Tuesday, May 10, 2011

Budget 2011: Too much pain; not enough pain.

And so after a couple weeks of announcements that the budget would be tough (you know a Horror Budget © ), out came a budget that well… was pretty much as expected.

It was a fairly typical Labor Budget – ie not a left-wing, Ben Chifley budget, but a Hawke-Keating budget. And given anyone under 50 never got to vote in a Labor Government earlier than the Hawke one, I think we can stop looking to the 1950s to frame what is a Labor budget.

For example here was Keating in 1986:

What is being required is a minimal sacrifice when compared with that being asked of wage and salary earners.

There will be a crackdown on cheating and fraud in the social security system. image

We will not compromise our deep commitment to assist the genuinely needy.

But abuse of the system will not be tolerated.

Special reviews will be conducted by teams of officers to identify and disqualify those wrongfully receiving unemployment benefits.

Additionally, reporting requirements for all unemployment beneficiaries will be tightened and it will be much harder for New Zealand citizens who are visiting Australia to qualify for unemployment and other benefits.

There will also be reviews of sole parent beneficiaries to verify continuing eligibility.

Wow! A crackdown! On cheats and frauds!

Then again in 1987:

Madam Speaker, the Hawke Government has always believed that only those in genuine need should be entitled to social security payments.

We have systematically implemented measures to exclude welfare cheats from the system.

In the May Statement I described a range of further initiatives to crack down on fraud and abuse.

More crackdown on those “welfare cheats” (Not one for using weasel words, our Paul).

imageAnd so too was Swan in the budget casting his eye over welfare:

To remove incentives for young people to leave study for the dole queue, we will extend Earn or Learn requirements to 21 year olds and create new pathways to full‑time employment for early school leavers.

To get the very long‑term unemployed into work, we will invest $233 million in new support programs and 35,000 targeted wage subsidies — encouraging employers to hire those who have not worked for more than two years.

To slow the growth of Disability Support Pension numbers and get more people in the workforce, we will bring forward strict new work tests, update the definition of incapacity, introduce new requirements for younger recipients, provide more wage subsidies, and allow more hours to be worked before payments are suspended.

To address entrenched disadvantage, we will introduce participation plans for teen parents, new requirements for jobless families, extend income management, and develop new place‑based programs to support local and regional employment.

Certainly his language is a lot more milder than Keating’s. And hardly vilifying.

About the only “new” thing in this (ie that hadn’t been announced) was the “strict new work tests” and “update the definition of incapacity”.  This will be interesting to see in detail – and no doubt will be attacked as Gillard and Swan being cruel, but given the increase in the numbers on DSP it is hardly unsurprising that a Govt would want to take a closer look at it. Also given the Government has allowed those on DSP who can work to now work up to 30 hours instead of 15 suggests it is not exactly beating them with a stick. Will such people be able to get that extra work? That is perhaps a deeper question.

How else was it Labor-like? Well Keating back in the 80s was also big on training. For example in 1985:

First, job training.

Presently, about 100,000 of our young people leave school each year and receive no further systematic vocational training.

It is this group which finds it most difficult to get jobs.

Accordingly the Government has decided to support the creation and rapid development of a new system of traineeships.

This scheme will provide young people with a combination of training and work lasting for a minimum of one year.

For example, under the scheme a 16-year old school leaver could become a trainee in the hotel industry or in the retailing industry, receiving at least 13 weeks outside instruction during the course of the year.

Swan, and especially Gillard are very much cut from this cloth of training into work. It has been Gillard’s mantra. And it certainly was throughout her speech to the Sydney Institute last month that was panned by some in the media as showing a Labor Govt without heart.

In this Budget, training was a big item:

Our plan begins with a new approach to training.

Putting industry at the heart of a $558 million National Workforce Development Fund that will deliver 130,000 new training places over four years.

Better meeting the needs of industries and regions with a $101 million national mentoring program to help 40,000 apprentices finish training.

Accelerating apprenticeships, letting them progress as they acquire the right skills, by investing $100 million in more flexible training models.

Plus up to $1.75 billion, in addition to our existing $7 billion investment, to leverage ambitious reforms of the vocational education and training system.

And funding 30,000 more places in the Language, Literacy and Numeracy Program to provide the basic skills essential for a job.

In other words it reflects very much what Gillard was saying in her Sydney Institute speech last month (and which she again repeated in her interview the next day with Fran Kelly) that she was talking mutual obligation – meaning the Government needed to spend money on training (ie the Government needs to do something as well, not just the unemployed). Now maybe this won’t work. Maybe those being trained will just be nicely trained unemployed people. But let’s get past the view that this Budget was all stick for the unemployed, or that it is all about kicking dole bludgers (or please, that getting those on welfare to do training or work is somehow un-Labor).

