Budget 2013: An Analysis of Labor's Budget, and of Abbott's Reply

 

above: Treasurer Wayne Swan has delivered a Budget that could have been worse; but also could have been better.

In the following article Tristan Ewins examines the pros and cons of Labor's 2013 Federal Budget. Labor's timidity in key areas of reform (eg: superannuation concessions) is confusing given its willingness to withdraw benefits from some low and middle income demographics. But there are some very good policies here as well - even though Gonski has been 'watered down'. Nonetheless, there are clear divisons between Labor and the Conservatives; and hopefully these will be cast into greate relief as the election draws nearer.

Tristan Ewins

The 2013 Federal Budget was neither what it could have been, nor what it should have been. Labor faced an unenviable task with a $60 billion revenue shortfall over four years- linked with the high dollar, declining terms of trade – and wavering business profits as a consequence. This impacted on Company Tax receipts especially. Reduced revenues from the mining and carbon taxes certainly didn’t help either; though Labor was too timid or too pragmatic to restructure and revivify either.

Labor had options – which we will discuss later – to bypass austerity entirely while actually better containing the deficit. But they chose not to go down that path for fear of ‘getting on the wrong side’ of vested interests. On the good side, Labor did decide to limit austerity. Cuts have not been so severe as to lead to a European style scenario of negative growth and mass unemployment. For this (parts of) ‘the business community’are happy: as increased consumption power is in their interests (or at least for those focusing on domestic consumer markets), even though business tends to oppose social welfare as a rule. (in order to ‘make room’ for further tax cuts that add to their bottom line) The overall dimensions of this Budget include cuts of $6 billion over four years and increased revenue of $29 billion of the same period.

First we will summarise Labor’s cuts in more detail.

Decreases in Medicare coverage will hurt some on low incomes and represent a step in the wrong direction. And while changes to superannuation will reduce concessions for the richest of all and bring in $800 million over four years – this is not anywhere near what was necessary – or what was possible if the government had targeted a broader base of genuinely wealthy Australians.

Higher Education cuts are in the vicinity of $2.3 billion. The worrisome truth, here, is that having locked itself in to a policy of small government and low taxes the Government decided to reprioritise rather than provide new money in order to fund something anything like what the Gonski review had recommended. The result of was the sacrifice of university scholarships valued at $2000 – which were transformed into ‘loans’, as well as the rescission of options to repay HECS (Higher Education Contribution Scheme) upfront at a 10 per cent discount. The latter will mainly affect reasonably secure families – as for the disadvantaged upfront payment could be unmanageable in any case. But the $900 million ‘efficiency dividend’ will put pressure on the wages of academics and other education professionals, while perhaps resulting in more course closures. There are already predictions that Sydney University will be required to slash $44-$55 million, while Wollongong University has predicted $14 million in cuts and foreshadowed further staff reductions.

Not just middle class welfare, but middle income welfare (as Tim Colebatch argues) is set to go. This is classic Labor policy–at least since the Hawke years: making do with less through extensive and narrow targeting of welfare. But some of the cuts are regressive. Here it is interesting that Labor has chosen to crack down on welfare for those on average incomes, but shied away from reducing superannuation concessions for the top 5% or 10% income demographic – which alone could have taken care of the deficit – bringing in between $10 billion and $20 billion.

So Labor has not quarantined ‘middle income Australia’ from its cuts. But by some analyses middle income is not the same as middle class. Surely more reforms aimed at recouping revenue from the top 10% income demographic would have been fairer – though the reality is that we need a broad enough tax base to bring in the necessary revenue to maintain health, education, welfare, infrastructure etc.

Family Tax Benefit A – intended to assist in child rearing - has been also targeted. The Costello-erea ‘baby bonus’ has been wound back. Low income groups who would have benefited from carbon tax compensation will also find that some of that compensation– in the form of tax cuts – has been withdrawn. (a more regressive decision) This is disappointing because regardless of the fact of a falling carbon price with moves to a ‘market carbon trading system’,progressive changes to the tax mix would have been of great benefit to workers and the poor in any case.

