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Thursday, 14 May 1998
Page: 2907


Senator MARGETTS (8:27 PM) —I rise to respond to the budget announcement on behalf of the Greens (WA). This budget is one that produces a nice bottom line surplus, but at what cost? The government is playing up the textbook tick and sidelining the other indicators that show the manifest inequities and deficiencies of government policies. This budget is a perfect example of how imperfect these narrow and deceptive economic indicators are. These measures are clearly not providing an accurate indication of the pain being felt in the community. This budget is a perfect example of the need for genuine progress indicators to identify wellbeing in Australia.

Genuinely reflective national accounts have been suggested by the United Nations. Senator Robert Hill, as long ago as September 1996, announced that the government was committed to linking the environment to the economy through indicators and accounting systems. What has come of this commitment? Absolutely zip.

The annual funding of approximately $300 million for the environment pales into insignificance when compared with the true growing environmental debt in this country. Just one example of the true debt is the estimated annual $1.5 billion in lost production due to land degradation.

The tunnel vision focus on the surplus this year represents regression from broadening the indicators of national wellbeing. This budget, in conjunction with the last two budgets, produces and reinforces social, environmental and economic debt. All the pats on the back belie the realities of what burdens have been borne to create the surplus.

There are two main things I would like to address tonight. Firstly, I would like to examine who has borne the brunt of this budget. Secondly, I would like to examine some fundamental problems with the government's general approach to the budget process. The flippant claims by the Treasurer (Mr Costello) that the burdens have been shared by all and the benefits will be shared by all are an absolute farce. The burdens of the last two budgets have been borne disproportionately by social security recipients, indigenous people, students, the unemployed, the elderly, the sick and people in rural and regional communities. The government forcibly tightened the belts of those who could least afford it, driving an ever increasing bitter wedge between the rich and the poor.

This year the Treasurer has come out swaggering with his smug smile. He has thrown a few crumbs at those who had the potential to be wooed before the election. The Australian people are not fooled by a free jab in the arm and an extension of the seniors health card. These measures are no compensation for the $3.6 billion that has been cut from pharmaceuticals, hospitals, dental care and Medicare in the last two budgets. Less than $2 billion has been put back. The fact that the states were so appalled by the federal government's offer on the Australian health care agreements that they walked out indicates how hopelessly inadequate the so-called increased funding to hospitals really is.

The government cannot pull the wool over the eyes of regional and rural Australia. They are not fooled by the balloons of hot air about the government's commitment. It is abundantly clear that the commitment to rural and regional communities is in a drought. All of the so-called `initiatives' are simply a recycling of funding. For instance, the landcare tax rebate for farmers comes out of the already stretched Natural Heritage Trust.


Senator Woodley —That is if they have an income to pay any tax.


Senator MARGETTS —That is right. The tax rebate is also worthless for those struggling farmers who are earning so little income that they do not pay any tax—great minds think alike! There has been no recovery of the permanent cut in funding of $15 million per annum that local governments lost last year. Such cuts seriously undermine the ability of regional and rural councils to provide desperately needed services.

This commitment drought comes at a time when the continued quality of telecommunications and postal services is under a huge question mark with the proposed sale of Telstra and Australia Post. Australians will not forget what has happened under the coalition pursuit of the bottom line. Families will not forget the loss of $821 million from child care. Students will not forget the missing $900 million from higher education. Indigenous people will not forget the $4 billion black hole in housing and infrastructure provision for Aboriginal and Torres Strait Islander communities.

A society with a sense of justice for all will not forget the slashing of over $100 million from legal aid. Unemployed people will not forget the $1.8 billion ripped from labour market programs and workers will not forget the fact that the government is threatening job security through industrial laws and by collusion with large companies.

The Treasurer has continued to play on prejudices and target certain groups so as to create divisions in society. After slashing labour market programs by $1.8 billion in the last two budgets, the government has put in an additional $350 million to pump up the work for the dole scheme. It is a scheme that is yet to be evaluated; a scheme that mutates the concept of mutual obligation—that is something the government should be doing—beyond recognition. Mutual obligation appears to mean, from the government's point of view, conscription and forced labour. Meanwhile, the new jobs network is putting $147.6 million back into the government's pocket while it abrogates its responsibility for dealing with unemployment.

Propping up programs such as work for the dole is a tactical manoeuvre by the government to shift the parameters of the problem from unemployment as a social and economic phenomenon to the unemployed as individuals. The general catchcry is: if you are unemployed, it's your own fault and you should pay. It even goes in the song: `You've got to look for the hero inside yourself'. It plays on and promotes the imagery of the dole bludger in a deeply insidious way.

The Treasurer has also sought to play on the One Nation style prejudices against immigrants. By flexing their muscles and pumping money into tightening border controls, they promote the image of the mischievous illegal immigrant, attempting to unfairly dip into the Australian honey pot.

Now the Treasurer claims that Australia has options; options to distribute benefits in the future. He strongly hinted that a GST will pay for income tax cuts. These hints, that deliberately antagonise the welfare lobby, are an attempt to derail a constructive and positive debate on tax reform. Moreover, this simplistic notion of tax reform has very clear winners and losers. Those who pay more income tax will reap the greatest benefits. The way in which personal income tax is determined means that, even if every marginal tax rate is diminished, high income earners will get the biggest windfall. They will get a tax break at every marginal rate.

It is widely understood that a GST disproportionately affects low income earners. It is clear to see who Mr Costello is lining up to get the rewards of all the hard yards. It is not the people who have borne the brunt of the burdens; it is those who have already had many of the advantages society has to offer. The government is driving a deep wedge between the prosperous and those struggling to make a reasonable life for themselves and their families. This budget amplifies that wedge.

