Malcolm Turnbull is on the brink of a major policy victory after the government mustered ten of the 12 non-Green crossbenchers behind its Gonski 2.0 policy.
The outcome of a week of intense negotiation by Education Minister Simon Birmingham means, barring mishap, the government is set to end this parliamentary sitting on a strong note, at least in policy terms. The Coalition remains in a bad place in the polls.
The new model for schools funding will be much closer to the original needs-based one recommended by the Gonski review, the implementation of which was compromised by a plethora of special deals.
In electoral terms, Turnbull hopes the schools policy will at least partly offset Labor’s usual strong advantage in education. But the fight over schools will still be on, because Labor will be promising a big extra boost to funding.
To get its legislation through, the government has shortened the time frame for delivering funding targets from ten to six years; boosted by $A4.9 billion to $23.5 billion the amount of additional money that will be spent over a decade (including $1.4 billion over the next four years); agreed to establish an independent body to oversee the funding; and endorsed a tight arrangement to prevent states lowering their share of school funding.
In a gesture to a deeply agitated Catholic sector, the government will provide transitional money for it next year, while a review is undertaken of the basis for calculating how much parents should be expected to contribute. Some money will also be available for schools that are part of systems in the independent sector.
This is being couched as transition money so that all systems will come under the new model from the 2018 start. The transition money will amount to $46 million, $38 million for the Catholics.
But the Catholics, who benefited from the previous special arrangements, remain angry. The future political implications of this are yet to be seen.
On Wednesday night National Catholic Education Commission executive director Christian Zahra said that commission representatives had just met with Birmingham who “set out the minor changes” he proposed in response to the Catholics’ “very serious concerns”. But the commission’s position hadn’t changed: the bill “still poses an unacceptable risk to the 1,737 Catholic schools across the country” and should be defeated.
The outcome has left the Greens caught badly short, exposed as under the thumb of the powerful teachers union, the Australian Education Union (AEU).
The government negotiated simultaneously with the Greens and the other crossbenchers. But the Greens were split, unable to finalise a deal even though they did most of the heavy lifting in extracting some major changes and additions to the government’s original $18.6 billion plan.
The result is they’re in the worst of positions. They are unable to claim victory in delivering the more needs-based system. But they have raised the ire of some of their supporters for attempting to reach agreement with the government.
As soon as it knew it had the numbers with the other crossbenchers, the government – unsurprisingly – brought on the second reading vote on the legislation in the Senate.
Greens leader Richard Di Natale said he was disappointed the government had stitched up the deal with the other crossbenchers. The Greens had still been negotiating when the second reading vote was called. “We thought those talks were progressing really well when out of the blue, the bells rang,” he told reporters.
He said the Greens were proud that what they did through their negotiations “was to raise the bar”. But they could not support the “special deal” for the Catholic sector, and had wanted more money for disabled children.
The government is relying on getting the votes of Pauline Hanson’s One Nation, the Nick Xenophon Team, Jacqui Lambie, Derryn Hinch, and Lucy Gichuhi.
Labor has trenchantly opposed the government’s package, saying the $18.6 billion is $22 billion short of what schools would have received under the ALP’s policy.
The opposition’s schools spokeswoman, Tanya Plibersek, says a Labor government would keep the parts of the package that “are practical, like an independent schooling resource body”. It would also retain the cuts to elite private schools.
But Labor has not spelled out how a Shorten government would alter the new model it would inherit and fund more generously.
It says Gonski 2.0 is flawed because it entrenches a skew in federal funding towards non-government schools (traditionally funded by the federal government, which is only the minor funder, compared to the states, of government schools). But that doesn’t deal with the issue of how a Labor government would handle the Catholics.
Labor has taken advantage of the Catholic rebellion. The Catholic sector, having lost the old special deals, would be anxious to extract some new ones from an ALP government that had extra dollars to put around.
So, will Labor give the Catholics any undertakings that in power it would rectify the wrongs it alleges the government will do to the Catholic system? If it won’t, what will be the response of the Catholics?
If, after the dust settles from the Turnbull government making the tough changes, Labor broadly accepts the new model as a basis for its own planned funding, it will have a sound policy position but questions to answer about disingenuous claims we have heard from it in this debate.
The government has finally found an issue it can cast in terms of “national security” on which it can get a fight with Labor.
Bill Shorten usually sticks leech-like to bipartisanship on anything with even a whiff of “security”. But now the opposition has said “enough” on the proposals to toughen the criteria for people seeking citizenship.
In political terms, the question is whether the government can turn this into an effective wedge against Shorten, claiming he is “soft” on citizenship. Labor’s challenge is to keep the debate as one about what are reasonable conditions to place on aspiring Australians.
The government believes it is in tune with the mainstream; its eye to the politics was obvious when Malcolm Turnbull went out of his way to make a statement on the matter at Tuesday’s news conference on his latest energy security initiatives.
