The May budget continues austerity regime

Contributed by Jim Hayes

 

Treasurer Scott Morrison had an opportunity to put Australia’s 1.6 trillion economy on a new footing when he delivered the 2016 budget on 3 May. He didn’t take up the challenge. Take away the spin and what is left is the same old, same old. Nothing has changed.

The key criterion for judgment is who are the winners. The top end of what is described as middle class Australians got a tax cut, more is to be spent on armaments.  True, small business will have a small tax reduction for those with a turnover not more than $2 million a year (down to 27.5 percent) and a rising scale for those up to $10 million. By 2023-24 the cut will apply to all Businesses and reduced to 25 percent by 2026-27.

So behind a marginal election sweetener the real agenda is to set the course for corporate tax breaks down the road.

Much has been said about multinational corporations losing out. This is not exactly true. The diverted profits tax mentioned that will add up to 40 percent for those corporations trying to send profits off shore sounds good. But there is little substance for it. Much of the transferring is already done through the selling to a parent at an inflated price and having this listed in Australia as a cost, not profit. In truth, profits sent overseas will not be taxed. Stopping the practice requires the closing of this and other existing loopholes. It is not being done.

Further proof of the limitation is the stated aim of clawing back $200 million, when the amount going overseas is in the billions. Multinational corporations are the biggest winners, given the pressure on the government to act to curb their abuse. Instead of action we are getting a smokescreen.

Another sleight of hand has been the new Tax Avoidance Taskforce, when the ATO has just been nobbled through job losses. Bringing in 1000 new staff into an organisation where you get rid of many of them beforehand achieves no more than treading water. As it was, the ATO was under resourced, given the scale of the task before it.

Nearly $3 billion has been allocated for some new infrastructure projects, mostly for roads in Victoria.

It is a con, given that the main infrastructure needs for the state involve rail construction and in Melbourne, expanded public transport to get cars off overcrowded roads. Furthermore, it looks more like a tactic to build towards a confrontation with the Victorian Labor government, which has different priorities and has the main responsibility. It may well be that much of the allocated money is not meant to really be spent.

The help said to be for our under 25-year-old job seekers, is no more than an attempt to provide a cheap labour force that will displace jobs on higher wages through compulsion. It’s another work for the dole scheme and like its predecessors, will prove ineffective in terms of creating new, stable employment.

New Enterprise Incentive Scheme (NEIS) is being expanded. Through this young unemployed will be put through a course, after which they are to start their own business. Trouble is, being unemployed means not having the start-up capital that would be needed. But it does help to keep the youth unemployment figures down.

Now for the admitted losers. Funding for government services will be reduced all round, mainly through job cuts termed increasing efficiency, to the tune of $1.4 billion over three years. This is quite a cut and it is inconceivable that this can be achieved without losing quality of service.

Not only this, but such a cut will shrink the Australian economy, the last thing needed when in real terms it is already in contraction.

Tertiary education cuts will continue making it harder for young people to get qualifications. Even if they do most will be burdened with a lifelong debt that will have an adverse effect on themselves and divert millions from the real economy.

This brief overview makes it clear that the era of austerity economics is still alive and kicking in Australia. The government will continue to manage in the direction of deepening economic stagnation and decline. This is an election budget. Without this it would have been much worse. But before we breadth a sigh of relief, note that the tone is being set for the next budget. With the same government, it will be a scorcher.

It is downright it is downright irresponsible, flying in the face of the mountains of available evidence. Austerity leads to more austerity. It does not create a healthy economy.

 

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