Treasurer Joe Hockey has delivered the Abbott Government’s first budget, announcing higher taxes for the wealthy and on petrol, new fees to visit the doctor, tighter welfare rules and cuts to health and education spending.
ANU experts have responded, and discuss the budget and its implications for Australia.
POLITICS - PROFESSOR JOHN WANNA
Australian New Zealand School of Government
“After all the fuss and the kite-flying, and pretending it was going to be a tough budget, the 2014-15 budget was fairly underwhelming. If the government stands by its decisions, most are long term and do not repair the deficit in the short term. Much of the government’s initiatives are simply winding back measures that the Howard, Rudd and Gillard Governments put in place over the past 14 years.
“It will probably be regarded as a lost opportunity to make more fundamental changes, despite business escaping the Treasurer’s clutches.”
ECONOMICS AND TAX
DR PAUL BURKE
Crawford School of Public Policy
ANU College of Asia & the Pacific
“The re-indexing of fuel excise to the consumer price index just means the excise will stay the same in real terms. What was a shrinking tax rate will now be a stable tax rate. The change makes sense, as a good source of revenue would otherwise continue to erode away over time. Indexing fuel excise to CPI was one of the Henry Review recommendations. Australia is at the back of the pack when it comes to the fuel efficiency of our vehicles. A key reason is that Australia has relatively low petrol prices for an OECD country. The budget's fuel excise change will help to prevent Australia falling even further behind.
“From an economic point of view, it is a shame that the Government plans to do away with the carbon price, which is one of the best taxes we have. This is a more efficient approach than the Government's Direct Action, and is much better for the budget bottom line. The $2.55 billion for the Emissions Reduction Fund is money that could be better spent elsewhere.”
DR TIMO HENCKEL
Research School of Economics
“This is a regressive budget, hurting the poor and vulnerable disproportionately. Reductions in entitlements apply mostly to lower income households and are designed to be permanent. The temporary budget repair levy is largely for show as it applies to individuals who typically have the means to avoid paying high taxes anyway. Making the under 30’s wait six months for Newstart or Youth allowance payments is downright cynical. Cutting funding to education and health while at the same time increasing defence spending neither promotes social inclusion, nor helps raise productivity. The excessive focus on roads in infrastructure spending is primitive – long term solutions must promote mass public transport.”
EDUCATION
PROFESSOR BRUCE CHAPMAN
Crawford School of Public Policy
“These are radical changes and will have critical implications for domestic students. They mean that we can expect to see fees increase both significantly and rapidly from 2016, but how fast and by how much we just can’t know. It is likely most universities will increase tuition to international student fee levels, which are currently about three times higher than domestic fees. In the past changes to HECS didn’t deter students, but now that there will be a real rate of interest on the debt we are in unchartered waters. The changes are good for private providers who will have access to HECS-HELP without too many constraints.
“Critically, the government has maintained the essence of HECS and that is a very good thing. This will hopefully mean that access for all students and particularly disadvantaged students should not be too much affected.”
WELFARE
PROFESSOR PETER WHITEFORD
Social Policy Institute
Crawford School of Public Policy
"In framing this year’s Budget, the Treasurer has argued that 'It is only fair that everyone makes a contribution' to fixing the Budget deficit.
"It is difficult to assess the extent to which the Budget pain is equally shared because this year’s Budget papers do not include any of the illustrative cameos that have been common in Budget papers for the last 10 years or so, to show who wins and who loses from the policy changes. Some of these changes for example to the Age Pension will not start until three years from now, but will then grow over time. Some changes are more immediate, including changes to Family Tax Benefits, and seem likely to cause the largest pain to low income families, particularly those whose youngest child is six years or over."
CLIMATE CHANGE
DR FRANK JOTZO
Crawford School of Public Policy
“The proposed changes go the wrong way for the budget, and the wrong way for action on emissions and a more modern energy system. Axing the carbon price will be a major blow to the budget. It will cost $7 billion next financial year, and could cost in the order of $20 billion from now until 2020. Replacing it with ‘direct action’ subsidies to carbon emitters will impose an extra burden on taxpayers, and will give a smaller emissions reductions benefit.
“Giving the chop to the other energy and climate change programs and agencies will do very little for the bottom line. Abolishing the Clean Energy Finance Corporation is probably going to backfire for the budget and energy sector investment.”
HEALTH AND MEDICINE
DR LIZ HANNA
National Centre for Epidemiology and Population Health
“The first federal budget from the Abbott government has demonstrated its ideology very clearly to the Australian public, which it did not do prior to the election. This government is apparently ideologically opposed to the health of Australians. The boost to medical research is a con job, thrown in as a sweetener, hoping Australia will swallow the nasty pill of the demise of Medicare. For decades, the Liberal-National Coalition has made repeated efforts to dismantle Medicare at every opportunity. This foot in the door, starting with a $7 co-payment, which they will no doubt increase over time, is yet another attack on a health system which remains the envy of the world.”
