The 1996/97 Federal Budget squanders opportunities and takes us nowhere argues ACTU Assistant Secretary Tim Pallas.

There is nothing visionary in the 1996/97 Federal Budget it squanders opportunities and takes us nowhere. It is a bean counter’s view of propriety and good management. For those of us who populate the real world and look beyond the ledger:
i] It inflicts austerity without either apparent reason or object;
ii] Its exacerbate hardship upon those sections of the community least capable of bearing it;
iii] Its cardinal sin is to avoid any responsibility for job creation or to address the needs of a community greatly concerned about income distribution.
When John Howard eschewed the big picture nobody could have imagined that the alternative could be quite so minute and insubstantial as this.
After 13 years in opposition and only fifteen months in power how could it possibly be that the only initiatives are directed at balancing accounts, dismantling or undermining labour initiatives such as superannuation, childcare, medicare and labour market programs. The Budget does nothing for job creation. The current account or even foreign debt reasonably prominent themes before the last election. I know it is too much to expect that markets or the financial media will look beyond the budget’s bottom line.
According to the Treasurer the Budget strategy fills in the deficit within two years. This objective is achieved mainly through improvements in the economy (an upward revision in economic forecasts):


  • proceeds from asset sales; and
  • the damage essentially done to expenditure in last year’s budget.



The Government seems to have abrogated any responsibility on their behalf to address the issue of unemployment. Indeed the Treasurer mentioned the word only once during his Budget speech. Since taking office the level of unemployment has increased from 8.5% to 8.7% contrary to last year’s budget prediction that unemployment would reduce to 8.25%. Tuesday’s unemployment figures give us little cause for optimism with long term unemployment rising to a 23 month high.
Finally Treasury have acknowledged that labour productivity has sharply improved since the beginning of the 1990s. In fact Treasury estimates our annual productivity gains since 1990 to be at 2%. The best result for two decades.
This budget sets the scene for a budgetary surplus in 1998/99 financial year which will no doubt set the scene for some old fashion pre-election pork barrelling most probably in the form of tax concessions.
Unemployment is both one of the sources of this Budget fiscal surplus and its greatest moral deficit.
The Government is forecasting unemployment to remain above 8% by the middle of next year, our seventh consecutive year of economic growth.
The Government is culpable for much of the problems through the combination of aggressive job reductions in Commonwealth employment and the destruction of effective labour market programs.
The 16,500 jobs included in this year’s Budget bring the number of public service job cuts to 27,000 in the last 18 months. The efficiency gains in the delivery of Government programs is expected to provide $1.75b savings in outlays by 1998/99.
Last years budget removed more than 230,000 training placements by cutting $1.8b from labour market programs.
Nothing of any substance has been provided to fill the hole. The Government main economic strategy for inflation and unemployment is to have the Reserve Bank “police” wage claims to bring down the growth in average wages.
In typically conservative style we have a budget of fiscal austerity coupled with an underlying philosophy of fight inflation first. Despite the fact that the later is not now nor is it likely to be a problem for the future. Headline inflation is predicted to trend down to 1% by 1997/98 and the underlying rate is to remain static at 2%.
Job creation whilst remaining the principle concern of the electorate appears to be a low order of priority for this Government. Labour market programmes aimed at skill development have been replaced with gimmickry one of funding for 10,000 “work for the dole” places. A Federation fund with no funding until 1998/99 financial year.
$86.3m dollars cut form vocational and industry training and related grants to the states. This is on top of cuts of $183m in last year’s budget.
The logical consequence of this disinvestment in young people’s future is already apparent. The growth in traineeships has reduced from 117% in the preceding Government’s last year to 68% in the Coalition’s first year in office.
On jobs the ACTU believes that the savage expenditure cuts in last year’s budget coupled with further reductions in this Budget have and will continue to have a regressive effect upon the economy deliberately slowing down growth to levels where real job creation is unobtainable. The reason for the reduction in the deficit and the move towards surplus was not the expenditure cuts but unexpected revenue increases from Asset sales.
The lack of motivation to directly address unemployment can be directly attributable to either a lack of leadership, blind faith in a market led jobs recovery or perhaps and more sinister proposal that a large and permanent pool of unemployed is needed to reduce real wages. As far fetched as such a proposition may seem it was only last week that the Government gave evidence before a Senate Budget Estimates Committee claiming that differential rates of pay for people performing the same job across the country was a legitimate outcome of the wage bargaining processes. One factor that was preferred as a legitimate consideration for such wage differentiation was the level of unemployment within the local community and therefore the demand for work.