“The Labor Party does not value Australian citizenship enough to say, as we do, that it must be more than simply the outcome of an administrative tick-and-flick form-filling process,” Turnbull said. Immigration Minister Peter Dutton invokes national security and claimed Shorten has been “mugged by the left of his party”.
The proposed legislation requires potential citizens to have a higher English proficiency than at present. Additionally, the applicant will need to have lived in Australia as a permanent resident for at least four years (just one at present).
There will be a defined process to assess a person’s commitment to Australian values, helped by the longer residency requirement; people will have to show what they’ve done to integrate into the community.
The immigration minister will acquire the power to override decisions of the Administrative Appeals Tribunal on citizenship, subject to a court appeal.
Labor is opposing the bill as a whole; it wants it referred to a Senate inquiry, and says that then, if it considers there are parts worth supporting, it would ask the government to bring them back in separate legislation.
Aware Labor is treading on potentially dangerous ground, citizenship spokesman Tony Burke is trying to fireproof it. “Don’t lie and pretend something is national security when it is not,” he said.
The opposition is challenging in particular the longer qualifying period and the harder English test.
The government has a case with the former; comparable countries make residents wait between five and eight years before applying for citizenship. It is on more dubious ground on English testing, where the standard is to be raised to “competent”.
This is a level where the person has “an effective command of the language despite some inaccuracies, inappropriate usage and misunderstandings. They can use and understand fairly complex language, particularly in familiar situations.”
Burke pointed out that the questions now asked of those seeking citizenship are in a test “which is written in English. If you can’t speak English, you can’t pass the test.”
He warned the new requirement would “guarantee there will be a group of permanent residents who live here their entire lives and are never invited to take allegiance to Australia and are never able to be told by the Australian government: ‘you belong’. That is a fundamental change in our country.”
While it is desirable, not least for their own benefit, to have aspiring citizens acquire good English, people can also be excellent citizens even though their English language will always be poor. Many of us know people like that.
One motive for upping the English requirement might be fears about inward-looking communities. But insisting on the proposed level of English proficiency makes for a very un-level playing field, discriminating against those from certain countries.
Immigrants should be encouraged to become citizens – surely that is likely to be a positive for national security because it promotes a more unified nation. A “two-class” situation in the migrant/refugee population, where some can’t make the cut because of the language issue, is not what we want.
Dutton dismisses Labor’s concerns about the longer qualifying period and the harder language test.
Possibly wearing a focus group on his sleeve, he says: “The Australian public wants to see an increase in the English language requirement, they want to see people meet Australian laws and Australian values”.
There have been mild concerns in Coalition ranks about people who are about to qualify for citizenship under current rules but will face waiting longer. Dutton has told colleagues to bring him any particular cases.
If the government is playing politics with its citizenship move, Labor will have its eye on what might be opportunities on the ground.
These changes won’t be popular with some in ethnic communities, where Labor seeks votes.
On the other hand, some of those who’ve entered the citizenship tent can be less than sympathetic to aspirants.
The government may get the legislation through regardless of Labor’s stand, via the crossbench. If so, the opposition would have to decide whether it would undertake to alter the law if it won the election, or just move right on.
Let’s start at the beginning on the vexed issue of foreign donations for political parties and candidates in an environment in which globalisation is adding to challenges in combating foreign interference in electoral processes.
Back in 1918, when the Commonwealth Electoral Act was drafted, no distinction was made between donors from Australia or overseas, or (effectively) between donors who were Australian citizens, non-citizens, or organisations.
In the last year of the 1914-18 war not much thought, if any, was given to the possibility that foreign interests would interfere with the Australian electoral process, or would have an interest in doing so.
But now, in an environment in which commercial and political interests leapfrog national boundaries in ways that must have seemed a remote possibility when the 1918 Commonwealth Electoral Act was drafted, it is time to subject the act to a comprehensive revision.
The aim of this exercise should be to exclude foreign donations. Those bans should extend to organisations engaged in the political process as lobby groups for one side or the other.
It would make little sense for bans to be applied to political parties themselves without also extending such bans to unions and business lobbyists.
As much as anything, such a provision would act as a deterrent to those who might seek to utilise foreign funds improperly.
Government ministers tell you it will be difficult to frame legislation that would stop all foreign funding.
What about grey areas, they ask, such as contributions by companies whose main business is in Australia, but whose headquarters is located elsewhere?
The London-headquartered Rio Tinto is one such example.
These are difficult issues and need to be worked through. There is no simple remedy.
Of course, one option would be to make political campaigns fully publicly-funded, thus obviating the need for private fundraising. But that arrangement potentially discriminates against new entrants who may not qualify for such public funding.
The Australian model in which funding is made available on the basis of past performance has merit. But its weakness is that it advantages the major parties disproportionately.