PROFESSOR SHARON FRIEL
Research School of Population Health
ANU College of Medicine, Biology & Environment
“What has the majority of the Australian population done to deserve such a brutal cull of services, livelihoods, and for many people a sense of self-worth? The 2014 budget delivered by the Coalition government makes a mockery of the duty that any democratically elected government has to ensure that its citizens physiological and safety needs are met.
“Health inequities are produced (and prevented) by policies and actions within the health sector - a $7 co-payment for a visit to the doctor and increased cost of medicines will undoubtedly affect lower income groups more than others, thereby potentially resulting in higher mortality and morbidity for some and increasing costs and suffering.
“But the health and health equity effects of this budget go way beyond the health sector. Health and wellbeing is also strongly influenced by other policy areas such as education, employment, social protection, taxation and transport.
AGEING, AGED CARE
PROFESSOR HAL KENDIG
Centre for Research on Ageing, Health & Wellbeing
ANU College of Medicine, Biology & Environment
“It is telling that the Department of Human Services did not mention aged care in its media releases though the budget outcomes statement did include residential and community care. In last year’s budget, just after the bipartisan passage of Living Longer, Living Better legislation, there were modest but short term allocations for re-structured aged care programs, in line with the important Caring for Older People report of the influential Productivity Commission. There were a few wins in this year’s budget – notably the Workforce Supplement funding has been welcomed by the aged care industry and Home Care Packages were brought forward – and aged care has largely been spared from the major cuts elsewhere in the budget.
“Major funding developments are largely left ‘between the lines’ for the future. Overall cuts in health funding, and severe restraint on State governments, have set the grounds for ongoing contention. There is the clear need for substantial resource increases to ensure adequacy of care, especially for people who do not have the means to contribute more of their own resources. The increase of accommodation charges is at the forefront of what can be expected to be more user funding in new means-testing arrangements.
“Aged care will surely emerge more prominently in the lead-up to the next election. This year’s modest allocations need to be appreciated in the context of the governments’ overall deficit reduction strategy.”
DEFENCE, FOREIGN POLICY
DR JOHN BLAXLAND
Strategic and Defence Studies Centre
ANU College of Asia and the Pacific
“Defence is in a sweet spot. The Abbott Government has promised a rise in expenditure to 2 per cent of GDP within a decade and has started to deliver on that promise. The opposition knows that this is the bare minimum necessary to reach the funding levels required to purchase the capital equipment items it endorsed in two successive Defence White Papers (2009 and 2013) but didn’t fund fully. The then Labor Government understood the regional security environment was becoming increasingly uncertain, warranting a beefing up of Defence. Nowadays, even critics of the American alliance, like Malcolm Fraser, see this as well and are calling for an increase to at least 3 per cent of GDP to enable us to be more independent. This means Defence is going to get what it wants for several years in a row now. Joint Strike Fighters, home-built submarines, air warfare destroyers, amphibious ships, here we come.”
DR PETER DEAN
Strategic and Defence Studies Centre
ANU College of Asia & the Pacific
“There is plenty of good news for Defence in what is a tough budget that hit hard in areas such as health, education and social services. The big news was an injection of $500M for capability investment. This was built upon with a number of efficiency and savings measures through the sale of Defence property, a reduction in public service numbers and administrative efficiencies – all of which will stay in Defence to be reinvested in capability. These are positive moves. However there is still a lot to be done if the government is going to achieve its self-imposed target, reaffirmed in the budget, of 2 per cent GDP to be spent on Defence within a decade.
In addition there is major structural reform that is only partly addressed in this budget. It’s a good start but we will have to wait for the Defence White Paper in 2015 and next year’s budgets to see the how far the Government is committed to heavy lifting in Defence.”
DR ANDREW CARR
Strategic & Defence Studies Centre
ANU College of Asia & the Pacific
“While expectations were low, there is a reasonable dedication of new funding to defence. But the real task of laying out how the target of spending 2 per cent of the nation's GDP on defence will be achieved has been deferred. Despite claims of heavy lifting, this was closer to a program setting and warm up session. The real heavy weights for raising defence spending are yet to be picked up. But credit for at least turning up and breaking a sweat. Strangely for a right wing government, the real focus was not the military but non-traditional security issues, in particular supporting regional neighbours like Sri Lanka and Indonesia to deal with asylum seekers.
“This might have been a missed opportunity to more radically reform Defence. Given the plans in the next few years to give far greater funding to Defence and undertake major capability purchases, this might have been the right time to be bolder to get the organisation in the right state.”
FOREIGN AID
Professor Stephen Howes
Director, Development Policy Centre
Crawford School of Public Policy
“Going in to the 2013 elections, the Coalition promised that it would deliver ‘annual increases in nominal funding in the aid budget’ in line with increases in inflation. Their costed aid savings meant, we calculated, that aid in 2016-17 would be at 2012-13 levels after adjusting for inflation. In this budget, the Coalition has delivered something quite different: a reduction in aid by 10 per cent in real terms by 2015-16.
“For a government which promised to enhance aid transparency and to protect the real value of aid, it is a discouraging beginning.”
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