The Abandonment Of The Co-Contribution Policy On Retirement Incomes

The Government’s breach of its W-O-R-D to deliver the 3% Government super contributions will have profound and adverse effects upon the vast majority of Australian workers.
It can be credibly demonstrated on conservative estimates that workers will loose anything in the vicinity of up to 40% of retirement income because of this change. Every dollar stolen by deception from workers’ retirement nest egg shall be accounted for and the Government will ultimately bear the cost politically and financially.
Australian workers are not stupid and it won’t require mathematical rocket science for each and everyone of them to figure at how profoundly they have been affected by these changes.
By removing the co-contribution Australia has lost a once in a lifetime opportunity to address and develop an effective national retirement and savings strategy. The opportunity will not come our way again. This nation had one opportunity and it has thrown it away, the principle of worker co-contributions to retirement savings is gone, gone forever and it will never return. The ACTU and the Australian union movement will never again support the principle that employees should be required to contribute to their own retirement. That was a commitment offered and honoured by Australian workers that has been rejected by this government and replaced by a savings incentive policy that was accurately described by Mike Secomber of the Sydney Morning Herald today as “fundamentally inequitable, a benefit for the rich and a hoax on the poor” .
By destroying a 15% income contribution to retirement the Government has irreparably damaged the retirement security of every working Australian. Dr Vince Fitzgerald described 15% as the minimum amount necessary for workers to enjoy an adequate income in retirement. Left therefore to the devices of government policy alone workers will be abandoned in retirement with insufficient savings to support themselves. For its part the Australian union movement will not be complicit in this deceit. Every Australian workers should be aware that they should demand of their employer further and improved contributions to their current level of retirement savings to bring the total up to a minimum of 15%.
The conversion of the co-payments into a new tax break on savings, a move that the Government believes will save it $1b is money stolen from working people.
The historical significance of this budget, its investment fiscal myopia and its discrimination against those with the least savings capacity can not be underestimated. In the long term, ordinary Australia will look back on this budget as the budget that caused them to be retiring with less superannuation than was to be the case.
Employers too will moan the fact that superannuation will re-emerge as an industrial claim where once a co-operated retirement strategy had existed. The abandonment of their co-contribution policy will mean our chance as a nation to create a huge pool of savings to finance our economic development will be lost.

National Savings/National Debt

Do you remember all the talk about our foreign debt at the last elections, we don’t hear much about that anymore.
National foreign debt is now at a record $202.4b. In the first 9 months of this Government’s term in office we have seen net foreign debt rise by $16 billion – by comparison in Labor’s last 2 years of office it rose by $18b in total.
The co-contribution strategy would have raised our national savings by over $10b a year by the year 2000, it would have ensured our national savings pool rose from today’s level of $300b to $2,000b by the year 2020.
This is a squandered opportunity gargantuan proportions.

The Tax Rebate

The most amazing thing about the tax rebate proposal is that the Governmet is seriously suggesting it as a credible alternative natural savings initiative. It is of course a joke in terms of its savings generation objective. The only people likely to benefit from this proposal are those with substantial income and therefore saving capacity. A very similar scheme was floated when Labor was in Government at the time Treasury rejected it as adding nothing to national savings. They were then as we are now sceptical about the likely pick up rate of the rebate incentive.
If you have $5,000 in savings the rebate will amount to just $37.50 a year/72 cents a week. Next to the high paid/high savers the only other net beneficiary of this scheme is the Government who are keeping the $3.7b previously earmarked for superannuation over the next four years. Under the Co-contribution Scheme if you put in $1,000 as a low paid worker the Government matched you dollar for dollar. Now you must put in at least $3,000 before you get a rebate of $450.
At the last National Wage Case the Commission received evidence that almost 40% of Australian households had difficulty in making ends meet and regularly reduced their staple domestic consumption expenditure as a consequence of insufficient income.
These are the very same battlers that John Howard seriously believes will put aside a lazy $3,000 to get a $450 tax rebate.
What a sad indictment on the responsiveness to real needs of real people. This is not a scheme about anything other than reducing Government fiscal obligations and destroying national superannuation savings strategy. The fact that the Prime Minster has personally refused to claim a rebate only serves to highlight the inequality of this system – that he should feel obliged to make a voluntary or moral means test highlights one of the scheme’s basic flaws. Will his Cabinet by all accounts the wealthiest in this nation’s history do the same. And what does it really matter.