Federal Budget: the good, the bad and the absent

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Paul Barratt, Chair of Australia21

 

 Australia21 Chair, Paul Barratt, reviews the 2017 Federal Budget

 

 

A teacher assists children at Cowandilla Primary SchoolNeeds-based school funding

This is very welcome. Ross Gittins summed it up well in the Sydney Morning Herald: “Without doubt, the budget measure that will do most to increase economic efficiency – not to mention fairness – is the government’s belated embrace of needs-based school funding.”

 

University lecture theatreTertiary education and research

Whatever view the government might take of how much students should contribute to the cost of their own education or when they should start repaying HECS/HELP loans, it is difficult to see a reduction of government expenditure on tertiary level education and research as the solution to any of the challenges that face Australia.

 

smoke stack from industryClimate change

In light of the Treasurer’s statement in the opening lines of the Budget Speech, “Because we cannot pass a burden and forsake our obligations to the next generation”, it is remarkable that there is nothing about climate change.

 

Train tracks with freight train in distanceInfrastructure

The Government’s newfound willingness to borrow for infrastructure is welcome, but the Government needs to embrace a very broad definition of “infrastructure”. All long-life assets should be funded by borrowing so that payment for the services they provide is spread across the generations that receive the benefit.

 

Good debt and bad debt

Australia21 - nurse with baby in humidicribThe distinction the Treasurer has drawn between “good debt” and “bad debt” is so simplistic as to be worse than useless:

  • The salaries of school teachers and academic teaching staff are recurrent expenditure, but the learning they impart to students lasts a lifetime, so education is something in the nature of an investment.
  • Similarly with expenditure on health. The hospitals are long-life assets (so should be financed by borrowings) but the salaries of doctors and nurses are recurrent expenditure. Timely medical interventions, by restoring people to health as quickly, simply and completely as possible, are also in the nature of an investment; where does that fit into the Treasurer’s scheme of things?
  • In public sector research, the buildings and equipment are long-life assets, but the salaries form part of the cost of research that definitely constitutes an investment.
  • Most of Australia’s defence expenditure goes on recurrent costs (salaries, equipment maintenance, fuel, lubricants, ammunition etc) but without those recurrent costs the major platforms provide no defence at all. There is a lot of recurrent cost in building capability. For example, it costs years of training and many millions of dollars to produce a front-line fighter pilot, so each is in effect a living, breathing bit of capital investment.

 

Inequality

Australia21 - man sitting hunched overThe budget does little, if anything, to tackle the serious social and economic problem of inequality. Raising student costs and demanding earlier repayment does not help. If anything, imposing the extra Medicare levy while relieving high income earners of the budget repair levy makes inequality a little worse. Without a significant attack on inequality the economy (retailing in particular) will continue to struggle.

Access to housing is a growing part of the inequality story. Solving that will take more than tweaking the process by which new home buyers save for a deposit. It is disappointing that the Government declined to tackle the key issues of the investor subsidies that make it so difficult for first time buyers to enter the market: negative gearing and, especially, the capital gains tax concession.

 

Welfare drug testing

Australia21 - man inhaling from marijuana bongRandom drug or alcohol testing of welfare recipients is poor public policy on three grounds:

  •  Unless there is a systematic process of referral for treatment it will do nothing to help these people find jobs and nothing for their drug or alcohol problem.
  • The fact that it is random means some will suffer serious indignity, disability and loss of self-esteem through the luck of the draw.
  • There should be nothing in the unemployment benefit framework that stigmatises people applying for benefits. The fact that we have unemployment at the current level means that there are more people looking for work than there are available jobs; someone has to be unemployed. If it is good enough for Winston Churchill to state that unemployment benefit is a citizen’s right and no shame should attach to it, it ought to be good enough for everyone else.

For more on the dangers of linking random drug testing to welfare payments, read our analysis by Australia21 Director Dr Alex Wodak.

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