate for all pensions – including ‘Newstart’ (ie: unemployment) benefits. 

This could provide a realistic goal around which interested groups could mobilise for the future – although even 30% MATWE is itself a compromise.  (the Council on the Ageing had previously argued for a rate of 35% MATWE.)

Further, the Combined Pensioners and Superannuants Association’s plea for a supplement of $80/week deserves greater attention.  This would now need to be adjusted to comprise a supplement of an additional $45/week for the most vulnerable: those subsisting on full pensions without other supplementary income, 

These figures will need to be adjusted as lobby groups begin to reorganise and reorient towards the Budget for 2010. 

This writer, however, is hoping that there may be some ‘last minute’ surprises.  


While unlikely, it is not beyond the possible that the Greens and independent Senators may ‘do a deal’ which could see parity in base pension rates: bringing Newstart in line with other pensions.  

While the Parenting Payment for sole parents could be reformed so as to be paid until the youngest child reaches the age of 16; so too could there be an additional ‘stimulatory’ supplement for the most vulnerable – as suggested by Charmaine Crowe.

The question, here, is just what kind of ‘deal’ the Greens and independent Senators could do to secure such reform, and ensure Labor’s support.  Certainly, Labor could do with a ‘smooth path’ for its legislation for the remainder of its first term.    

Yes - Labor should have provided for the most vulnerable without it coming to a 'last minute deal' - but for the unemployed especially - their needs are desperate.   Those with leverage need do whatever they can...


For the vulnerable – and the forgotten – let us hope the ‘last word’ has not been heard on the issue of pension justice.

 by Tristan Ewins - May 2009


  1. Tristan

    I think Labor was trapped into the single pension increase. They felt forced politically to do it, having raised expectations about a real increase.

    If anything it is not enough.

    And I also wonder if the small increase for couples could be tied to the recognition of same sex couples.

    The cynic in me says that same sex couples on the pension will or may be re-classified as a couple. The Government will then save some money. (Does anyone know how the recognition of same sex relationships plays out here?)

    More generally, I think the failure to increase the dole is deliberate. It is a form of 'dole bludger' bashing, I think.

    How can anyone live on $226 week?

    But I think Labor didn't increase the dole for two reasons. First it enable them to send a signal that being unemployed is socially unacceptable. It's your fault you are unemployed appears to be the logic.

    Second it puts downward pressure on wages. I'll take a wage cut to keep in work and not have to survive on the low dole.

    More generally, I was surprised the Government didn't attack services and its own staff more. I suspect they are going early - say October - and then in the next Budget really get stuck into workers.

    One final point. Defence spending will increase 3 percent in real terms till 2020.

    So its billions for bombs, nothing for the unemployed and carers.

  2. Oops. I forgot to mention my main point, one I made on my blog.

    The growth figures for this Budget are completely unrealistic. 2.25% growth in 2010/11 and 4.5% the year after? How is this turnaround to occur?

    Treasury appear to have based their estimates on an analysis of the recessions in the 1980s and 1990s.

    Why not pick 1929 instead?

    And unemployment peaking only at 8.5%?

    I think this is dreamworld stuff.

    To my mind we are at the start of the decline, not its end. And that comes about through the way production is organised under capitalism.

    There is, as Marx said, a tendency for the rate of profit to fall.

  3. I agree that the Falling Rate of Profit is a factor with capitalism... This is linked with the response of increasing the rate of exploitation... But capitalism can survie regardless - as improved technology and means of production - improve material living standards regardless...

    But the financial crisis we're in now goes further than that. Falling confidence is also a factor - linked here with the plethora of bad debts, poor lending practices, the housing bubble - here and in the US... If governments the world-wide nationalised banks to restore liquidity - it would make a real difference I believe too...

    Importantly also: a mixed economy in which there is a substantial role for public housing...could have helped prevent the speculative bubble - and the vulernable in the US particularly - would not be suffering this disaster to the same magnitude...

