Andrew Leigh

THE GOVERNMENT HAS DELIVERED A BUDGET THAT SET ITS SIGHTS LOW, BUT STILL ASKS TOO MUCH OF AUSTRALIANS

The Canberra Times, October 10 2020

A trillion dollars is a lot of money – one with twelve zeros after it.

That’s where Australia’s debt will peak. To put it in perspective, when the Liberals launched their ‘debt truck’ scare campaign in 2009, they did so with the figure ‘$315 billion’ emblazoned on the side – one third of the level of projected peak debt under the Coalition today.

So what does Australia get from that spending?

The economy came into this crisis from a position of weakness. Last year, productivity went backwards, investment was in the doldrums, wage growth was among the slowest on record. We had problems in retail and a downturn in construction.

That means we need to have big aspirations. When Curtin and Chifley sat down at the end of World War II to rebuild the economy, they didn’t take a ‘Back to 1939’ philosophy. Similarly, our highest aspiration shouldn’t be the way the economy was in 2019.

Our nation needs to set our sights higher. We need to ensure we get maximum value for the spend. Ideally, government spending should deliver a Keynesian double: providing stimulus now, and a building a stronger society in the long-term.

COVID-19 has been a huge hit to human capital. Not just to physical health, but to mental health too. Education has suffered, particularly among disadvantaged students but also among the quality of tertiary education. In workplaces, we’ve seen what economists call ‘automation forcing’, as firms have replaced workers with machines. In cities, we’ve seen deurbanization, which is going to place massive pressure on the thousands of people who work to support city economies – from building managers to baristas.

The right response to these challenges would have been to invest in education. But that’s not what we’ve seen. The budget makes no major investment in schools, despite that fact that Australia’s PISA test scores have been falling for two decades. On vocational education, there’s a plan to create half as many apprenticeships and traineeships as have been lost under the Abbott, Turnbull and Morrison Governments. Average fees will rise under the Coalition’s university plan, and the reintroduction of student caps in recent years has made it harder for a talented young person to win a place at university.

Rather than a ‘we’re all in this together’ approach, the Morrison Government is cutting support to millions of people.

A centrepiece of the budget is a plan to encourage firms to bring forward business investment, and to hire workers aged 35 or under. But there’s little thought about how this will affect older workers. There are 928,000 people aged over 35 on unemployment benefits who are going to be ineligible for the hiring bonuses and vulnerable to automation. According to an Industry Department report, 54 per cent of jobs are vulnerable to automation.

Done right, technology can be a major driver of productivity. But full-employment productivity requires investment in skills and education. Economists Claudia Goldin and Larry Katz say you can think about inequality as being a race between education and technology. If technology gets too far in front, inequality rises. If education keeps up, you can have growth with equity. But the federal budget accelerates automation and freezes education. The risk is that it takes Australia further down the path of low-wage America rather than down the path of high-wage Scandinavia.

For Canberra, we’ve seen a mere one-year top-up to the budgets of the national institutions, to make up for the shortfall in visitor revenue. But it won’t restore the 229 jobs at national institutions that have been lost since the Coalition came to office from our national institutions, including 40 job cuts at the National Gallery, 42 job cuts at the National Film & Sound Archive, 52 job cuts at the National Library and 71 job cuts at the National Archives.

For the public service, this budget asks a lot of budget servants. It provides a temporary top up in public servant numbers in a few agencies. But that won’t make up for the fact that there are 7 per cent fewer public servants now than when the Coalition came to office. Under the budget, the arbitrary public service cap stays in place – driving casualisation, costing the taxpayer more, and acting as an ideological ball-and-chain on the public service.

Then there are the looming deadlines. At the end of this year, less than 3 months away, unemployment benefits will snap back to $40 a day – a level that ACOSS, the Business Council, and even John Howard doesn’t think is reasonable. That will affect one million Australians.

The timing is skewiff. Between now and the end of the year, 160,000 people are forecast to lose their jobs. Yet JobKeeper is being cut. There is no plan for tackling insecure work. There’s very little for childcare. There’s nothing substantial for climate change. The women’s economic package is about what you’d expect from a Prime Minister who names his chooks after former Prime Ministers’ wives.

From a government that’s delivered Sports Rorts, Reef Rorts, Helloworld, the Paladin scandal, RoboDebt, DividendKeeper and WaterGate, many will fear that new slush funds in the budget could be used for further pork barrelling. In the deepest downturn since the 1930s, and without a federal integrity commission, the budget just can’t afford that kind of waste.

Among marathon runners, there’s a saying: ‘you don’t rise to the level of your hopes – you fall to the level of your training’. The problem with the Coalition is they lack training in good budgeting. For a quarter of a century, going back to Peter Costello, the Liberal litmus test of budgets has been ‘does it deliver a surplus?’. Consequently, they’ve ignored long-term economic reform for decades.

That lack of training is now showing. Having abandoned surpluses throughout the 2020s, the Coalition is economically floundering. Hope isn’t a plan. Despite over $1 trillion of debt, the 2020 budget fails to set Australia up for a productive and egalitarian future.

Andrew Leigh is the Shadow Assistant Minister for Treasury, and his website is www.andrewleigh.com.

ENDS

Authorised by Paul Erickson, ALP, Canberra.