Notably the policy of mandatory detention of asylum seekers – supported by both the major parties – has itself resulted in a blowout of over $3 billion. But so long as Abbott plays the fear card on refugees Labor can be expected to emulate Coalition policy in order to neutralise or minimise any political benefit.

Now for a range of other policy initiatives – someof them quite welcome. Although many of them have not been taken far enough.

An increase to the amount of money that those deemed unemployed can earn in casual labour before their benefits are effected has risen by about $20 a week. This is a good initiative: but not going far enough; and not lifting the unemployed out of dire poverty. (which in principle is supported not only by welfare organisations, but even by elements of the business community.) A $50/week increase in Newstart remains an urgent priority.

There have also been boosts for cancer research and treatment, and a scheme to assist seniors to ‘downsize’ their home - moving into smaller and more “manageable’ residences is very welcome. This is welcome; but further progressive action could involve the removal of taxes such as stamp duty from low-income Australians also wanting to move in to cheaper accommodation. Stamp duty is a state tax; but the states could be encouraged to implement such a policy in return for compensation from the Commonwealth.

Labor is promising public money for transport infrastructure – but probably much of this will be in the form of Public Private Partnerships. It is likely, therefore, that some new projects will take the form of toll roads and the like. This is likely to have a regressive distributive effect.

Though hopefully the decision to invest $4.6 million in “an institute for ageing” could lead to more robust and fair aged care policies into the future.

And importantly – Labor is recouping $4.2 billion over four years by closing business tax loopholes – certainly a more welcome initiative than further austerity.

But Labor’s big policies remain disability insurance and the so-called Gonski reforms.

According to‘The Age’ (May 15^th 2013) - when fully implemented by 2019-20 disability insurance will have a price-tag of about $22 billion – covering over 450,000 disabled Australians. In order to provide funding there will be a 0.5% increase in the Medicare Levy –though arguably more robust action is necessary on the tax reform front to fund the program over the long term. These increases to the Medicare Levy are welcome, though further progressive tax mechanisms to provide funding would have been more welcome.

The government is set to provide 50% of the funding for the NDIS (renamed Disability Care Australia) – though when combined with the education reforms it is doubtful that the states can afford this without further federal grants – or further state-level ‘reforms’ – with user pays infrastructure, or increased state taxes. Disability insurance is a massive and overdue reform – providing support, amenities and services to some of those who are in the most need. But even the Liberal states had been arguing for tax reform in order to consolidate their fiscal position. (though of course they were Ideologically driven to demand a regressive increase in the scope and coverage of the GST, rather than fair reforms elsewhere in the tax mix)

The Gonski reforms have also been dramatically watered down. Though nonetheless they remain substantial. While originally the Gonski Review called for an increase in funding of $6 billion a year, the government is promising only $9.8 billion over six years. Some money will be redirected from other schemes, and again there is the expectation that the states will ‘come to the party’. When combined with projected State funding the Commonwealth expects total funding of $14.9 billion over six years – compared with the initial vision to expand education funding by more than twice that amount. The changes to the funding mix are apparently more progressive, however, with loadings targeting the inclusion of students from disadvantaged backgrounds –whether the consequence of poverty or disability.

The Abbott response

In response to the Labor Budget Abbott talked of a “Budget Crisis’ created by ‘Labor mismanagement.’ This might go down well with some people who don’t want to scratch far beneath the surface. But the reality is that the high dollar has been central to the Budget’s deteriorating position. And for Abbott’s part he shared the position of not intervening to lower the dollar in order to mitigate poor terms of trade, and the disaster for manufacturing. Arguably intervention is warranted in exceptional circumstances. And furthermore, Abbott’s opposition to a more robust mining tax deprived the government of the funds that may have been employed to effectively subsidise affected industries in manufacturing and tourism especially – keeping them viable until the end of the mining boom, and a drop in the dollar. This was important to prevent skills and capacities being lost over the long term.

