Ministers in Julia Gillard’s government have warned of a huge shortfall in government revenue, estimated at $7.5 billion by treasurer Wayne Swan and $17 billion by finance minister Penny Wong.
The purpose of these pre-budget announcements is to prepare the public to accept cuts in social spending. Indeed the Gillard government has already announced the biggest cut to tertiary education funding on record.
The $2.3 billion cut is bigger than any of the cuts to tertiary funding by the former Howard government. It comes after a $1 billion cut last year by the Gillard government and cuts to TAFE funding by the Victorian and NSW state governments, cuts that have brought the TAFE sector to the edge of destruction.
There is nasty manipulation of public fear and confusion going on here.
As Richard Denniss of the Australia Institute wrote in a Crikey article on May 9: “Although the John Howard, Kevin Rudd and Julia Gillard governments have all worked hard to pretend that providing better services were their 'priority', the last decade of budgets highlights that their real priority was reducing the amount of tax paid by the biggest companies and the highest-income earners.”
The Australia Institute has calculated that if the Howard, Rudd and Gillard governments had left the tax rates unchanged at their 2005 level, then this year the federal budget would have collected about $39 billion more in additional revenue.
The Australia Institute’s modelling also shows that the rich gained the biggest share of those tax cuts. Denniss wrote: “The top 10% of income earners received a bigger share of those tax revenues than the bottom 80% combined.”
It is not just these generous cuts in the income tax paid by the wealthy that have put the budget under pressure. There is also “the enormous cost of the tax concessions on superannuation, the decision to tax income from capital gain at half the rate that ordinary income is taxed and the rise and rise of the cost of tax concessions and subsidies to profitable industries such as mining and unprofitable industries such as logging.”
The tax concession on super earnings has increased in cost from $9.5 billion in 2009-10 to $32 billion in 2012-13 and Treasury predicts that will rise to $45 billion by 2015-16, by which time it will overtake the cost of the age pension, as Mike Steketee pointed out in the ABC's The Drum on February 22.
The public subsidies to the mining industry are calculated to be $4 billion a year by the Australian Institute and Gillard's weak Minerals Resource Rent Tax (MRRT) not only is collecting less than forecast (a miserable $126 million in its first six months), the generous deductions mean some of the biggest and richest mining companies are billions of dollars in credit.
An ABC news report on May 9 said: “The mining tax allows companies to offset the value of their mines against the tax they have to pay, and the 2012 financial reports of BHP Billiton and Rio Tinto show that amounted to tax credits worth $644 million and more than $1.1 billion respectively.
“Hancock Prospecting's freshly lodged 2012 financial report — submitted to the Australian Securities and Investments Commission (ASIC) six months late — shows it has an even bigger credit against the mining tax worth $1.16 billion.”
The report said Andrew Forrest's Fortescue Metals has repeatedly said it does not expect to pay any mining tax in the “foreseeable future” because it has claimed an MRRT credit of almost $3.5 billion. This brings the total mining tax credits of the big four iron-ore producers to almost $6.4 billion.
The big mining companies have gotten away with daylight robbery and this is why the Socialist Alliance is campaigning for the nationalisation of the mines and banks under the control of the people.
Then there are the billions misspent on imperial occupations of Iraq and Afghanistan, the purchase of expensive war planes and submarines.
Gillard announced on May 2 that her government would spend an extra $1.5 billion on 12 new electronic warfare fighter planes to cover the delays in the joint strike fighter project.
At this stage, the Australian government plans to spend $16 billion on 100 of these warplanes, but their cost keeps rising dramatically.
Gillard also committed to buying 12 new submarines and two new Navy supply ships. According to the Australia Institute, each submarine costs $6 billion over its lifetime, which is three times the $1.8 billion it would cost the government to raise the Newstart unemployment benefit by $50 a week.
Denniss said: “Australia is one of the richest countries in the world living at the wealthiest point in world history. We can afford to do anything that we want, but we can't afford to do everything we want. If we wanted to spend more on health, education and transport we could. The fact that we don't is proof either that we as a community don't want to or that our elected representatives aren't listening to us.”
But the public clearly does want money to be spent on what is urgently needed for the common good. This was clear for all to see in the political wedging games the big parties are playing around the issues of “Gonski” school funding, national disability care funding and industrial relations.
On all three of these issues, and despite the deeply flawed ALP proposals, Tony Abbott’s opposition has been forced into making concessions — even if only in promises that may not be kept should it win the next election.
The opposition feels the pressure of popular support for better education and disability care funding and it is haunted by the memory of the mass mobilisations of hundreds of thousands of workers against Howard’s anti-union WorkChoices laws.
If the memory of those popular mobilisations is enough to make Abbott blink, imagine if the trade unions and other influential institutions were prepared to call independent mobilisations in support of urgently needed social and ecological spending and for workers’ rights?
[Peter Boyle is national co-convener of Socialist Alliance and is its candidate for the seat of Sydney in the federal election.]