Conservative opportunism and Labor timidity in the face of economic meltdown

Recent polls suggest an increase of support for the conservatives in Australia under Malcolm Turbull.  In particular, the conservative parties have been putting on the ‘hard sell’:  that Labor is an irresponsible economic manager, and that deficits and debt finance are unsustainable. 

Yet despite this, the conservatives have made little point of differentiation between themselves and Rudd Labor’s 2009-2010 Federal Budget.  Instead, there is an opportunist war of perception - playing upon ingrained prejudices. Turnbull has decided to oppose progressive changes to the Private Health Insurance rebate which would see benefits cut for higher income earners – with some of this redirected towards needy pensioners.

 

In place of these progressive reforms. Turnbull has instead suggested a 12.5% increase in tobacco taxation: enough to cover the $1.9 billion lost as a consequence of blocking Private Health Insurance Rebate reform. 

http://www.news.com.au/dailytelegraph/story/0,22049,25484966-5001021,00.html

 

Importantly: we are not talking about a substantial difference in policy here.  Remember: the economy is now annually valued at over $AUS 1 trillion.

In some senses Turbull’s stance is weak: in other ways it is a clever piece of political footwork.  By focusing on a relatively minor difference in policy, Turnbull makes it difficult for Rudd to justify a double dissolution.  Without such a ‘trigger’ there is a danger that Labor may go to the next Federal election with the economy still struggling with recession.  Further: ‘by getting his way’ Turnbull appears to have had a victory: providing the appearance of credibility he craves.

 

Of course, in reality the only alternative currently to running a deficit is to submit to a ‘downward deflationary spiral’ of falling tax receipts, economic recession, and unemployment.  Here, Turnbull’s ‘playing upon’ popular prejudices and fears is grossly irresponsible.

 

Furthermore – Turnbull’s condemnation of Rudd’s earlier stimulus package (comprised of cash handouts) neglects the fact the infrastructure investment will take some time from their announcement – until the benefits flow through the economy in the form of employment.  The so-called “cash splash” in-fact supported the economy – specifically retail – during the interim.   

 

The strategy, therefore, makes sense.  In fact - there are some who suppose Labor’s stimulus does not – in fact – go far enough.   As noted elsewhere in this blog:

 

Ken Davidson has argued that “the expenditure is not sufficient to hold unemployment at 6% or lower.”  http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html   

 

To put the deficit in perspective: as Paul Kelly has noted: the 2009 budget deficit is

“caused two-thirds by the revenue collapse (totalling $200 billion over four years) and one-third by the stimulus package.”   http://www.theaustralian.news.com.au/story/0,25197,25449742-28737,00.html

Furthermore, the figure of  $22 billion (on ‘nation-building’ projects) does not refer only to new spending,  There is the $4.7 billion already set aside for the National Broadband Network, and also “projects from the last budget”. http://www.smartcompany.com.au/construction-and-engineering/22-billion-for-infrastructure-in-budget.html

 

Labor’s rhetoric of stimulus is spot on.  By investing in infrastructure now, we support jobs through the course of the recession.  Meanwhile, this provides the foundations for future prosperity and growth.  Any debt incurred can be serviced later – especially so assuming investment now adds to productivity, capacity and growth in the future.

 

Returning again to Ken Davidson’s projections:  assuming “ a deficit of $54 billion in 2009-10 and $188 billion in 2012” – “interest on the debt will be only 0.6 per cent of GDP.”  http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html

 

That’s less than $6 billion/year in the context of an economy valued at over $AUS 1 trillion.    The amount is significant: but well within our means.  And when considered alongside the toll that would otherwise be taken by unemployment – to tax receipts and broader economic activity – the effective cost is lower still.

Again: it raises the question of why Labor is not providing bolder and more assertive leadership.

 

Labor’s budget does at least not fall into the austerity trap: by which disinvestment in infrastructure and public goods and services feeds a recessionary spiral. 

 

While most of the investment mooted in the budget it not new – at least Labor opts for a deficit – to cushion the economy, and support tens of thousands of jobs. 

 

Labor could go further – and should go further – but there is a clear distinction now between Rudd Labor and the conservatives. 

 

The real losers in Labor’s 2009 Federal budget are the unemployed: who languish behind other pension groups.  They are deemed ‘unworthy’ in the eyes of reactionary pundits of ‘popular opinion’.  Here Labor’s timidity in the face of injustice is cause for despair and anger from those who have hoped for a social justice agenda from the government.

 

Single Aged and Disability pensions are now “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.” http://www.news.com.au/heraldsun/story/0,21985,25470871-662,00.html

These reforms – while a genuine improvement - do not meet the minimum demanded by pension lobby groups: or the even more modest benchmark of 30% MATWE proposed by the author.   Certainly, it is not sufficient to eliminate – or even meaningfully mitigate - poverty amongst some of the most vulnerable Australians. 

 

Even assuming an activity test, the unemployed are expected to make do on $454/fortnight.  http://www.acoss.org.au/News.aspx?displayID=99&articleID=5893

The full Single Aged Pension, in contrast, will rise to $673.36 per fortnight: a gap of well over $100/fortnight between this and ‘Newstart.’  (the unemployment pension) http://www.superguide.com.au/2009/05/32-per-week-increase-in-single-age-pension/

 

The onus is now upon the Greens and independent Senators to apply pressure to Labor:  pressure for a bolder expansionary deficit – directed towards sustaining employment, and future productivity and capacity for our economy.   And further, we need for those Senators to apply pressure to Labor now - for Newstart to be raised to a the point of parity with other full single pensions.  

 

Finally, we need a movement WITHIN Labor  - and throughout Australian civil society - towards these and other essential demands of social justice: an expanded welfare state; a broad and inclusive social wage; and a democratic mixed economy. 

Together, Australians can emerge victorious in the struggle for justice – during hard time, and always.

 

Tristan Ewins, May 23^rd 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.   http://www.theaustralian.news.com.au/business/story/0,28124,25470703-643,00.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. http://www.smartcompany.com.au/construction-and-engineering/20090512-22-billion-for-infrastructure-in-budget.html

Further investment is to include $5.3  billion for Tertiary research and innovation.    http://news.theage.com.au/breaking-news-national/universities-thrilled-with-budget-boost-20090512-b1rs.html

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.”

http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html

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.”  http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html

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." http://bob-brown.greensmps.org.au/content/media-release/green-opportunity-missed-budget-2009

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.”   http://www.crikey.com.au/2009/05/13/eva-cox-2009-budget-is-oversold-and-unfair/   

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.”  http://www.news.com.au/heraldsun/story/0,21985,25470871-662,00.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.”   http://business.smh.com.au/business/federal-budget/budget-winners-and-losers-20090512-b1ql.html

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.

http://www.crikey.com.au/2009/05/13/eva-cox-2009-budget-is-oversold-and-unfair/

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.”       http://www.acoss.org.au/News.aspx?displayID=99&articleID=5893

To compare: the full Single Aged Pension, in contrast, will rise to $673.36 per fortnight. http://www.superguide.com.au/2009/05/32-per-week-increase-in-single-age-pension/

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.” http://www.cpsa.org.au/MAIN/srelease.php?id=114

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