Budget 2013 - what the experts say

15-May-2013 11:23 AM

Monash University experts comment on the 2013 Federal Budget, handed down by Treasurer Wayne Swan last night.

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Budget deficit:

Professor Jakob Madsen, Xiaokai Yang Professor of Business and Economics, Department of Economics

Australia’s budget deficit has been heading in the wrong direction over the past ten years and from measures announced in last night’s budget, it is likely that the budget deficit will be larger than forecast over the next few years due to far too optimistic predictions.

I would have liked to see more investment in future growth such as in research and development and university education, particularly science and engineering. Internationally, Australia’s schooling standards are very good, making the massive spending announced to implement the Gonski reforms unnecessary. The Government should also be making savings by eliminating the tax subsidies and tax breaks to carbon emissions. The government should also consider raising the GST.

Legacy-building and workplace-relations initiatives:

Professor Greg Bamber, Department of Management

This is a legacy-building budget. Its three biggest contributions are in the fields of disability insurance, school education and investing in infrastructure. These are worthwhile initiatives, which are overdue.

But it is unfortunate that the government has cut its investment in tertiary education. This is not a smart move!

Turning to the workplace relations field, the budget allocates more than $5 million extra per annum to the Fair Work Commission to fund its new power to deal with vexed challenges of settling disputes about bullying.

The Commission will also get more than $6 million over four years to establish a pay equity unit. Initially, this will focus on the early childhood education and care sectors. It had already been announced that these sectors will receive more funding to increase pay for these important workers. It is appropriate that people who care for some of the most vulnerable members of society get a fairer deal at work.

Asylum Seekers:

Professor Greg Barton, School of Political and Social Inquiry

A Swan song it may be but the Treasurer hardly gave it his best shot. If Tuesday’s budget was intended to help salvage its reputation the Labor overnment did too little too late.

One small but poignant detail speaks to the moral and fiscal plight it now finds itself in.In May 2012 it estimated the cost of managing asylum seekers at a little over $1 billion in the 2012-2013 financial year.

Yesterday’s projection saw the 2013-2014 estimate almost triple to $2.9bn based on the very optimistic forecast of 13,200 arrivals (more than 20,000 have arrived so far this financial year, against a forecast of 5,400).

Asylum seeker arrivals present a difficult challenge with no easy answers. Dropping mandatory detention would be a lot more humane and it would likely save us quite a lot of money. It won’t solve the problem and it won’t save the Government but if you can’t do anything else at least you can be decent. That would be a proper swan song.

Professor Sharon Pickering, The Border Crossing Observatory

As in last year’s budget, the foreign aid increase has been postponed for another year, saving the Government $3 billion over the forward estimates. A total of $375 million of current foreign aid investment will go towards asylum seekers in Australia, a figure which will be capped.

Australia's asylum seeker policies cost the budget $1.3 billion. The lions share is spent on offshore processing which has serious legal and ethical shortcomings and moreover generates further costs in relation to deleterious health impacts. Reintroduced following the Houston panel and the legally meaningless 'no advantage' test, current expensive policies have not resulted in decreasing risks to life at sea or irregular maritime arrivals.

Against all available evidence as to efficacy or desirability, the commitment to offshore processing is unsustainably expensive.

The high cost of pursuing this poor policy is compounded by the fact that reductions in foreign aid will foot the bill.

Professor Louise Newman, School of Psychology and Psychiatry

In a budget badging itself on commitment to "Stronger, Smarter and Fairer", there is little focus on fairness for asylum seekers and refugees or on regional issues. Whilst acknowledging the asylum seeker "management' cost blow out of $1.3 billion due to increased arrivals, we do not see this discussed along with an analysis of the cost of maintaining offshore remote processing and indefinite detention - a much greater investment. This is a clear example of a government stuck with simplistic policies of deterrence, maintained even if they are ineffective, and without care for the cost. Announcing a review of the refugee determination process to bring Australia in line with other countries in terms of acceptance rate is presumably along similar lines.

Education:

Associate Professor Lucas Walsh, Faculty of Education

It may be argued that our education is biased towards favouring higher education as a preferred pathway from school, and not without some justification. So for the Governemnt to further slash funding to an education sector that receives relatively low levels of funding compared to many other OECD countries reflects a short term response to a long-term challenge.The $97 million boost to Commonwealth funded places and $186 million boost to research infrastructure announced in the budget will only go a tiny way towards redressing this cut, but overall the budgetary measure sits in contrast to the Government's long-term, 10-year aspiration.

To restrict funding to higher education is therefore also counter intuitive and counter productive, as is the lack of resources dedicated to developing other pathways. As perplexing is the absence of a coherent response to building alternative pathways for young people for whom higher education is not a preferred option. The fact is that after two decades of unprecedented economic prosperity, there has been a failure to invest in enabling a wide range of pathways sufficient to meet the needs of a shifting economy and to provide for future social and personal wellbeing. This budget, though welcome in fostering desperately needed reform to Australian schooling, is delimited in providing the means for addressing the needs of those most vulnerable during economic uncertainty post-school. Media commentators have described this as akin to "robbing Peter to pay Paul"; however, a better description might be that in seeking to provide a better start in life, this budget risks robbing Paul of future opportunities after completing school.

Dr David Zyngier, Faculty of Education

The 2013 Budget establishes the foundations for a more equitable funding of school education. But it only partially introduces the recommendations of the Gonski Review of School Funding.

Education is the key for long-term improved economic performance especially as Australia is forced by global competition to move away from its traditional manufacturing industry base to a more sustainable and competitive hi-tech low energy environment underpinned by a highly educated and technologically savvy workforce.

