17 December 2015
by John Passant
MYEFO: Abbott's cuts repackaged
ON TUESDAY, the Treasurer Scott Morrison released the Mid-Year Economic and Fiscal Outlook (MYEFO). It confirms that a budget deficit is here to stay for some time.
Every budget and every MYEFO, the prediction for getting into surplus is delayed and this MYEFO is no different. Under the Abbott and Turnbull Governments, the surplus prediction has moved from 2018-19 to 2019-20 and now, to 2020-21.
The May budget deficit prediction for this financial year has increased by $2.3 billion to an estimated $37.4 billion. One reason for this is the collapse in iron ore and other resource prices and hence, in tax, from mining companies. Another major factor is lower than predicted wage increases, which means tax bracket creep isn’t as great and so isn’t bringing in as much extra revenue.
On top of that, the government has revised down Gross Domestic Product (GDP) growth predictions from 2.75 per cent to 2.5 per cent. This means, among other things, less spending and hence, less GST and, with less non-mining company profits, less non-mining company income tax.
Such low GDP growth may also see unemployment increase, although this isn't indicated in the MYEFO. The current Australian Bureau of Statistics (ABS) unemployment figure of 5.8 per cent in November is, in my view, unreliable, given the low level of GDP growth – both actual and predicted – and the questions about the reliability of the changed ABS figures themselves.
Then again, maybe there are all these low paid weekend jobs being created in services and retail, despite those supposedly high job-destroying penalty rates "holding back" these growing sectors.
Australia’s budget deficit and accumulated Commonwealth Government debt are small by comparison to most Organisation for Economic Co-operation and Development (OECD) countries. So too, are government spending and government revenue as a percentage of GDP. Australia is a low spending, low taxing country.
Many commentators are calling this MYEFO a more sober assessment and approach. It isn’t because the Government continues to use the budget deficit bogy to attack the poor, the unemployed, the aged and the sick. The Government’s proposed "savings" – that is, cuts – of $5 billion come from, among other things, an attack on welfare "fraud".
Last year, only 1366 cases were referred for fraud prosecution. This is 0.02 per cent of all welfare recipients. The government claims this “crackdown" will raise an extra – unbelievable, in my view – $2 billion over three to four years, according to MYEFO. This is fairyland stuff designed more to create a "dole bludger" atmosphere rather than to address the real issues of collapsing revenue and ways to get rid of the tax rorts for the rich and powerful.
The government is also proposing to remove bulk-billing incentives for imaging and pathology services — a backdoor Medicare co-payment. MYEFO estimates this will "save" $650.4 million over four years. The saving will mean some people won’t be able to afford the services and may as a result, according to one senior pathologist, die.
There are also cuts in the order of $472 million from aged care funding and $595 million over four years from workforce health programs. After all, (sarcasm alert) who needs a healthy workforce? And how productive are all those old people to society?
Cuts include funding for various arts programs too. Who needs a good book or film when you can read Gina Rinehart’s poetry? (In the interests of journalistic integrity – or is it? – I should declare that Songs for the Band Unformed [Ginninderra Press], my first volume of poetry, will be published in mid-2016. I hope it is of sufficient quality to compete with Gina’s brilliant work.)
On top of all this, there are $7 billion worth of cuts stalled in the Senate which the Government has also factored into its savings. They are unlikely to pass through the Senate, so the deficit is, if we take away the Pollyanna polish the government is trying to project, another couple of billion worse off this year and into the future.
The 2014 budget exposed the Abbott Government as one that attacked the poor, the unemployed, the sick and the aged. The 2015 MYEFO cuts, that attack the same groups, expose the Turnbull Government as the Abbott Government with a silver-tongued leader.
It should open our eyes that the $12 billion or so in superannuation tax benefits, that go to the top 10 per cent of income earners, remain untouched. Similarly, negative gearing and the capital gains tax 50 per cent discount, both of which overwhelmingly favour the rich, remain untouched. It is clearly about priorities and for the Turnbull government, protecting the rich and powerful and attacking workers and the poor, are its priorities.
By the time you read this, the Commissioner of Taxation (Chris Jordan) may well have released his tax transparency report on the tax affairs of public companies with a turnover of more than $100 million. Based on the last general figures available from the Australian Tax Office (ATO), this report will detail those one third of public companies which don’t pay income tax. Further, according to the Tax Justice Network and United Voice report, ‘Who pays for our Common Wealth?’, a large number of the top 200 Australian Securities Exchange (ASX) listed companies have effective tax rates (the percentage of tax paid on accounting income) of less than 10 per cent — well below the company tax rate of 30 per cent. We will soon find out who they are.
To be fair, the Turnbull Government does have a tax plan. They really want to increase the GST to 15 per cent and apply it to fresh food, health, education, sewage, water and financial services. They want to slug the poor and low paid workers so they can give tax cuts to companies and the rich.
You have to wonder, don’t you? In light of the soon to be released ATO revelations about the massive levels of tax avoidance and use of tax rorts legislated in the system by the rich and powerful, why are Turnbull and Morrison not attacking their tax rorts and tax avoidance? The answer seems pretty clear.
This is a government of the rich and powerful