The Brotherhood of Saint Lawrence seems to be broadly supportive of the changes to welfare:

‘At long last we see policy initiatives that recognise that the most disadvantaged in our community have modest mainstream aspirations and that they won’t shy from increased obligations in welfare if they are matched with more and better assistance.

‘This is the test of the new welfare morality: that increased obligations are commensurate with the additional assistance on offer. It’s a test that the welfare initiatives in the Budget pass.

‘The new obligations on sole parents, teenage mums, youth and the disabled are matched with appropriate financial incentives to take on work and additional investments to improve their literacy and numeracy and vocational skills. My experience suggests if implemented sensitively, most will relish the additional support.

Lines like that make it pretty easy for the Government to respond to criticisms of it being cruel and harsh on the poorest in society.

It also increased the foreign aid budget – something it sure as hell could have let slide, without worry of criticism from talk back radio shock jocks:

New aid investments in the 2011-12 Budget, totalling $1.9 billion over four years, will implement the Gillard Government’s aid commitments on water and sanitation, education, maternal and child health, avoidable blindness, eliminating violence against women and increasing the number of volunteers in the aid program, as set out in the 2010 election statement “A Good International Citizen: Australia’s development assistance”.

This increase has already been derided by Joe Hockey in his post-budget interview on ABC radio as a sign that that Government is out of touch with ordinary voters. So yeah, the debate is going to be a joy to watch…

Is it a lefty-love fest? Of course not. The chaplaincy program will be hated by the left (and I mean hated). The cutting of the solar programs and other environmental programs will not meet with joy from the Greens (and it demonstrates that Gillard is putting all her environmental eggs in the carbon price basket… something that may need to change in the future).

And the right wing? Well the Libs mostly ignore it completely. Specifics? Meh. We don’t want too many of those! Hockey in his post-budget interviews pointed out a $10 million payment to unions to develop a website, but that was about it for measures that he had found in the small print. The Lib’s attack will be the lack of a carbon tax in the budget means it is mostly hooey. This attack will of course ignore the fact that if the Government had put in the carbon tax, which has not been agreed on and would be all guess work right now, it would make the budget complete hooey.

But hey, who needs facts, data, reality…

More importantly the media. What is its reaction? The early reports often mirror the media releases, and can change a bit when the front pages come out the next day, but mostly (as in the past four years) they focus on the Budget not being tough enough. Here are a smattering of the headlines from budget stories from News.ltd papers, The Oz, SMH, The Age, ABC and Crikey:image


Swan's budget surplus by a thousand cuts Budget delivers $20b in cuts

The great no-tax-cut budget of 2011

Swan makes jobs his budget mantra

Swan's budget as tough as tofu

Budget 2011: Australia on a wing and a prayer

Middle class missed out on biggest tax breaks: budget

Labor banks on no-frills budget to regain control

No chainsaw massacre, just modest cuts from Swan

Enough nasties to make it a tough budget

Wayne Swan hacks away at middle class welfare in budget

Tough times, tough measures

Slim pickings in Treasurer Wayne Swan's budget

Swan's blueprint for surplus

Wayne Swan delivers austere budget to reduce deficit

The general consensus from the hardnosed types is the cuts to middle class welfare – eg the the phasing out of the Dependent Spouse Tax Offset – are good but they wanted more of them.

Alan Kohler went in hardest:

Lindsay Tanner, come back! All is forgiven.

The former finance minister would have been embarrassed by this budget: despite all the stern prime ministerial repetition, it is not tough. Revenue forecasts made just six months ago have proved to be way too high, yet spending has gone on regardless. What's more the optimistic forecasts remain just as optimistic.

Any decent CFO would be embarrassed by this budget.

In the other corner is Ross Gittins:

Taken in sum, there are plenty of cuts and savings that suggest some courage in Canberra.

For four years running, Wayne Swan has warned us his budget would be tough. This year, for the first time, he was right. That's bad news for the victims of his spending cuts, but good news for people who hate interest-rate rises and want a stable, healthy economy.

This budget contains quite a number of nasties aimed particularly at the better-off. None of them is all that major, but there are enough of them to hit most upper-middle families: some of those with company cars, up-front HECS payments, private health insurance, family trusts, salary sacrifice into superannuation, dependent children and stay-at-home mums.

That such an unpopular government would risk annoying so many groups tells us something about Julia Gillard's courage and willingness to do what needs to be done.

As is always the case, the Government will be trying to tell us it was tough but fair for those “doing it tough”, and the opposition will say they were not only not tough they were not fair on “families”.

How will it all play out? The media of course – and the headlines on tomorrow’s front pages will go some way to setting the agenda, but given Swan had the entire media in a lock-up all day, he can’t complain if his message doesn’t come across.