Abbott and the Conservatives have also been complaining about Labor’s ‘out of control spending’. And they are talking about a ‘simpler’ tax system – which almost certainly translates into more regressive flat taxes –(eg: an expansion of the GST, and its extension to food) with a redistribution of wealth from the real ‘battlers’ to the affluent. Here, the Australian Conservatives are taking a leaf out of the extreme US Tea Party’s book. And for Abbott it is a betrayal of his Democratic Labor Party past. While the DLP sabotaged Labor for years, and were not a friend of Labor, they were not neo-liberals and believed in social welfare. But Abbott will say and do anything to get the ‘top job’. The Americanisation of Australian politics is a real threat: and the Liberals seem to see the US ‘ideal’ of harsh social stratification as something to aspire to and emulate.

Also, Abbott’s rhetoric proves to be hollow when subjected to scrutiny. As Tim Colebatch points out (The Age, May 15^th 2013) “Revenue this year is forecast to be 23 per cent of GDP, compared with the Howard Government’s post-GST average of25.4 per cent. And spending levels are pretty much identical. And amazingly - in Melbourne’s ‘Herald Sun’ Jessica Irvine was allowed to make the observation that Labor“inherited a structurally flabby Budget from the Howard Government, with too many cash handouts and unsustainable tax cuts.” And: “The Budget would be in surplus today if personal income tax rates had not been cut [under the Howard Government) eight years in a row.” (Herald-Sun, May 15^th, 2013)

Why is Costello’s record therefore not examined more rigorously? On the Howard/Costello watch the housing bubble rendered home ownership an impossible dream for many. The privatisation of Telstra left subsequent Labor governments in a position of having to ‘pick up the pieces’ and pay a high price for access to Telstra infrastructure for the NBN. The benefits of the mining boom were squandered with unnecessary middle class welfare and unsustainable tax cuts.

Abbott has also attempted to rationalise his Parental Leave for the wealthy scheme by comparing it to annual leave. There is a significant difference, however. While many Australians only get 2 weeks annual leave, Abbott’s scheme will provide SIX MONTHS leave on FULL PAY for professionals earning $150,000/year. True, Abbott is sourcing the funds from a levy on big business – But the money could be prioritised for areas of greater need. The ultimate effect is a redistribution from more vulnerable groups to the wealthy – as Abbott’s largesse with Parental Leave will be mirrored by austerity elsewhere.

Other projected Abbott policies include more punitive welfare in the form of Work for the Dole, and the removal of the Newstart (threadbare) ‘safety net’ entirely for under 30s. A layer of desperately unemployed – a ’reserve army of labour’ – will undermine workers’ organisation and bargaining power. And perhaps for the Conservatives that is the point!

We can also expect an inferior version of the National Broadband Network; as well as assaults on the rights of labour including organisational rights; cuts to welfare; and the rescission of superannuation co-contributions for low income workers.

Abbott is still maintaining a 'small target' strategy; and most of the media is providing precious little scrutiny. Should he attain government, the austerity could well extend further than even this author supposes!

Lessons for Labor

There are several areas in which Labor could have taken a proactive stance – minimising the deficit, preventing austerity and actually expanding the social wage.

A more rigorous mining tax could have brought in perhaps $6 billion. Reversion to 75% Dividend Imputation could have recouped perhaps another $6 billion – or perhaps $12 billion if reverting to 50% as once advocated by renowned Australian economist John Quiggin. Restructuring income tax should also be an option; as should a tax on inheritances over $2 million. Cutting superannuation concessions for the wealthy and the upper middle class could have captured between $10 billion and $20 billion. Talk of ‘taking pressure off public pensions’,here, is a furphy – as superannuation concessions alone are now costing more than the entire Aged Pension Budget. Again: we have a policy redistributing money from ‘battlers’ to the wealthy.

Arguably Labor’s timidity was unnecessary. The government is withdrawing payments from low to middle income groups – but somehow thinks it could not have raised further revenue from the top 5% to 10% income and wealth demographics. Why back away from such reforms when they would target only a wealthy minority; and when they would provide the scope for massive expansion of Australia’s social wage and infrastructure – the benefits of which should be plain to voters?