The Gonski Review recommended that $6.5 billion per annum was the minimum required to enable the most disadvantaged students of whom 80 per cent are enrolled in public schools to meet their academic potential. However, the budget has allocated only $14.3 billion over 5 years, less than 50 per cent of the Gonski minimum. At the same time, the treasurer has committed the country to the absurd proposition that all schools despite their resource base to receive the same or even more funds. This includes the most advantaged private schools receiving over $12 million each per annum from the public.

This was a lost opportunity to finally cut the Gordian knot of public funding of elite private schools. Universities losing over $2 billion from their budgets in order to pay for the Gonski lite reforms does not make us a clever country.

Defence:

Dr Remy Davison, Jean Monnet Chair in Politics and Economics, Monash European and EU Centre

The 2012 Federal Budget saw defence spending cut to its lowest level since 1938. The 2013-14 Budget sees some restoration of defence expenditures through 2016, with $5.4 billion of additional funding.

But there’s a sting in the tail: over 1,000 defence public service personnel will be cut to help pay for future defence procurement. An additional $875 million has been allocated to ongoing operations in Afghanistan, despite the withdrawal of Australian forces later this year.

The 2013 Defence White Paper, released in early May, has already identified its materiél requirements for the next decade. The White Paper aims to restore defence spending to 2 per cent of GDP “when fiscal circumstances allow.” The 2009 White Paper aimed at 3 per cent, so lowered expectations for defence spending are now the ‘new normal’.

Meanwhile, the wish-list includes 12 Growler aircraft, 12 new submarines, three air warfare destroyers, six C17 Globemaster heavy transport planes, plus 100 F35 Joint Strike Fighters, which will ultimately replace an equivalent number of F-111s and FA-18 Hornets.

The expenditure increases are backloaded; the 2013–14 Budget allocates less than $1 billion in new spending, while the largest increases are long-term: from 2017, the defence budget will average over $36 billion per annum. The medium-term plan is to spend $30 billion on defence in 2016–17.

Given the unlikelihood of the ALP government remaining in office on 15 September, the budgetary projections ares virtually irrelevant in view of the spending priorities and fiscal targets of the next federal government. The 2013 White Paper’s spending plans are ambitious, but an Abbott government will certainly amend and re-order defence spending priorities, once the prospective Coalition government frames its own Defence White Paper.

Tax reform:

Ken Devos, Department of Business Law and Taxation

The Treasure’s 2013 Budget attempt to clawback the $18 Bill deficit due to revenue write downs, has again failed to deliver any real tax reforms.

With the shortfall in the mining tax, we see another combination of ad hoc tax measures aimed at recovering the revenue that was so confidently forecasted. The abolition of the baby bonus, phasing out of the medical expenses tax offset and closing of corporate tax loopholes have been targeted while discounts for upfront HELP payments will also disappear.

The much debated carbon price is projected to fall from $25.40 in 2014/15 to $12.10 in 2015/16 and as a result associated 2015/16 tax cuts will now be deferred. It is the policy decisions behind these proposed measures that need to be questioned.

It is a shame that many of the recommendations for real tax reform which emerged out of the Henry Tax Review in 2010 were not adopted and as a result, the government is chasing its tail to recover the revenue.

Dr Gennardi Kazakevitch, Department of Economics

Both major sides of the politics are not willing to admit, that the country is facing a major structural problem in its fiscal system, and any cosmetic adjustments will not help to resolve it.

A number of tax reductions have been implemented during the Howard era and continued by the Rudd government at the time when resource prices peaked. Back then the whole country really benefited on the resource boom.

Now, when the prices are considerably lower, committing major new expenditures, such as education and disability care reforms, would be only possible if a taxation reform is undertaken that increases the proportion of taxes in the GDP. Necessary but politically impossible.

Health:

Libby Callaway, Department of Occupational Therapy

The Labor government’s 2013 budget detailed an investment of $14.3 billion over four years for Disability Care Australia, a national disability insurance scheme. Significant budgets cuts and savings were outlined to claw back revenue to fund this and other major reforms, given the $18 billion budget deficit. Labor detailed a plan to fund the Scheme beyond the next decade via a 0.5 per cent increase to the Medicare levy from July 2014, with revenue raised by this levy placed in a special fund only to be used for Disability Care.

However, a key element in the solution of supporting people with significant and permanent disability to live with choice, control and dignity was missing in this year’s budget – we need stimulus for and investment in affordable, accessible housing for this group of people. Disability Care will go part way to addressing these people’s needs by funding the equipment and support they require. But, if these people do not have access to accessible and affordable housing, their opportunity to harness a lifestyle that they are satisfied with will continue to be restricted.

The housing needs of people with significant and permanent disability must be considered if the Government is to deliver on their promise that no Australian is left behind because of the circumstances of their birth or the events of their life.

General commentary:

Dr John Vaz, Department of Accounting and Finance

There is a distinct lack of a theme in this budget, this is even more surprising due to the absence of normal direction-setting election spending to strengthen Labor's traditional voter base.

My impression is that this budget tries to distract the public from its past fiscal (mis)management performance by looking to the future, notably on implementing major initiatives such as the NDIS, NBN and Gonski.

It is also trying to be seen as economically responsible by forecasting a return to surplus in 2016, the problem is nobody believes this. The Government claims to have fully funded its initiatives by a mixture of savings and collecting more taxes from the quarters that it hopes are not winnable anyway, namely big business and upper middle class and yet it also targets health care rebates and university funding and other benefits taking away money from its traditional base.

My summary of this budget is perhaps best captured by this quote: “If you don't know where you are going any road can take you there” - Lewis Carroll, Alice in Wonderland.

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