The government, in the last two budgets, has placed a priority on debt reduction through a cutback in public sector outlays. The aim and focus has been primarily on a nice, fat bottom line. The government boasts about moving towards surplus and tightening our belts. The government claims that these priorities are the so-called `fundamentals' of the economy, and once we get those fundamentals under control, there can only be prosperity for everyone.

Australians are crying out for the government to understand the economy in the context of the `fundamentals' of society, the `fundamentals' of the Australian ethos—fundamental concepts such as caring, tolerance, quality of life and a fair go for all Australians. This means 100 per cent of Australians; not just the prosperous or corporate Australians, but indigenous Australians, Australians living in poverty—mind you, over 30 per cent are living below or just above the poverty line—rural Australians, disabled Australians, elderly Australians, young Australians and sick Australians.

The result of previous cutbacks has been devastating for the most disadvantaged part of Australian society. The results are becoming more and more obvious. In a relentless pursuit of efficiency, a society of the overworked and unemployed is emerging. Welfare providers on the ground are seeing a massive increase in the need for their services. Just ask them. Welfare providers have seen people come through their doors who have never had to ask for help before. Things have got to such a desperate state, however, that people have had to lower their dignity and actively appeal for help because they just cannot make ends meet.

In 1998, we have a growing working poor in Australia. Despite all the evidence on the ground, the government has not heard the cries of the Australian people. The government has closed their eyes to the impact of their relentless pursuit of debt retirement. They have been conveniently mesmerised by that nice fat bottom line. Despite any realities in Australian society, despite the blow out in the current account deficit and despite the falling exchange rate, they continue to claim that prosperity will come. Just you wait and see.

Not only does the government's approach produce social problems, but the economic basis is, to say the least, questionable. In economic terms, does Mr Costello really deserve a pat on the back for the budget surplus? Is he justified in expecting the surplus to expand? The government is happy to take the accolades for the surplus and to wear the badge of economic responsibility, but is this truly an economically responsible strategy?

As pointed out by Professor Quiggin in the Australian Financial Review today, this fiscal strategy is highly questionable. The government fails to recognise that Telstra is a major contributor to public savings. Telstra uses retained earnings to finance investment and produces over $1 billion in retained earnings every year. This is obviously a huge contribution to public sector savings and it does not show up in the budget papers. Quiggin also notes that Treasury fails to take into account the fact that the government does not claim franking credits. Private shareholders, however, are sure to claim these credits. Quiggin estimates that this will be a cost to revenue of $600 million. So the projected $700 million gained in interest savings by 2001-2002 is looking rather irresponsible in light of the $1 billion in retained earnings and the $600 million lost through franking credits.

Surplus? The longevity of the surplus is a sceptical proposition. The government took bows for the recovery of the `$10 billion Labour deficit', despite the fact that nearly half was due to bracket creep—a thing that they decried Labor for on a number of occasions. Similarly, the government is taking the bows for surplus projections despite the fact that Treasury provided the government with a $5.5 billion windfall by adjusting the parameters on which the budget is based. How nice to be able to spend some of this handy windfall while being able to present an ever increasing surplus estimate for the coming years.

Many commentators, including John Hewson, have pointed out that the surplus forward estimates should be taken with a truckload of salt. The impact of the Asian crisis has been underestimated, and the surplus projections have been bolstered by unrealistic spending projections and artificial ly low spending projections. What we should be doing is looking at structuring the Australian economy to better weather the external storms. Bottom lines provide no real projections. If we have in this country a situation where every time there is an increased consumer confidence we have a blow-out in imports, somebody should be asking questions.

The government's suggestion that economic benefits will flow from pushing the budget to surplus is another dubious proposition. This is certainly not the case in relation to the current account deficit. The coalition's policies and claims are based on the concept of the `twin deficit theory' pushed by the International Monetary Fund. This theory is based on a link between budget deficits and surpluses and the current account deficit or surplus. As a result, the IMF continually pushes free market style structural adjustment policies—they pull it out of the drawer and they give it to every country they go into—labour market reform and substantial cuts to government spending as the best means of addressing problems such as large current account deficits.

The coalition has been a great fan of IMF style policies. Indeed, the Prime Minister was reverberating advice coming from the IMF's Mr Camdessus on page 2 of the Australian on Friday, 8 May 1998, by claiming that our recent current account blow-out meant that tight fiscal policy was needed. The idea of the twin deficit theory has never been born out in practice. This is overwhelmingly illustrated by the latest current account figures. Despite moves towards budget surplus over the last two years, our current account deficit is at its highest level ever. If anything, it appears that the more the current account deficit blows out, the more the Reserve Bank is able to produce more favourable dividends, which in turn makes the budget easier to balance.

The current account deficit, which reflects the state of the national economy, deserves serious attention. A good current account deficit can give leeway to deal with government budget deficits. A bad current account deficit can cause national economic collapse in spite of government surpluses.

The short-term focus of the budget surplus has failed Australia miserably. It has entrenched social, environmental and economic deficit. Socially, it has increased poverty and tension. Environmentally, it has ignored the real damage that is occurring and the reality that future generations will have to pay the mounting environmental debt. Economically, it will be shown to be wanting in the long term. Wipe that smug smile off your face, Mr Costello. Judge the budget truthfully. The Greens will be watching you and looking at the real indicators of Australia's well being on behalf of the forgotten community.

Debate (on motion by Senator Parer) adjourned.