  4. sorry I'm a bit clumsy with my prose here - not feeling too well today...

  5. Get better soon Tristan

    I am not so sure about the Budget. Much of the infrastructure spending looks like re-badged prior commitments. Is that right?

    And I can't see how this is going to prevent further declines in the economy if the problem is profit rates.

    Even if stimulus packages could even out the booms and slumps, how big (and well directed) do they have to be.

    Swann said that treasury figures showed that the $52 bn announced so far (of which from memory about half went to immediate spending) saved 210,000 jobs. So if $21 billion saved 210,000 jobs, and there are going to be 1 million unemployed by mid next year or the year after, why not spend $100 bn to make unemployment zero?

    I think there are a few reasons. Such spending wild bankrupt the capitalist economy. It also wouldn't work because if the problem is profit rates across the world then stimulus spending doesn't restore those profit rates.

    And the more unemployed there are the more confident bosses feel about cutting wages and conditions.

    Anyway you'd have to spend that sort of money every year until (or if) the economy righted itself.

    Then you'd need to figure out where to get that sort of money from.

    Taxing the rich can't work for ever. Taxing profits undermines the whole exploitative process.

    Taxing workers stuffs aggregate demand. printing money merely creates inflation and hyperinflation destroys economies and countries.

    Unlike Tristan I am also not so sanguine about improved technology enriching our lives. If that process were under democratic control I'd agree. But it's not and the present crisis may in fact be attributable to the way technology is structured under capitalism.

  6. Dear John/Readers,

    I would agree that a co-operative approach to research could achieve gains in technology that a competitive approach might not...

    But when I think of the difference the internet has made to everyday life - it is truly remarkable...

    That said - I think its possible to re-distribute wealth to a degree... I think progressive taxes - aimed at the top 20% of wealth holders and income earners - could make a great difference to the resources available for pensions, social services and infrastructure...

    That said - the Swedish examples shows us that even in countries with a strong social democratic compromise - the capitalist class will resist if its power is challenged too directly - or to too great a degree...

    For now we need to achieve the best compromise we can - and if that meant following the example of Sweden, Holland, Denmark - it would make a great difference to the lives of the more vulnerable...

    If a bloc of political and class forces were to grow so strong as to be able to achieve a 20% stake of the stock market - as was achieved for a time in Sweden - it would be a massive strategic victory...

    That said - I think the aim of 6% unemployment is achievable should we invest heavily in infrastructure, services and public housing now... - and I think it is also achievable to have a compromise which ensures protection for the vulnerable - including the unemployed...

    Think here a 30% MATWE formula for 'Newstart' (almost $18,000) - and a massive investment in public housing...

    It's not utopia - but it's much better than what we have now...

    And maybe we could aim for the CPSA's compromise for the most vulnerable of of- which I have mentioned above...

    Thinking long term is good - but let's think about the achievable here and now as well.

  7. also re -taxing workers 'stuffing' aggregate demand...

    I don't think that's right... Redistributing wealth allows that wealth to be spread and spent elsewhere... Building roads, rail, ports, public housing, broadband - creates jobs - which in turn are taxed... And this in-turn allows for expenditure on public services elsewhere....

    Take collective consumption through Medicare... By allowing for a more efficient Health System this actually improves quality of life...

    And without tax we can never afford to invest in skills, or infrastructure that increases capacity...

    Importantly - if we mobilise strongly enough - we can succesfully demand compromise from capital...

    Exposing the rorts involved in PPPs - and investing in genuinely public infrastructure is on important and immediate objective... Provide education for citizenship - not just the needs of the labour market - is another... Many of the transitional aims originally supported by Marx have been achieved today...

    The situation is not as hopeless as some on the Left think it seems... Change is possible now - even if there is no immediate end to gross exploitation and privilege in sight...

