The Hockey budget betrays an ideological drive towards US-style small government and corporate power. By Wayne Swan.

Wayne Swan
The ideology driving the Abbott government’s first budget

Raw ideology – a desire to shrink the size of government – is the real driver of the Abbott government’s first budget. 

It splinters the key planks of our social contract, which makes Australia one of the most prosperous and socially mobile developed economies in the Western world.  

We’ve known from day one that the Abbott government’s so-called “economic emergency” has simply been a stalking horse to justify a broader and hidden ideological agenda.

Quality health and education is what has driven a high level of social mobility in this country. The centrepiece of the budget was a massive $80 billion smash and grab from public schools and public hospitals the length and breadth of the country. 

Pensioners and low-income families have had payments cut and the young unemployed have been thrown adrift with a first in Australian history – time-limited welfare benefits. Australia has a highly targeted, efficient and poverty-alleviating transfer payment system that supports workforce participation and working families. Developed and developing countries around the world look to ours for best practice. 

I feel ill every time our blueblood treasurer calls our social security system a “cargo net”, as if our low-income families and pensioners have somehow grabbed the controls and swung our luxury liner towards an iceberg.  

Our ship of state, a AAA liner, has grown 15 per cent since 2007, has just about all hands on deck at work, yearly ticket prices are steady and it has got the support of all the major shipping companies around the world. All of the passengers have put their savings together and they’re worth more than the total value of the ship.

Our $1.5 trillion economy, with its $1.4 trillion superannuation savings pool, is growing around trend levels and it is picking up customers all the time in a growing Asian region. 

So why is the new Abbott management sounding the alarm about the state of our finances?

They claim we have unsustainable levels of debt, but the savings in health and education announced in the budget have not been used to pay down debt.

Instead, these new savings have been used to plug the billion-dollar holes left by the abolition of the mining tax, the carbon tax and the removal of measures to stop multinational profit shifting and a whole bunch of other kickbacks to the top end of town. They’ve also used these savings to fund new coalition election commitments. 

As a result, deficits are broadly the same as they were in the pre-election fiscal statement when we left office. And, stunningly, net debt has not gone down – it has gone up from 12.5 per cent in September last year to 14 per cent in 2017-18. While our level of net debt is very low at 14 per cent, it’s higher than we’ve experienced in any year since 1997-98. 

In addition, deficits across the forward estimates are not dramatically different from the deficits forecast by the last Labor government, yet they will be bundled up and spouted as an example of wasteful spending despite once again being some of the best outcomes in the developed world. 

So we’ve had a lot of sound and fury about deficit and debt and neither has gone down substantially. Why? They’re starving the beast: a strategy imported from the United States. Reagan, then Bush and now the Tea Party have all employed this strategy, which sets about shrinking the size of the government by, first of all, driving the budget into deficit, then concentrating all political firepower on the need to cut expenditure to fix the deficit. 

The perfect case in point of this is the argument Tony Abbott appears to be making, with the help of his Liberal Party premier mates, for an increase in the GST.

That’s why they’re talking about more cuts to come. In 2015-16 spending as a percentage of the economy is expected to hit 24.8 per cent, modest by international standards and around the Australian average. 

The continuing attacks on the deficit and Labor’s culpability for it are all part of a concerted campaign to take spending down towards US-style levels of GDP, with a percentage in the low 20s, to justify further assaults on the social safety net.  

Sacrifices, however, have not been demanded of the corporate sector. Indeed, the largest companies are getting tax cuts. But we do have a token contribution from them in the form of a debt tax. 

This is in contrast to the denial of the Newstart benefit to people under 25 years of age, or significant cuts to family benefits for low-income earners. The $7 GP tax is only the beginning. It opens the doors for Abbott to smash Medicare one piece at a time.   

This budget should be viewed alongside the recommendations of the National Commission of Audit. It is a war on the middle class, a combination of both Fightback! and WorkChoices. The budget is really a part payment on the findings of the Commission of Audit, which seeks to cut the minimum wage by $140 a week. And in some cases, the budget goes even further than the commission’s recommendations, as can be seen with the changes to the pension.  

Ultimately, this budget is one step down the road of shifting the balance towards corporations and away from working people via less corporate tax and a higher GST. And a smaller government. A tamed beast, indeed.

This article was first published in the print edition of The Saturday Paper on May 17, 2014 as "Darkness at the top end of town".

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Wayne Swan was Labor’s federal treasurer from 2007-13.