Australia: Labor unveils “tough, unpopular” budget cuts

With three weeks still to go before the July 2 federal election, the Labor Party yesterday repudiated another set of pledges to oppose deep cuts to welfare, healthcare, education, pensions, aged care and family payments.

Families with children, students and universities—all already facing acute financial stresses—are especially targeted by Labor’s latest policy reversals, which will slash social spending by another $6.1 billion over the next decade.

Worse is yet to come. Labor leader Bill Shorten said there would be further “hard” measures before the election. “We will need to make difficult decisions as this election unfolds,” he declared.

In previous elections, incoming governments waited until the voting was out of the way before junking their promises. This is no longer possible because of a rapidly deteriorating economic situation in Australia and internationally. The corporate and media elite is demanding an austerity agenda to make the working class pay for the economic breakdown, and Labor is just as committed as the Liberal-National Coalition government to satisfying those dictates.

Shorten described yesterday’s measures as “fair,” claiming they would affect “rich” families. But among the biggest items were halving family tax benefits for families with combined incomes of over $100,000 a year, stripping more than $500 million from them over the next four years. This would hit many working class households, most of which now depend on having both parents working in order to try to make ends meet.

Likewise, the government’s current freeze on the indexation of the Private Health Insurance and Medicare Levy Surcharge thresholds would be continued for 10 years to 2026–27, making thousands of families liable to pay the tax levy of up to 1.5 percent of income. Households would pay an extra $2.3 billion over the decade.

Students face a reduction in the threshold for repayment of HECS-HELP tuition fees from annual incomes of $54,126 to $50,638. This would raise another $129 million from graduating students over 10 years. Fees would rise by $159 million over the decade for students in early childhood education, maths, science and nursing.

Resources for universities, chronically starved of funds, would be cut by a further $3.7 billion over the decade by indexing funding to the official cost of living index, not education costs.

This is the second instalment of promises to be ditched. Two weeks ago, Labor repudiated pledges worth more than $9 billion over four years. It abandoned plans to retain the $4.5 billion school kids bonus and reverse $3.6 billion in pension cutbacks and $1.2 billion in aged care cuts.

Labor has foreshadowed further budget measures, such as imposing a four-week wait for young people to access unemployment benefits, raising the age of eligibility for the Newstart jobless allowance to 25, and removing the carbon pricing scheme compensation for new welfare recipients.

A party spokesman told the Australian Financial Review the measures included some “tough, unpopular” decisions and “it’s not going to be pretty for the true believers.” These are vows to deliver the requirements of big business, regardless of the electoral backlash or working class opposition, just as Labor governments have done in the past.

In a bid to exploit the hostility toward the Coalition government’s budget cuts, Labor’s election slogan remains: “We’ll put people first.” But the shift in its focus to assure business of its intentions was symbolised by the removal from Labor’s election web site of two petition campaigns that ran for months. One was called, “Don’t pocket our pensions” and the other, “Fair go for families.”

Shorten yesterday underscored Labor’s essential bipartisan unity with the Coalition government, not only matching the government’s pledge to eliminate the $40 billion budget deficit by 2020-21 but saying the difference between the two on the deficit over the next four years would be “relatively modest.”

A day earlier, Labor released a vague ten-year “economic plan” that would allow slightly higher budget deficits than the government’s until 2020–21, then cut spending enough to return to surplus. But this provoked warnings by business economists and global ratings agencies that Australia’s credit rating was threatened, because of the country’s rising public and private debt levels.

One economist, John Daley from the Grattan Institute, pointed to the mounting frustration in big business with the failure of federal governments, both Labor and Coalition, to dismantle welfare entitlements and slash social spending since the global crash erupted in 2008.

Daley said Labor had “placed the AAA rating at risk” because governments and oppositions were again delaying harsh measures. “They [the agencies] are very nervous about a pattern of behaviour that puts off tough decisions again and again,” he said.

A cut in the credit rating would increase the interest rates on government and corporate debt, including that held by the country’s four major banks. This is under conditions where the mining boom has collapsed, prices for commodity exports have plummeted, a debt-fuelled housing bubble is showing signs of bursting and many areas of the country are already in recession.

Labor’s move yesterday came in direct response to demands in the corporate media for it to impose key cuts to health, education and welfare that have been blocked in the Senate since the 2014 budget. This impasse has largely resulted because in the last federal election, in 2013, “independent” and “third party” candidates won about 25 percent of the votes for the Senate by posturing as opponents of the major parties—Labor, Liberal/National Coalition and Greens—and felt compelled to oppose the most egregious cuts for the sake of their own political survival.

Australian Financial Review political editor Laura Tingle voiced fears that the July 2 election could result in greater political instability. “There has been a lot of talk around what sort of Senate the next government will face. But whoever actually takes their seats in both houses, the relationship between the government of the day and the Senate will be heavily influenced by the extent to which the two major parties ultimately agree on a range of these spending measures.”

In its June 9 editorial, the Australian demanded that Labor return to the path of “economic and fiscal reform” pioneered by the Hawke and Keating Labor governments in the 1980s and 1990s. It was Labor—backed by the trade unions—that began the assault on the social position of the working class, cutting taxes on companies and high-income recipients, and carrying out the greatest redistribution of wealth to the rich in Australia’s history.

In its election statement, the Socialist Equality Party warned against any illusions in Labor’s efforts to regain office via “shameless lies that it will pour billions into health, education and infrastructure.” The statement explained: “The credit rating agencies have made clear they will insist on savage cuts to social spending to slash the budget deficit. And Labor will obey their dictates.”

That warning has already been vindicated, and there is still three weeks of the election campaign to run.

Authorised by James Cogan, Shop 6, 212 South Terrace, Bankstown Plaza, Bankstown, NSW 2200.