  8. IMPORTANTLY - does anyone have anything to say on Turnbull's reply from tonight? Mostly of no substance - of so little consequence that a double dissolution what appear a waste and unnecessary... But maybe win back some of the Conservatives' core constituency that went over to Labor form the last election? I'm hoping we can get a better compromise that circumvents the Libs/Nats entirely...

    Hope readers are willing to share their views with us...


  9. Tristan

    I think the Government has already picked up on the obvious. So Malcolm, tax increases for health purposes are OK? Then why not pass the alcopops tax?

    There's no substance in the Budget response.

    But I think both Labor and the Opposition are positioning themselves for an October or November election so the Budget and the reply are big on rhetoric and short on substance, in particular big attacks on social service and public servants.

    So the horror Budget, if I am right, will be next year, no matter who is in power.

    By then too unemployment should be rapidly increasing, as the Budget papers predict. I estimate the increase is going to be about 35,000 per month for the next 12 months, but that is back of the envelope stuff at the moment.

  10. Huh?

    This comment makes no sense to me.....

    "But capitalism can survie regardless - as improved technology and means of production - improve material living standards regardless..."

    After all our experiences since World War I, after all the data that is now available on debt, aftyer all the emerging problems with population expansion, after all the problems of the rich nations getting richer, why is it that we still get lazy comments that "capitalism will survive regardless"?

    it seems clear to me that capitalism only appears to survive provided it can increase the population and debt (so as to appear to maintain effective consumption).

    If population and per capita debt can increase forever then I agree - capitalism can arguably survive, but this growth in debt and population has to be exponential.

    A moments reflection will easily expose this fantasy.

  11. My point is that technology improves material living standards even as the rate of exploitation intensifies... Although environmental crisis poses a critical challenge... Vest interests are blocking clean energy and clean technology.... There is the assumption of limitless growth - which must be challenged...

    But can capitalism survive?

    The answer is yes - but that the system will need discipline and planning...And that ordinary people must stand against the vested interests who would rather see the planet ruined than embrace change...

    That said - I am also still a socialist - I want to see democratic organisation of production... But regardless of this belief - I still believe the system can survive...

  12. Tristan

    Socialism is not the "democratic organisation" of capitalist production.

    Your post contains a fatal flaw - capitalism cannot survive without "limitless growth" but you want one to survive without the other!

    You seem to have a sociological view of capitalism that ignores its true economic nature. This is typical of OECD middle class pundits.

  13. There are different interpretations of socialism.

    Some say socialism is characterised by central planning; others say it is state ownership... I believe socialism is the movement towards democratic and egalitarian organisation of production, and provision of goods and services.

    Overcoming class stratification is also part of this movement. That said - I don't exclude other definitions - I'm fairly open minded about it. (within reason)

    re: Whether capitalism can survive without growth...

    Firstly - an exploitative class system and market economy can theoretically survive - yet in a state of stagnation... There are environmental limits to growth also - but there is hope some of these may be overcome with technology.

    Captialism can also survive also be intensifying exploitation - and this can be offset by improvements in productivity...

    One response of mine is that workers should organise to demand capital share to compensate for a falling wage share...

    Finally: pls believe me, I am not middle class. :-)

  14. All this considered - it's not to say there's not going to be a readjustment of the world order... Exponential reliance on debt cannot last forever I agree. And deindustrialisation - and financialisation produces nothing in the end - undermining real living standards...

    That said - moving beyond constant growth can be a good thing - from the perspective of sustainability - social and environmental...

    Moves, here, towards a shorter working week for instance -can mark a transition to a 'human need' economy...

    But it need not be 'all or nothing'... The balance of class forces is not yet 'on our side'... Sometimes I wonder if they will ever be...

    But moving towards an environmentally and socially sustainable economy - is an important goal to work towards...of value in its own right...

  15. How can there be different definitions of socialism?

    Socialism only exists when producers control their own produce, and vice versa when all producers control their own production, then there is socialism. That is all.