Also importantly– Labor could have mimicked Abbott on one crucial point: his 1.5% levy on big business. Abbott could hardly have complained given his own policy, and Labor could have directed the money into areas of much more acute human need – for instance, aged care. It is still not too late to develop just such a policy and seek a mandate for it at the coming election. Such a policy could well be very popular!

With perhaps over $30 billion from such initiatives- that is, were they all implemented to the fullest extent – a surplus may even have been achieved for the coming year. Though that would be a political objective; as in reality the precariousness of the world economy demands a more fiscally expansionist stance. Gonski could have been implemented in full. And comprehensive Aged Care insurance could have been rolled out on similar principles to Disability Care Australia. Finally, resources could have been provided for the States – maintaining health funding; maintaining equity in provision of health services; providing further resources for public transport and other infrastructure without regressive user pays mechanisms or even privatisation of roads…

Policies of‘small government’ will only lead to more Public Private Partnerships, and perhaps outright infrastructure privatisation for which consumers will pay the price.

Instead, Labor should go to the election heralding further action on the social insurance front. And while following through with its education and disability reforms, Labor must promise a multi-billion dollar annual investment (new money) for Aged Care services.

Indeed it is not too late for Labor to further re-emphasise social insurance as a central theme for the election. If Abbott could be pressed to accept disability social insurance, the right kind of articulatory strategies by Labor could drive him to accept Aged Care insurance as well. If Labor loses the election –but manages to dictate the policy agenda in such a manner – then even in electoral defeat it would comprise a kind of victory. The suffering of our aged citizens – especially those in high dependency care – is an obscenity to the extent it could be ameliorated – but is not – because of ‘other priorities’. I have argued for such action in previous articles here – and for any who have not read this material yet I urge them to read the following:

http://leftfocus.blogspot.com.au/2009/02/another-look-at-aged-care-crisis-call.html

Again: There is relief that (in Julia Gillard’s words) Labor “has not cut to the bone”. But the Budget is not all that is could have been, nor what it should have been. Failing to extensively reform superannuation concessions was the key capitulation in the face of vested interests.. Hopefully, though, Labor will press the themes of tax reform , social insurance and social wage expansion further in the following months, and seek a mandate for progressive change.

Is this a real Labor Budget?

above: Treasurer Wayne Swan thinks he has the economic policy settings right

In this latest 'Left Focus' article Tristan Ewins asks:  What are the high and low points of Federal Labor's 2011-12 Budget?   Labor seems to be prioritising return to surplus, and containing inflation. But has social justice been lost in the process?

nb: If you find this article interesting PLS join our Facebook group - to link up with other readers, and to receive regular updates on new material.  see: http://www.facebook.com/group.php?gid=58243419565


Federal Labor’s 2011-12 Budget is framed by a variety of political and economic imperatives: fear of being outflanked by the Conservatives on the populist right with welfare and refugees; fears of inflation and increased interest rates as the economy picks up; and the symbolic drive for a surplus by 2013 – regardless of natural disasters at home and abroad which have impacted upon our economy. I intend to consider the high points and low points of the budget, with some views on how it may have been improved, and what progressives ought be aiming to achieve in the future.

Firstly, the high points

The $1.5 billion in new initiatives for mental health is both welcome and necessary. ‘The Age’ has observed there are an estimated 600,000 Australians “with debilitating mental illness”, with the most severely affected second only to indigenous Australians in mortality rates. (presumably including suicide) http://www.theage.com.au/business/federal-budget/new-services-to-benefit-mentally-ill-20110510-1ehin.html

The emphasis on ‘early intervention’ for young people is notable – as surely prevention is better than cure – most importantly in terms of preventing human suffering, but also for the budget bottom-line. Though more resources should be devoted to improving social participation and reducing social isolation.

