Latests Posting


2016 Coalition Budget makes the poor pay!

Max O

The old saying that a leopard can't change its spots is an apt description of the Coalition Government's attempt to garner support for their third budget whilst in office. Their change of mantra from the 2014 "Budget emergency" to the 2016 "Jobs and Growth" doesn't really disguise the fact that both are attacks on the working and under class. 

Prime Minister Turnbull enjoys contrasting his progressive social attitudes against the previous incumbent Abbott's conservative outlook; however, when it comes to the sphere of economics he is just as reactionary as Abbott. With the 2016 budget Turnbull and Treasurer Morrison have only moved the deck chairs around the ship's bridge to appear they are doing things differently, but in effect maintaining the same economic assaults of their previous two budgets of taking from labour and giving to capital.

With the world economy in decline, Treasurer Morrison's budget speech to federal parliament asserting that it is an "economic plan for jobs and growth" is unlikely to fool struggling workers and the poor. The Reserve Bank's cut to the base interest rate to a rarely seen before low of 1.75 percent makes Morrison's forecast that the Australian economy would grow from the present 2.5 percent to 3 percent in the coming financial years up to 2020-21 look bogus.

All areas of the Australian economy are witnessing declining profits. The falls in earnings of the banks, mining and retail point to the fact that capitalism in Australia is heading for recession/depression and a deflation slump, not growth!

The Reserve Bank reduced the interest rate due to a 0.2 percent drop in the consumer price index in the first three months of the year; a measure in line with many other countries which are also experiencing a slump into deflation.

Without mentioning austerity measures that aim to reduce government spending, Treasurer Morrison projected a return to budget surpluses by the beginning of the 2020s. Morrison's budget will be achieved by savage cutbacks to government social, welfare spending and to workers' living standards.

The capitalist class are always the budget winners
The three big winners in this year's budget are: the corporations, who'll receive a reduction in their tax rate eventually down to 25%; the wealthy, who'll gain some small tax cuts; and the military, who'll gain a big increase in spending.

The corporate tax cut is initially disguised as a rate cut of 1 percent to 27.5 percent for small to medium businesses with earnings less than $10 million. During the next 10 years the rate will be cut to 25 percent, including large corporations. A massive $49 billion tax cut to big business; a figure  that Turnbull and Morrison were too embarrassed to publicly acknowledge.

Morrison's budget claims that there will be 1 percent increase to economic growth resulting from the company tax cut isn't backed up by his Treasury, who actually estimate the economy to grow by 0.15 to 0.2 percent. The sophistry that reducing company tax for businesses will produce a boost in jobs and economic growth is nullified by the fact that Australia has system of dividend imputation.

Under Australia's taxation system, the less the company pays in tax, the more tax the owners pay on their dividends; and conversely when the company pays more in tax, the less tax the owners pay on their dividends. Plausibly, a cut in taxes will encourage companies to hang on to their profits in the business, rather than pay it out as dividends or spend on new investments.

It takes many years for any economic gain to occur after the tax cuts have been implemented, and that's only when it flows on to big business. Once big business receives a reduced company tax rate it attracts more foreign investment into Australia, boosting outlays in plant, equipment and possibly some jobs. 

However any benefits to Australia's economic growth through lower company tax attracting foreign investment will be countered by the fact that profits from the investment will flow back overseas. Also any supposed gains in growth and jobs through the reduction in company tax will see a loss of tax revenue for government social and welfare spending.

The wealthy, as always, get a nice little bonus from the Morrison budget. Individuals will now begin to pay the 37 percent personal income tax rate from $87,000 instead of $80,000. 

Less than 25 percent of taxpayers earn over this figure and the 3-4 percent who earn over $180,000 will be the main beneficiaries; for example someone who earns $1,000,000 will see their income tax reduced by $16,000. On top of this the temporary 2 percent tax impost on the rich that was brought in 2014 will be eliminated.

This tax gain for the rich is compensation for the loss of their superannuation tax concessions which allowed them to amass their wealth through tax avoidance. Wealthy investors will continue to maintain their negative gearing and capital gains tax discount advantages, a tax subsidy which disproportionately goes to the top 10 precent of the population.

70 percent of taxpayers have gained nothing from the shift in the tax bracket of paying 37 cents in the dollar, because they don't earn the 'average wage of $80,000'. A more accurate wage figure is the median wage (mid-point), which is $62,000 for median full-time wage and $52,000 for median wage overall.

The working and under class are the budget losers
The big loss to the working and under class is the cruel cutbacks to government social services. Morrison's budget executes $13 billion in cuts to paid parental leave, income support for young people and family payments. 

A $3 billion cut to income support for people with disability payments, Medicare, dental health and other essential services. Aged care received a $1.2 billion cutback.

The Coalition will maintain the freeze on Medicare bulk billing payments; the bulk billing rate will stay the same that it was 2 years ago for the next 2 years, which is in effect a co-payment that the government tried to float 2 years ago.

Working and poor women do terribly in this Budget because of the planned cuts to women's refuges and community legal services. The savage $500 million cutback to Aboriginal Australia carried out in 2014 remains.

The Budget underfunds education and health by around $73 billion: $23 billion from 2018 for the Gonski reforms are dumped; and $50 billion cut from future health spending.

Being aware of the widespread anger of millions of working poor about social inequality and the essential services crisis in health, public education, transport and the dangers of climate change, Labor leader Bill Shorten dubbed the Coalition Budget as one for the "millionaires" and not for the "battlers", in his pitch to win the Federal election in July.

Whilst he pledged to bring back budget fairness by defending public services and reducing social inequality, Shorten is at one with the Coalition when it comes to military expenditure in the Budget. Military spending will increase by 3.5 percent to $32.5 billion for the next financial year and estimated to reach $495 billion in the forthcoming decade. 

This military expenditure is not for Australia's defence but instead the comprador government's (whether it be Coalition or Labor) contribution to the US-led war drive against China in the East and South China Seas and Russia in the current Middle East wars. 

The Australian Labor Party (ALP) and Bill Shorten have a dismal history when it comes to supporting the working and under class. Labor when in government reneged on many issues that affected the working poor, such as Julia Gillard's Budget cut to single parent mother's allowance. 

The Hawke and Keating government's privatised public utilities, deregulated the economy and carried out tax cuts for corporations. These events occurred because the Labor party is committed to similar neo-liberal economic policies as the Coalition. It accepts and never challenges capitalism.

This Coalition Budget will be detested and opposed by the workers and the poor, with the ALP trading on this to get elected into Federal Government. Then once in government, Shorten, true to form, will abandon workers. This has already been indicated when Shorten said he would accept an Australian Fairwork Commission decision if they took away Sunday double time penalty rates.

Of more importance is the development of an Independent Working Class Agenda to oppose budget austerity measures, and the creation of a people's movement to fight for an independent and socialist Australia.


2016 Coalition Budget makes the poor pay!
Print Version - new window

2016 Coalition Budget makes the poor pay!
Print Version - popup window



Back to Article listing


  Home | About Us | Marxism Today | Statements | International Documents | Articles | Links | Downloads | Search | Contact
Copyright © 2013 Vanguard - Communist Party of Australia Marxist Leninist