Sunday, May 15, 2011

2011 Budget

This past week, the Federal Treasurer, Wayne Swan, delivered his budget on Tuesday night. Traditionally, the Leader of the Opposition gives a Budget reply speech. By common agreement among journalists, Tony Abbott gave a pre-election speech.

In his 3rd paragraph he said:

Since December 2007, the price of electricity is up 51 per cent, gas is up 30 per cent, and water is up 46 per cent. Education costs have risen 24 per cent, health 20 per cent and rent 21 per cent. Grocery prices are up 14 per cent. Since the middle of 2009, interest rate rises have added $500 a month to mortgage repayments while wages have risen just 7 per cent.

This is spin and needs to be challenged, and questioned:

  1. electricity: for years, all state governments starved their still or then-owned electricity corporations of funds. Consequently, there was grossly insufficient investment in line maintenance and upgrades. Further, both state and Federal governments had an agenda to encourage and reward users who installed home-based solar panels. Some states paid up to 3 times the price for electricity fed into the grid. Increasing demand from new developments, rising population and increasing numbers of electrical appliances have all contributed to the price increases. The latter also applies to gas supply.
  2. Education costs: what costs? The cost of private education has certainly increased, as have their prices. Both public and private schools have had to upgrade IT infrastructure. Tony Abbott has not been sufficiently clear about what ‘costs’ he has used, nor those which he wants us voters to use for our own comparisons.
  3. Interest rates are still lower that when he was last in government. He was part of a government that splashed so much money that the Reserve Bank was forced to raise interest rates 11 times between 2001 and 2007. At the 2007 election when the government of which Abbott was a member lost, RBA interest rates were 2.00% higher that they are now!
  4. Wages: while wages growth has been slow, the wages of Abbott’s target voters were often savaged under the WorkChoices legislation he voted for, and defended, even while executive salaries ballooned.


Tony Abbott targeted the people whose votes he will need to win government: teachers, nurses, police officers. It is entirely reasonable to debate whether a family earning $150,000 per year is wealthy, it is also reasonable to note that the top 2% of income earners earn $150,000 or more; and the top 17% of households have that income or more. That’s 1 in 6 families. Five in six families earn less. The top 20% of people own 60% of the wealth in Australia; the bottom 20% of people own just 1%. Part of the problem for people is that, under the previous Liberal-National Coalition government, they became used to increasing amounts of money being handed to them by the Federal Government. People will adapt to the changes. That is human nature.

It is this type of voter attitude that is partly responsible for the financial troubles of PIIGS in Europe (Portugal, Italy, Ireland, Greece and Spain). That is the voters don’t want to pay increased taxes, often actively avoid paying taxes, but still want government handouts, including a government pension.

Some have complained that there’s nothing in the budget for them. There is plenty, including:

  1. Government-subsidised health (Medicare, and other health programs)
  2. Government-subsidised pharmaceuticals (Pharmaceutical Benefits Scheme, for prescription drugs)
  3. Government funding for social infrastructure, usually provided to the states (public hospitals, public schools …)
  4. Government co-contribution for low-income earners (it means they will be less reliant on government pensions in future). They will also get some of their rebate each pay period, rather than after submitting a tax return.
  5. The child care rebate remains, regardless of income
  6. The baby bonus, or paid parental leave, is still available

But it is not a perfect budget by any means. Some of the savings measures will affect consumer discretionary spending. Yet this includes the area of the economy that is in the ‘slow lane’: retail, entertainment, tourism & hospitality. Tony Abbott has previously said that a Labor Government will never return a surplus. There is no doubt the government will do all it can to return the budget to surplus: it wants to make liar of Tony Abbott. Abbott, meanwhile, will “do anything” to destabilise government in Australia. We will be in for a long 2 1/2 years of Government and Opposition spin.

Many, including the media are rather too focussed on asking ‘What's in it for me, me, me?’ Australian society would benefit from a more positive attitude, recognising that the budget does try to help those less fortunate, while still providing considerable funds for all, including “middle class” people. Like me.