Meanwhile some of Labor’s savings make good sense. The practice of parents using children for purposes of ‘income splitting’ in relation to the low income tax offset on unearned income will be cut back severely to $416 per annum. Tighter superannuation contribution caps for the over-50s demographic comprise an attempt to stem an effective tax-minimisation strategy, and reduced concessionary arrangements for upfront payment of HECS debt by students will save $480 million over four years, affecting mainly higher income groups. http://www.news.com.au/money/federal-budget/the-budget-what-it-means-for-you/story-fn84fgcm-1226053524859

Also very notable was the government’s announcement that it intends to enact separate legislation to means test the Private Health Insurance Rebate. http://news.ninemsn.com.au/mobile/article.aspx?id=8247906&_sp=2045&noid=6303&_s=eb0745b1-ffdd-4839-b584-91e50ee86c21

These savings are targeted for fairness, and are welcome insofar as the alternative may have involved further cuts to health, welfare, education, or crucial infrastructure. They are welcome in providing the scope to increase income support for families with teenagers in study aged 16-19, as well as ‘bringing forward’ the Low Income Tax Offset to apply to workers’ weekly pay instead of being accessible only with their end-of-year tax return. http://www.abc.net.au/news/stories/2011/05/09/3210940.htm

In relation to the government’s skills policy Treasurer, Wayne Swan had observed that: “skills shortages could constrain our economic growth and mean missed opportunities for Australians". http://www.smartcompany.com.au/economy/20110510-federal-budget-2011-3-billion-workforce-training-and-participation-projects-to-combat-skills-shortages.html

In this context the government has committed $3 billion in new money over six years including a National Workforce Development Fund (industry-based training with 130,000 places over four years), support for new apprenticeships, and incorporating a renewed commitment to skilled migration. This is the Budget’s true centre-piece. http://www.smartcompany.com.au/economy/20110510-federal-budget-2011-3-billion-workforce-training-and-participation-projects-to-combat-skills-shortages.html

There are also some bright spots amidst a largely disappointing welfare agenda. Employer subsidies aimed at helping the long-term unemployed and the disabled to re-enter the workforce are welcome: as is a restructuring of Disability Support Pension eligibility enabling the retention of some payment up to a maximum of 30 hours a week. For some disability pensioners – for instance those suffering mental illnesses – this is welcome on the basis that such peoples’ capacity to work fluctuates irregularly. http://www.jennymacklin.fahcsia.gov.au/mediareleases/2011/Pages/b05_10052011.aspx

Single Parents will also face incentives to work, with an easing of means tests. http://www.theage.com.au/business/federal-budget/tough-love-work-rules-20110510-1ehi8.html

Finally, a record $4.3 billion is being provided for the regions, targeting areas like health, infrastructure, and vocational and higher education. And an emphasis on skilled migration - with 16 000 places allocated to the Regional Sponsored Migration Scheme - will prove crucial to regions facing critical skills shortages in areas such as health services. http://www.minister.immi.gov.au/media/cb/2011/cb165287.htm

The commitment to regional Australia illustrates that where country-independent MPs hold leverage over a minority Labor government they will be in a position to ‘deliver the goods’. A mutually beneficial move could be for these independent MPs to enter into a ‘pact’ with Labor now, foreshadowing the possibility of another minority government, involving guarantees of a continued flow of resources for regional Australia. This could even provide a spur for additional independent contenders: and at least in theory provide impetus for a new party. Emphasis on consolidating regional population centres could ultimately be crucial in ameliorating the effects of urban sprawl in the major cities.

But Tony Windsor must reconsider his demand that Carbon Tax money be diverted from compensation for affected groups to investment in renewable energy programs. If there is to be new investment here it needs to be funded separately. Overcompensation and support for trade-exposed industries are just too crucial for Labor in ‘selling’ the Carbon Tax and achieving re-election. And despite talk of ‘cash churning’ the resulting market signals should still provide the desired effect.

