Introduction by Croakey: Prime Minister Scott Morrison is suggesting that next week’s Federal Budget will be one of the most important budgets since the Second World War.
“We find ourselves in unprecedented times when it comes to the effect of a global pandemic on a modern, globally interconnected economy,” he told journalists this week.
Clearly, the budget’s ramifications for health will be significant, in the short and long term.
Action on climate change is unlikely to be a focus of the Government’s economic recovery measures, despite strong evidence that this could provide a sustainable pathway out of recession.
A recent report, published by the International Renewable Energy Agency, shows significant job growth in the renewable energy sector and argues that this could be accelerated by adopting policies to fast-track the transition away from fossil fuels and towards renewable energy.
The Million Jobs Plan, developed by climate change think tank Beyond Zero Emissions, provides a blueprint which would deliver a stronger COVID economic recovery than the Government’s preferred gas-led strategy, with lower unemployment, higher living standards, and contained government debt.
The details of the budget will not be known until next week but reports that environmental groups have been excluded from the lockup indicate suggest that the Government is not expecting a positive response from this sector.
Below, Croakey editor Jennifer Doggett provides an overview of recent related commentary.
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Jennifer Doggett writes:
Next week’s Federal Budget will be critical in supporting Australia’s recovery from the health and economic crisis caused by the COVID-19 pandemic.
The budget provides the opportunity to address the inequities exacerbated by the pandemic but a predicted $355 billion (over three years) deficit may make the government reluctant to significantly boost spending.
Here is an overview of analysis and suggestions from economics and other experts for stimulus spending.
Social housing vs tax cuts
A survey of 49 eminent economists found that they supported funding for social housing and JobSeeker over personal income tax cuts in the upcoming Budget.
The survey was conducted by The Conversation and the Economic Society of Australia and reported by Peter Martin.
The report quotes Monash University econometrician Lisa Cameron who said the budget provided an unusual opportunity to fix things for the long term while boosting the economy.
“Social housing would leave us with something worthwhile (as did the school hall building program during the global financial crisis) in addition to providing work for the building industry. Alleviating homelessness would be a lasting benefit.”
It also outlines the strong support for increased unemployment benefits among the economists surveyed, including Melbourne University economist John Freebairn who pointed out that with no real increase in Newstart since 1993 and many on it in demonstrable poverty, every extra cent spent on it will be spent rather than saved.
The least popular options nominated by the economists were company tax cuts and support for fossil fuels.
In Advance Australia Unfair, Elizabeth Minter from Michael West Media argues that the proposed tax cuts will increase inequality in Australia by favouring men over women, old over young, rich over poor.
The Government has also announced the budget will contain a big investment in infrastructure spending, which again benefits the male-dominated construction sector.
Yet research from the Australia Institute has shown, spending on health and community services, sectors that employ predominantly women, create far more jobs per billion dollars spent.
Surely the government’s focus should be on groups that have paid the highest price?”
‘Bizarre’ tax cuts
In Rich Thinking Minter describes the Coalition’s plan to flatten taxes as ‘bizarre’ and argues that politicians have completely lost sight of what most working people earn”
“Just 3.4% of all workers earned more than $180,001 in 2017-18. Federal MPs, on their $211,000 base salaries, are clearly in a rarefied atmosphere…
Last year, Labor leader Anthony Albanese said he did not “regard someone who’s earning $200,000 a year as being from the top end of town.
In May 2015 then Prime Minister Tony Abbott said that a family income of $185,000 “isn’t especially high” in a city like Sydney. At the time the National Centre for Social and Economic Modelling showed that those with an income of $185,000 were in the top 6% of all family incomes, including single earners.
The nation’s politicians are well and truly out of touch with the average Australian. They are far more representative of the wealthy few, who benefit disproportionately from their policies.”
Budget gender impact statements
A gender lens is also applied by Professor Rhonda Sharp, Monica Costa and Professor Siobhan Austen who argue in The Conversation for the return of Budget gender impact statements, a practice started by the Hawke government in 1984 and continued until the 2014 Abbott-Hockey budget.
Sharp, Cost and Austen argue that COVID-19 has made the need for gender analyses more apparent by increasing the care needs of households and highlighting the critical role of women in meeting these needs to maintain the economy.
Gender responsive budgeting could make a substantial contribution, documenting the extent to which investment in childcare and other services is more likely to create jobs, and jobs for women, than spending on construction. While the current government appears uninterested, the tide is turning.
Almost half of the 37 countries in the Organisation for Economic Co-operation and Development now have some form of gender budgeting. The former head of the International Monetary Fund has declared it good budgeting.”
Priority stimulus measures
Former Secretary of the Department of Employment and Industrial Relations, Department of Finance and Department of the Prime Minister and Cabinet, Michael Keating, has two articles previewing the budget in Pearls and Irritations.
The first discusses the economic outlook and concludes that further stimulus measures will be necessary in the forthcoming Budget.
The second focusses on what extra stimulus should be incorporated in the Budget, making a strong case for directing this additional expenditure to services that the government has squeezed and under-funded in recent years.
Specific examples suggested by Keating are:
- aged care and mental health services
- labour market programs and vocational education and training to help disadvantaged people catch up and learn new skills to give them their best chance of being job-ready when the economy recovers.
- universities which are presently laying off staff in response to the loss of international student revenue, but whose graduates and research are vital to the future growth of the economy
- reducing the cost of childcare to parents which would increase female workforce participation as well
- increasing the amount of rent assistance which along with the low rate of unemployment assistance represents the greatest area of need among low income people
- the arts, including the ABC and public galleries and museums, which will find it especially difficult to recover without additional funding
- targeted help for the hospitality industries, such as the provision of vouchers
A new deal
The need for a radical rethink of economic policy is proposed by Amanda Tattersall in The Conversation.
She describes the main findings of the“Real Deal” report, developed by a diverse range of stakeholders, including community and climate groups, unions and business groups bought together by the University of Sydney’s Policy Lab to identify strategies for creating a different way of making policy and building a new economy coming out of the crisis:
“The Real Deal isn’t a typical policy document that outlines a magic bullet to the problems the pandemic has created.
We tried to break with the old battlegrounds and ideologies that have failed us over the last century. Instead of calling for unfettered free markets or big welfare states, or simple solutions like budget surpluses or endless stimulus packages, we are calling for a new relationship between the markets, government and civil society.
At the centre of this, we are arguing for a more collaborative approach and for mass community participation to be valued in public life.”
Major reforms in aged care
Aged care is also another area which clearly needs both policy and budget reforms to address what Stephen Duckett, Anika Stobart and Hal Swerissen in The Conversation describe as “a litany of failures: unpalatable food, poor care, neglect, abuse and, most recently, the tragedies of the pandemic”.
Duckett, Stobart and Swerissen argue for major reforms stating that:
“More money is necessary but not sufficient. The aged care system needs to be redesigned, throwing out the current market-driven, provider-centric approach.
The 2020-21 Federal Budget, to be unveiled October 6, should include an aged-care trifecta: expansion in home care, greater transparency, and a rescue package. The ultimate goal should be a dramatically different aged care system which is more attuned to supporting the rights of older Australians.”
See Croakey’s previous coverage of #Budget2020Health