Mantles of fairness Editorial Issue 86
Mantles of fairness
Budgets are politics dressed up as economics. Perhaps the most widespread view of the 2017 Budget is the Turnbull Government trying to retrospectively fix why it almost lost the 2016 Election. These include admitting to the unfairness of the 2014 Abbott-Hockey Budget and coating the 2017 Budget as fair. As Michael Pascoe put in the Fairfax media, the Government is fixing ‘”Mediscare", education, housing affordability, the banking royal commission proposal and One Nation and its fellow populists’. It is trying to blunt Labor with Gonski 2.0 and a guarantee on Medicare. But with enough to please the Abetz-Abbott conservatives in and out of the Liberal Party especially the measures directed at welfare recipients. And still enough in Dutton’s strong borders to at least get preferences from Pauline Hanson’s One Nation (PHON) voters.
A more substantial reading
The macroeconomics of the Budget are quite fundamental changes. ‘Small government’ is apparently gone. The language of fairness and harmony casts aside Tony Abbott. The Governments breaks with sureties of John Howard and Peter Costello especially about being ‘debt free’, reducing direct taxes and decrying almost everything Paul Keating stood for.
The use of government and infrastructure to stimulate jobs and growth is mild Keynesianism. The building of the Western Sydney Airport and Inland Rail as public assets plus the investment of billions in pumped-hydro signals that ‘government’ is back in fashion. The Treasurer stressed in the Budget speech that Snowy Hydro will have to remain in public hands.
Paul Keating remains an astute reader of political moods. He says the most significant thing about the Budget is ‘the Liberal Party's final acceptance of the new community standards Labor set in the 1980s and 1990s: Medicare, superannuation, a system of minimum wage rates and a trebling of year 12 retention rates in schools‘.
Voters want properly funded public services - not the American road
Opinion surveys after the budget show that all the major measures - increasing the Medicare levy, fully funding the NDIS, school funding, and the bank levy - have majority support. As repeated surveys and even elections prove, a substantial majority of voters want high quality universal public services including but not limited to health, education, aged and child care. They are also prepared to fund these services through general taxes and especially through hypothecated taxes. Labor seems to have missed how the Budget shift has been forced on the Coalition by mass opinion. And that paying for the NDIS via Medicare also locks Medicare into the DNA of the Australian body politic.
The cynical public-choice view of politics portrays the Budget as a calculated and ideology-free move by the Turnbull Government to rebuild its electoral fortunes. Labor and other commentators have made play that the Government has stolen Labor ideas and is not to be trusted. Both the latter are true; but neither really matters. The Turnbull Government has moved to guarantee a public health system with universal access; it has accepted needs-based funding in schools; it has provided more funding (and seemingly full funding) for the NDIS.
These should be acknowledged and celebrated - not because the Liberals have done it - but because they are the appropriate things to do. As Paul Keating also says, we have avoided the American road. ‘This is why Australia is a better society than the US. It's a Labor-designed society, a design the Liberal Party has finally adopted’
Labor might be better off (and certainly more honest) by congratulating the Government rather than complaining about stolen ideas. It is germane to ask whether Turnbull has been able to move the Government to a “Labor-lite” position because of the strength or the weakness of Labour. Put another way, has Turnbull adopted Labor’s policies on education, health and the like because they are compelling? Or has Labor been so vacillating that they have left the middle space to Turnbull?
Indeed, Labor might be covering its own weakness especially in education. The Gillard measures in 2012-13 were not the full adoption of needs-based funding - especially the curious acceptance that ‘no school should be worse-off’. Ken Boston the architect of Gonski says, Labor ducked the fundamental issue of addressing the relationship between aggregated social disadvantage and poor educational outcomes.
Writing for the TJ Ryan Foundation he argues that the present ‘quasi-market’ system of schooling, shaped by the Hawke and Howard Governments, has comprehensively failed. Moreover, we have a publically-funded school system in which fee-paying schools (including Catholic ones) add their fees on top of public funds that are almost as much (and in some cases more than) the per-student amount going to state schools. The recurrent costs of the majority of non-government schools are essentially funded by governments.
Labor and progressives need to be arguing that Australia has one of the worst and a still deteriorating relationship between educational achievement and low socio-economic status of the OECD. Fixing this should be at the front of school policies – not pandering to the likes of Catholic Education who desperately want to cling to system-based and not school-based funding.
The overall macroeconomics of the Budget relax the pressure to balance the Budget; rhetoric about debt disappears. The Government has followed the new IMF line. In late 2016, the IMF recommended that Australia should deliberately slow the pace of getting a balanced budget and increase spending on ‘growth-promoting’ infrastructure. The Treasurer’s clumsy ‘good debt-bad debt’ might come from this. So does the emphasis on using government to stimulate growth and jobs. For example, the claim that the Regional Growth Fund of $472m will ensure ’all levels of government collaborate to create jobs’.
Is ‘nation building’ for the Nationals?
The regional funds need close scrutiny. Much of the ‘nation building’ seems to be manna for the National Party and part of their bulwark against PHON. The ‘Inland Railway’ is a prime part of this but so are the increases in regional development funds. They add to the $5 billion of concessional assistance in the Northern Australia Infrastructure Facility. It is archetypal National Party – roads, dams, defence facilities. And of course, it might well include public assistance for the railway from Abbott Point to the Adani mine in the Galilee Basin which Minister Kanavan strongly favours.
One Nation’s challenge to the National Party is especially strong in Central and North Queensland. The ALP faces a similar challenge marked by the failure to win Capricornia from the LNP at the last election. To deliberately pun, the Nationals are offering voters concrete. Labor, as evidenced by the appalling and aborted “Aussie jobs” commercial, proffers a crude populism and a Caucasian work-force. This needs to be called-out for its complete absence of cultural awareness. It is an insult to the radical history of North and far-North Queensland which for much of the nineteenth and twentieth century was the most culturally diverse part of Australia.
Where the budget is weak
It is easy – the absolute lack of mention of climate change. No credible solution to the problem of housing unaffordability. The continued increases in defence funding. The cuts to overseas aid. The attack on the unemployed which is principally an attack on the young since over 41 per cent of the unemployed are young people.
The underlying economics of the budget are extremely questionable. The old link between economic growth and jobs is broken. Economic growth is occurring without proportionate increases in employment. The situation is compounded by the long-run problems of youth unemployment, high levels of part-time and contingent insecure employment and the new pressures for automation in driving, warehousing and computer machine reading and writing in health, law and journalism.
Australia, like the rest of the OECD has a serious problem with youth unemployment. The most recent OECD data on youth (15-24 year olds) unemployment puts Australia around the OECD average of 13 per cent. This rate has been persistent since the mid-1980s. A further 18 per cent are underemployed. What work is available for young people is more insecure – there are now more part-time than full-time young workers
The projection that wages growth is going to increase from 2 per cent in 2016-17 to 3.75 per cent in 2020-21 and provide the taxes to balance the budget is heroic. It presumes either that employers (including the Federal Government) will suddenly become generous in wage bargaining or that workers and the remaining unions will gain industrial power. Yet as Greg Jericho shows underemployment, especially for men, is ensuring that the ‘reserve army’ is large and keeping wages down.
Progressives have got plenty to do. Accept a little win on health and education and get to work on how to achieve real and deep equality and how to balance economy, society and environment including climate change.