Disappointments

Perhaps the most glaring disappointment is the government’s capitulation regarding the never-ending campaign of vilification against the unemployed, single parents and to some extent disability pensioners.
Disability Support Pension (DSP) recipients under 35 will face a more stringent “impairment test” . They will also be compelled to attend regular interviews (every three months) reassessing their capacity to work. This will apply to those “assessed as having a work capacity of at least eight hours a week.” http://www.jennymacklin.fahcsia.gov.au/mediareleases/2011/Pages/b05_10052011.aspx

With regard to ‘NewStart’, the unemployment benefit: long-term unemployed will now be compelled to ‘work for the dole’ 11 months of the year, two days a week. http://thecourierpigeon.com.au/government-gets-tough-on-the-unemployed/851664/

And unemployed 21 year olds will be shifted to the ‘Youth Allowance’. (at a rate $43 a week less than the poverty-level Newstart allowance). The targeting of this demographic seems largely arbitrary, and hence unfair. Many people will be of this age upon completion of tertiary study. For young people thrown into unemployment, and yet struggling to pay rent and bills, search for work, and feed themselves – this is a cruel blow. Perhaps some of the costs will simply be passed on to parents.

And yet Single Parents will be shifted on to Newstart Allowance (a $56/week reduction) when their child/children reach the age of 12. (down from 16) http://www.businessspectator.com.au/bs.nsf/Article/Groups-question-tough-love-welfare-GQGNM?opendocument&src=rss

One wonders whether the politicians, who expect these women (and some men) to raise a young family, and balance this task with paid work, understand the pressures and demands of raising a family alone. Do they really suppose a 12 year old child is in a position to care for themselves? The stresses of these new arrangements will undoubtedly also ‘flow through’ to young dependents in the form of emotional pressures and academic disadvantage.

The unemployed and single parents comprise ‘soft targets’, the vilification of whom is regularly beat up in the dominant right-populist monopoly media. And even still, expectations that savings can be made by targeting ‘rorting’ of the Disability Support Pension betray a lack of understanding of how debilitating some conditions – for example, mental illness - can be.

It warrants the question: does Labor accept the logic of its own policies, or is this a ‘sacrifice’ to placate those looking for scapegoats? Already Abbott is claiming so-called ‘tough love’ measures do not go far enough. So if Labor’s policies do comprise some strategic ‘sacrifice’ – then will this logic of retreat know any end??

Yet even amongst these attacks upon the most disadvantaged, ‘The Australian’ and Tony Abbott are talking of ‘class war’ against ‘middle Australia’ with some welfare cutbacks for households on $150,000/year and more. http://www.theaustralian.com.au/national-affairs/budgets/thats-not-a-knife-wayne-swan-as-budget-cuts-middle-class-welfare-but-increases-jobs/story-fn8gf1nz-1226053971008

Assaults upon the rights of pensioners, the introduction of regressive user-pays principles for everything from roads to schools, the gradual abandonment of progressive distributive mechanisms – these are considered ‘objectively sound policy’. But any attempt to achieve a modicum of distributive justice involving a greater proportionate burden upon the upper middle class is branded by the Conservatives a ‘war on middle Australia’.

Labor needs to press home the argument that someone must pay for health, education, infrastructure and the social security safety net. And if those on relatively high incomes do not pay their share then who will pay instead? Also while the very rich should pay their fair share, the tax system needs a broad enough base to fund the social necessities provided by government.

Chris Lewis, writing for ‘Online Opinion’ and quoting The Household, Income and Labor Dynamics in Australia Survey points out that restricting welfare payments to households on incomes of $150,000 and more “will [only] exclude about 15 per cent of income groups.” http://www.theaustralian.com.au/national-affairs/budgets/were-not-rich-but-wealthier-than-most-sydney-family/story-fn8gf1nz-1226054297260

Class interest is an unavoidable factor of political and economic life -although the Conservatives attempt to obscure the issue with false appeals to the principle of ‘classlessness’; where distributive justice is labelled ‘class war’ but assaults upon the most vulnerable are unquestioned. At other times fears about refugees and resentment against marginal groups are beaten up as a ‘wedge’. Finally there is appeal to ‘competence’ on ‘economic management’: usually constructed as adherence to the dominant neo-liberal ideology.

