Labor’s first budget deserves conditional support and a press for much more

Jim Chalmers delivers his first budget

Contributed by Joe Montero

The Albanese labor government’s first budget delivered by Treasurer Jim Chalmers brought down a package that had some good parts and some that are not so good. This has been the typical assessment from various quarters. Both sides demand some comment.

Chalmers claimed his budget is responsible economic management fitting the times. The question is whether it stands up to the claim. Everyone agrees, at least in words, dealing with the problem of cost of living is what is most important. So, let’s see how the package meets this objective. Secondly, the budget was delivered in the context where the Australian economy faces major challenges from both domestic causes and the impact of headwinds from the poorly performing global economy. Does the budget to anything to answer this?

The treasurer acknowledged there are economic problems and that the Australian economy is not doing well. This is the reason he gave for the importance of delivering a responsible budget. There are all sorts of definitions as to what a responsible budget means. Let’s just say, a responsible budget is one that protects and delivers for the wellbeing of society, and not mainly look after a few.

There is the $4.6 billion allocated to the childcare subsidy, which will, in theory, provide access to 1.2 million families on lower incomes. How far this will go depends on there being enough new childcare centres and places. This second need has not yet been met. This is the piece missing to make a big difference. But despite this obvious shortcoming, the allocation of this money is a step in the right direction.

Paid parental leave has been increased from 20 to 26 weeks, providing 18 weeks paid leave for the primary carer and 6 weeks for their partner. This is good news for young families under pressure. The government will provide 180,000 free-free places at university and 48,000 at TAFE and community vocational centres over 4 years. Further good news for hard pressed families.

Money will be provided for 10,000 new affordable homes, through government grants allowing home buyers to enter the property market with a lower deposit and taking out a smaller mortgage. This is in addition to the 30,000 affordable social housing home already promised.

More housing stock will help lower the cost of housing. providing it is not left to investors to leave empty as is being done with a significant part of the existing housing stock. We don’t yet know how this is going to be managed. at least there is significant potential here to lower the burden of having a home.

Why wait till 2024 to start building? There will undoubtedly be argument on whether a subsidy to the private rental market is appropriate.

There is more money for regional health services, $172 million in all, and a further 757.7 million committed to mobile and national broadband services. Women’s safety has attracted $1.7 billion for improved services.

Together, these headline initiatives are modest gains for working men and women and do mark a small shift from the policy of the Morrison government. The most important part is that they initiatives that can be built on.

Now consider the negatives. The budget remains securely tied to the ideology of neoliberalism. This means an exaggerated commitment to working towards a budget surplus and the notion that a corporate led recovery will fix the economy, create jobs, and improve living standards for all. This is an illusion that’s not going to materialise, an illusion that marks a continuation of the economic ideology of the previous government, and what lies behind the negatives.

The way to really counter the rising cost of living is to secure the revenue needed to make a real difference by not going ahead with the stage 3 tax cuts for the rich. Then there is the massive corporate tax evasion industry. Ending this would go a long way towards solving the existing trillion dollar budget deficit and thereby provide the funding to take on the cost of living crisis in earnest.

The budget and the comments around it have left a door open for possibly delaying or stopping the stage 3 tax cut. But there is still no intention of taking the corporate tax evasion industry. The rationale is that big-time investors will be scared away and won’t invest in Australia. This ignores that these big-time investors are already not investing to meet Australia’s needs and can’t be relied on as the generators of an economic cure.

A consequence is that the burden of cost for the modest changes in this budget have been put on the backs of wage earners and the poor. Therefore, wages are to remain stagnated, and recipients of Centrelink payments have been denied an increase in their income. This is the reason or omitting further advances in taking on climate warming and building a sustainable economy. Energy companies are to be allowed to overcharge and reliance on the export of coal and gas is encouraged.

Neoliberalism and the incentive to capture the middle ground have led to some concessions for the relatively comfortably well off. The threshold for the seniors Health Card will increase from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples. Deeming rates for those with financial assets will be frozen where they are now for two years. Although these moves are not necessarily wrong, they do give further indication of the government’s mind set of pandering to the Coalition’s base and ignoring those who are worst off.

If Labor is to continue to have credibility and legitimacy, it must begin shifting away from the grip of neoliberalism. It must admit that the economic and social challengers faced by Australia mostly stem from structural problems in the economy. This is that the private market dominated by monopolies is not meeting the needs of Australian society, and that the only way to remedy this is to build an economy that involving a healthy state sector, working in tandem with the community and small business as the backbone, creating the conditions under which the monopoly sector must operate.

The conditions to go down this road don’t exist right now. Australia must find the next step along this road. This does not mean advocating the fall of the Labor government be advocated. On the contrary. The only existing alternative today is a Coalition government, which would be far worse.

Supporting Labor government does not mean blindly agreeing to everything. Conditional support for what is positive and pressure to change what is not positive is the way to go. In the end, it will be what the Australian public demands that is the key, and attention must be put to raising public understanding of what is necessary, till it becomes a driving force on the Australian political landscape.

Some additional agreed to steps could be to provide more for new childcare centres, public and cooperative housing, introduce rent control, open education and training opportunities further, provision of assistance to businesses providing genuine sustainable energy and manufacturing, as a backup to public investment in these areas. There could be agreement on imposing some control over the finance sector, to ensure it operates in the interests of Australia and the citizens of Australia. There could be support for new community and cooperative economic initiatives.

The fallacy that real wages must be kept down must go. Inflation is a rising problem. But it is not wages that is causing this. Inflation occurring because the economy is not performing and the demand for money is for other than for other than for the consumption of what we produce.

This is revealed by the following graph that shows that inflation does not move in proportion to increases in wages. Now the gap between them is becoming wider, with inflation outstripping stagnant wages growth. This suggest there are other factors at play.

Source: CEIC/ING

This is in the hands of the corporations. Imposing greater control over finance and directing it to where it is most needed, would act as a powerful counter force. Raising the wages share would increase the domestic market, lead to more opportunities, and create jobs.

The next budget will be due in May 2023. In the meantime, Australia could be encouraged to get on with the business of coming together on new priorities.

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