    Socialism is independent of growth, sustainability, social justice, equality, shorter working-week and all other nice things. Socialist can pollute the environment, exploit women, and harbour racism as well as capitalists but have less economic interest in doing so.

    Capitalists give us nice things in the OECD West through the welfare state, itself funded by international exploitation. In other words, we type away on our imported keyboards only because technology is made in the third world by slave labour with few trade unions or OHS provisions.

    If our cars, whitegoods, clothes, TVs, Pentiums, ipods and etc were made by workers enjoying Western conditions, we could not afford them.

    How can capitalism survive by intensifying exploitation? The need to intensify and spread exploitation is the core factor destroying capitalism and (eventually) all who try to live within its perfumed garden.

  16. Redgum - my point re: intensification of exploitation is the increased productivity can lead to higher material living standards - and can make possible shorter working hours - while maintaining levels of consumption.

    Yes - Marx said that capitalism "produces its own gravediggers" - but I do not think even Marx foresaw how far technology and production could go...

    Yes - I imagined a Commnunist system - which presumes abundance... But Marx also supposed capitalism would create absolute emiseration of labour... Even if we lose our place in the world economic order - technology and productivity mean we will maintain relatively decent material living standards.

    re: exploitation of the Third World... This intensifies the need to develop sustainable industry - including energy and transport - and 'roll this technology out' in the developing world... Surely we cannot expect the developing world to bear the burden...

    This also makes Fair Trade extremely important... But it's true - even other workers in the devloped world depend on the exploitation of Third World labour... Even if indirectly...

    One preliminary move could be to lift foreign aid to 1% of GDP... Doesn't sound like much - but in fact would lift aid by over 400%...

    Finally - You are referring to Marx's definition of socialism... While I think Marx and the Marxist tradition are a valuable source of ideas and inspiration - I don't think he has a monopoly on the term...

  17. re: this passage - "Yes - I imagined a Commnunist system - which presumes abundance.."

    It should have read: "Yes - Marx imagined a Communist system'...

    Just a correction.

  18. Tristan

    This is NOT possible, within a natural economy viz:

    "...intensification of exploitation is the increased productivity can lead to higher material living standards - and can make possible shorter working hours - while maintaining levels of consumption".

    You can only get the appearance of maintained levels of consumption and shorter working hours (eg France) if the goods they consume are manufactured increasingly in the Third World, where exploitation is greater, consumption is less, and working hours are longer.

    I would have thought this was pretty obvious. You seem to be very infatuated with the front window of world capitalism, and appear to give little weight to the backyard conditions immediately adjacent.

    The level of technology is not relevant - the same exploitation and contradictions occur whether the economy runs on horsepower and candles, compared to steam and gaslight, or compared to fossil-fuels and electric light. Technology is irrelevant once you understand the underlying forces.

    Fair trade can only emerge outside of these underlying forces (capitalist exploitation). Calls for fair trade in isolation to this understanding is as meaningful as marching up George Street Trotsky-like chanting "Fair Work Now"

    We need more understanding and less commentary on symptoms.

  19. Redgum; since you have very strong opinions here - I was wondering if you'd like to write an article of your own on the subject - to be published here? Write back if you're interested.

    For my part, I think technology is very important - the rise of modern capitalism would have been impossible were it not for the rise of factory labour/mass production...

    Whether or not 'fair trade' can emerge outside of capitalism - it's a matter of definition... A 'Fair Trade Agenda' - where the return for Third World labour is increased - is possible. I wish these workers the best - to organise and fight for a fairer share...

    That said - even with progress, exploitation would persist...

    Exploitation of workers by a parasitical capitalist class - is not fair... But even thus it's true that organised labour has at times won reforms which really did make the process more fair for workers...And involving real improvements to workers' quality of life...

    Again - let me know if you're interested in writing a blog entry of your own... (run any idea by me first though - don't want you to waste your time if I'm not going to run it...)


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