Many a radical in the 19th and early 20th Century imagined an in-built working-class majority would make transition to socialism inevitable in the context of universal suffrage. Since then, however, the class homogenisation imagined by Karl Marx was replaced by many layers of differentiation within the working class. The idea of a (predominantly white collar) middle class self-identity has long since impeded working class solidarity. Essentially, though, the Conservatives are still afraid of a Labor Party which appeals consistently, unashamedly and unambiguously to the class interests of the majority; a move which could reconsolidate Labor’s ‘natural base’.

Conclusions

This Budget – including its welfare and training provisions - is about pushing the economy to full capacity – anticipating a reinvigorated mining boom . There is the accompanying goal of containing inflation and hence interest rates and cost of living pressures. Greater participation should also ‘increase the size of the pie’ from which a larger and proportionate investment in infrastructure and social services could spring.

Labor governments of times past would attempt to contain inflation by working with the trade unions. But with the lack of such arrangements so-called ‘tough love’ measures on welfare aim to increase labour market participation by ‘any and all’ means necessary. Apparently this includes labour conscription, pressures upon the disabled and vulnerable single mothers, and continued relegation of the unemployed to dire poverty. By expanding a ‘reserve army’ at the bottom end of the labour market, Swan supposes he can contain the inflation genie.

It is conceded that labour market participation can ameliorate social isolation; though this can be pursued without the punitive elements contained in this Budget. As suggested, there are better ways of promoting growth and containing inflation than these. (ie: via agreements with organised labour which nonetheless do not erode real wages; but also through tax measures targeting consumption at the upper end to reduce inflationary pressures in the most equitable manner possible)

Despite this it is notable that Gillard Labor has broken with a long tradition amongst both Labor and Liberal governments of delivering income tax cuts ‘as a matter of course’. The political pressure to return to surplus by 2012-13, and pressures to maintain some modicum of social justice have ensured that.

Yet a higher and progressively-structured flood levy could have stemmed pressures to enact austerity. And delivering on an unnecessary and costly cut in Company Tax simply put the government under more pressure. However, a National Disability Insurance Scheme could have seen Labor ‘on the front foot’ – pursuing a big ticket reform agenda re-establishing Labor’s ‘can-do’ credentials. A ‘NDIS’ especially could have been crucial in expanding by billions real funding for disability services and income support to meet the true level of human need.

Instead the government is ‘dying a death of a thousand cuts’, depicted as indecisive, and victim to a deceptive fear campaign on the Carbon Tax.

The question that arises, therefore, is: ‘where to now’ for the government?.

Harsh ‘Work for the Dole’ provisions could actually spur public sympathy for reform of Newstart. The best could be made of a bad situation by tying these provisions to significant across-the-board increases in the Newstart pension (perhaps $50 a week), and signficantly greater increases for those directly involved in the program. Its severity could also be diluted with time; with more ‘carrots’ and less ‘sticks’. The Greens should demand such compromise through the negotiation process.

It is also crucial for Labor to drop its commitment to restrain proportionate growth in public expenditure ‘no matter what’. A NDIS must deliver significant NEW funds into the system. And in addition to existing shortfalls for services, welfare and infrastructure, sooner or later Labor must address in a progressive manner the pressures of an ageing population and a growing population.

Tens of billions are needed for aged care, health, medium-high density social housing, and transport infrastructure. This expansion cannot go on forever, but a reasonable goal for the time being would be to increase the tax base progressively by 1.5% of GDP per term of government. As this author has argued before, Labor should consider restructure of income tax or dividend imputation, a wealth tax, or a National Disability Insurance Scheme - or a mix of these options. And following a broader restructure and indexation of the bottom two income tax brackets, Labor could also let bracket creep ‘do some of the work’.

Only by meaningfully grappling with these issues can Labor overcome the impression of indecisiveness; reclaiming its status as a real electoral contender; as a government of vision, social conscience, and active social and economic reform.