The Budget won’t likely change too many votes (Budget bounces are a bit of a myth really), but that doesn’t mean Swan and Gillard can put their feet up. If they want this to be the start of their comeback, they will have to work hard for the next month or so to use this to incrementally build up a foundation of economic responsibility in the eyes of the voters. The carbon price debate has yet to really heat up, and if they can’t sell this budget as being sensible and fair, that much bigger fight on carbon will be all the more tricky for the ALP to handle.


darkdirk said...

Nice summary.

FYI the “strict new work tests” and “update the definition of incapacity” for the DSP were announced a few months ago at the ACOSS conference

Anonymous said...

I love the fact that there are major centrelink changes but they are cutting the staffing levels.
If you are a middle class family who's main breadwinner is a public servant it is going to be an interesting time.

The Hours for Disability is just going back to how they were pre-2006 when Mr Costello cut the hours to force people into looking for work.

Ben said...

You forgot to put "working" in front of "families", because, you know, you're not important if you're not working (e.g. you're a pensioner or disabled or have the tough luck of being out of work). You're also not a family if you don't have kids so, well, no surprises in this budget.

Greg Jericho said...

Oh cheers Darkdirk, missed that.

Anon - yeah I thought that was the case - I was pretty sure I had read that in a budget speech given by either Keating or Dawkins, but last night in my mad rush I couldn't find it.

Ben - yep singles with no kids are forever the forgotten people in every budget.

Anonymous said...

On the budget I'm with Alan, not Ross - too much dancing around the edges and optimistic forward projections to be a serious 'tough budget'

The absurd 'efficiency dividend' grows, weighing down the ability of an already struggling public sector to deliver and we kick unemployed people in the teeth some more.

Perhaps we should rescind the vote from anyone who isn't in full time paid work, just to ensure they are properly excluded.

Plus the Greens have abandoned their carbon targets!

Towel said...

Did you see Joe Hockey on the ABC after the budget speech? He struggled to form basic sentences.

I think it was one of the first times a TV interviewer really went in hard on the "negativity" angle of the opposition, and Hockey didn't see it coming.

The victory in this budget is it's really hard to frame it in a negative light without drawing the inevitable "what would you do" line, which the opposition wants to stay away from like a house on fire.

I wouldn't be surprised if the coalition find something else to talk about as quickly as possible.

Saskia said...

I know we're meant to be focussing on the content of the budget - but I'm really struck by the difference in language between Keating and Swan.

Keating and Swan essentially say the same things here, but Keating's sentences are lovely and straightforward and they pierce right into your brain. (And I'm pretty sure this was before his Don Watson days.)

I have to concentrate to read Swan's words - most of the sentences are passive and too complex.

I'm pretty sure this is why the government has so much trouble trying to communicate its messages. They need to become Don Watson disciples!

wilful said...

Ok I own up - I hate the schools chaplaincy program.

Anonymous said...

If you can stand it, take a look at the Terrorgragh's coverage. Somehow the budget manages to be hearless and cruel and not tough enough at the same time.

Oh, and they continue they're campaign against the independant's by listing the items that they received in the budget as "the price of their support". They forget that Abbot would have had to make the exact same concessions if they supported him.

Patricia WA said...

Apart from News Ltd. outlets which continued their relentlessly illogical hostility to anything the government says or does I found it refreshing to find something like balance in the reporting and commentary on the budget. Listening to the ABC today one had the impression there were a few thinking adults around again. Country Hour comment was almost effusive about the infrastructure spending in the regions. There was particular appreciation for education, training and health initiatives.

I wonder what voters in New England will say to Barnaby Joyce if he starts canvassing for votes there with his usual 'Debt!' and 'Waste!' mantras. That's not only being consistent with his own message for years now but so far it's the Coalition's only response to the budget.

Sonia said...

For me its only tough in that the majority of people didnt get anything monetary. Efficiency dividends for the public service will be nasty. That term is the bane of any public servants life (well here in NSW) .
I dont know why Tony Abbott bothered to go onto TV today. I know Hockeys general comment was we'll need to discuss it but Abbott is the leader for goods sake surely he can make some meaningful comment

silkworm said...


You say the chaplaincy programme will be hated by the left, yet elsewhere you have declared yourself to be a committed Christian. How are we to take this? It appears you want to dissociate yourself from the left because of their secularism, but I can't believe you associate yourself with the religious right. So where do you stand on funding chaplains in public schools?

(I originally posted this on the Sideshow thread by mistake.)

Bobalot said...

I honestly thought the budget was pretty decent. There are three pet peeves of mine that remained, which were the Chaplaincy programme, First Home Buyers Grant (which it appears Australians now hold sacred) and the set top box programme.

The spending into infrastructure & training was very good. On top of that, they finally started to wind back middle and upper class welfare.

Every time I see these self-absorbed yuppies complaining about how hard it is living on 120k+ and how they deserve government assistance, it makes my blood boil.

My entire family lived on less than 40k for years! Even then, we never complained about how "tough" things were because there were people who lived far worse than we did. It's unbelievable how entitled these yuppies are.