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A painful and unnecessary journey to nowhere.

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Hon Gareth Evans QC MP

Deputy Leader of the Opposition and Shadow Treasurer


12 May 1998


A Painful and Unnecessary Journey to Nowhere


Treasurer Costello’s surplus “milestone” has been built on the backs of Australian families - paid for by two years of savage cuts to health, nursing homes, education, child care and job programs.


Australian families are supposed to believe that tonight’s Budget rewards them for carrying the cost of two years of Howard Government. But it falls way short of doing so.


No-one will be fooled by the policy reversals the Treasurer trumpets tonight: most of them don’t even go half-way to redress the cutbacks already made.


Costello’s road goes nowhere at all for the jobless: unemployment, even on his heroic growth assumptions, will stay stubbornly at around 8 per cent.


There was another road to surplus — one that went for growth and jobs.


- With Labor in government, growing as we did the whole economy 1 per cent faster than the Coalition, and jobs nearly three times faster, unemployment would now be down to 6 per cent - with 150,000 more Australians back at work.


- Tonight’s Budget papers show that if government policy had continued on a no change basis after Labor’s last budget, there would have been a deficit of less than $3 billion in 1998-99. As previously announced, we would have pursued a moderate fiscal consolidation program, saving $1 billion in 1996-97, and an additional $1 billion in each of the next two years — more than neutralising that deficit.


Th e pain for ordinary Australians in the Coalition’s journey lies in the cuts they have endured over the last two years. Alarming cracks have been opening up in Australian society, which the panicky expenditure reversals of the last few months have done little or nothing to fill.


The Australian community has had to endure, along with many other cuts:


- a public health system lurching from crisis to crisis. In his first two budgets Costello took $3.6 billion out of public health in cuts to hospitals, dental services, pharmaceutical benefits and Medicare — he has put back less than $2 billion;


- a continuing nursing home fiasco for elderly Australians. Costello has taken $500 million from nursing homes — and put absolutely nothing back in this Budget;


- a ch ild care system decimated by $800 million of cuts — with not a cent put back in this Budget;


- an education system with its foundations crumbling — bearing $3 billion in cuts to universities, TAFEs, government schools and student support, and with just on e-thirtieth of that now put back; and


- jobs programs cut back by a massive $1.8 billion, while youth unemployment has risen at the same time to 27.1 per cent - with no new expenditure announced in this Budget.


The projections for growth and employment i n this Budget are themselves in many ways scarcely believable. Treasurer Costello has already before spectacularly failed to meet his job and growth predictions. For example:


- economic growth in 1996-97 was originally estimated at 3½ per cent:

the outcom e was 2.7 per cent;


- employment growth for 1997-98 was originally forecast at 2 per cent:

now it’s been revised down to 1¼ per cent.


It strains credibility to believe that, in a year when GDP growth was forecast to fall from 3¾ per cent to 3 per cent, e mployment growth will increase from 1¼ per cent to 1¾ per cent.


Virtually all the components of economic growth, upon which increased employment could be based, are forecast at lower levels in 1998-99 than in 1997-98. Consumption, the biggest contributor to growth, is only held at 3 per cent by the assumed effects of the sale of AMP shares: otherwise it would be ½ per cent lower, and hardly enough to create jobs.


Far from getting Australia back on track, Peter Costello and John Howard are shunting us off to a siding.


This is a do nothing, mark time Budget, intended to fill a lull while the Government struggles to put a positive gloss on its huge forthcoming taxation con job, where it will seek a big change in the tax mix - switching the burden from those who can most afford to pay to those who can least.


Contact: Margot Marshall - 0419 497 103






The Budget Papers show that if the Labor Government policy had continued on a no change basis - ie had followed the policy settings set out in Labor's last Budget- the n the 1998-99 result would have been a deficit of $2.7 billion.


This figure is arrived at by deducting from the $2.7 billion surplus the combined effect of all of the Howard Government's policy measures on the 1998-99 Budget (ie $5.4 billion).


Taking into account the moderate and responsible $1 billion per year in savings that Labor would have pursued (and stated in 1996 should have been pursued), the Budget would have been broadly balanced this year.


If we then consider the better macro-economic outcomes that Labor would have achieved if growth had not been unnecessarily reduced through the enormous cost cutting of the 1996 Budget, there would, in addition, have been a further structural improvement in the Budget.


Rather than confirming the wisdom of the Government's strategy, this Budget confirms that the higher growth road would have yielded the same result (ie a small surplus in 1998-99) and that therefore the pain from the 1996 Budget was unnecessary and completely avoidable.