Then there is the whole murky area of funding for organisations like the conservative Institute of Public Affairs, or groups on the left, like GetUp, which supports progressive causes.
Under present circumstances, organisations like the IPA are not obliged to disclose their sources of funding. Since they are involved in the political process, these lobby groups should be required to open their books.
In the United States, funding for similar organisations is transparent, for the very good reason that just as sunlight is the best disinfectant so is transparency in ascertaining what might motivate groups to adopt certain positions.
The IPA, for example, opposed plain packaging for tobacco products on what it insisted were libertarian grounds. It would have been useful, however, to be apprised of whether the tobacco industry contributes funds to that organisation.
Lobby groups should be obliged to place sources of funding on the public register, especially since many of these organisations derive tax benefits from their status as not-for-profit organisations.
The whole question of “money talks” politics has come into focus in the past week or so with revelations in a Fairfax Media/ABC investigation of money being splashed around political parties by Chinese-born billionaires, one of whom is not an Australian citizen.
Clearly, the aim of these contributions has been to influence Australian politicians in a way that would make them more sympathetic to China’s aspirations.
Indeed, in one case, funding that had been promised to Labor was withheld after one of its spokesmen advanced a point of view contrary to China’s interests.
This was a clear example of money being used – or the threat of funds being withheld – for political purposes. It should be regarded as distasteful, and, potentially intimidatory.
If there is a rule of thumb in politics, it is that money does not bring purity, rather the reverse.
Special Minister of State Scott Ryan, who has responsibility for an overhaul of the Commonwealth Electoral Act as it relates to political donations, acknowledges that grey areas exist that will be difficult to legislate.
The IDEA has a formula that would be helpful in establishing exactly what constitutes a “foreign interest”.
It defines such interests as entities that:
contribute directly or indirectly [and who are] governments, corporations, organisations or individuals who are not citizens; that do not reside in the country or have a large share of foreign ownership.
In the case of the latter provision, framing regulations to stop foreign donations would present challenges. Rio Tinto is just one example of companies with large stakes in Australia, but domiciled overseas.
Perhaps the most compelling argument for an Australian ban on political donations is that, apart from New Zealand, Australia is the only English-speaking democracy to permit such donations.
In New Zealand, overseas donations are capped at $NZ1,500.
In Australia no such cap applies.
However, donations to parties and candidates above $13,200 require the name and address of donor to be supplied. This information must be made available at the end of each financial year.
One reform Ryan might consider is to oblige disclosure more quickly. In last year’s federal election, Prime Minister Malcolm Turnbull made a very significant personal financial contribution to the Liberal Party campaign. But under law, this donation did not need to be disclosed in a timely manner.
In 2010, the Labor government introduced the Commonwealth Electoral Amendment (Political Donations and Other Measures Bill) that would have banned donations of “foreign property”.
The bill passed the House of Representatives, but was not proceeded with in the Senate and lapsed at the end of the 43rd parliament.
Labor and the Coalition toyed with the introduction of a donation and disclosure reform bill in 2013, but nothing came of these efforts.
In this latest 45th parliament the Greens have restored their own Commonwealth Electoral Amendment Bill that bans donations of foreign property. This version lapsed at the dissolution of the 44th Parliament.
Now is the time for this whole issue to be re-visited.
Ryan, in conjunction with Attorney-General George Brandis, needs to come up with a bill that seeks to forestall the possibility of candidates and parties being bought and sold in a monied environment that is infinitely more susceptible to influence peddling by foreign interests than it was a century ago.
The federal government on Wednesday reached a settlement with 1,905 detainees on Manus Island for A$70 million. The settlement was agreed immediately before a trial was due to begin in Victoria’s Supreme Court. The case alleged the Commonwealth and its detention centre contractors, G4S and Transfield, had breached a duty of care owed to the plaintiffs in relation to their detention, and falsely imprisoned them between November 2012 and May 2016.
The decision to reach a settlement can be read in several ways.
It would first seem to be a stunning admission by the Commonwealth that it did owe a duty of care to the detainees, and that it breached this duty through its detention practices.
Alternatively, it may be read as a strategic decision by the Commonwealth to reduce the political damage it believed would be caused through a protracted trial (predicted to be six months). This damage was likely to be exacerbated by the court’s decision to allow proceedings to be streamed live.
A small price to pay?
Compared to the federal government’s expenditure to manage unauthorised maritime arrivals – $1.078 billion in the 2015-16 financial year, and more than $800 million in 2016-17 – $70 million is a tiny sum.
And $70 million – an average of about $36,000 per detainee – might seem a small price for the Commonwealth to pay for the litany of allegations of mistreatment detailed against it in the statement of claim. These included:
failure to provide adequate toilet facilities;
inadequate and delayed medical treatment; and
This mistreatment was connected to the death of three detainees, and the serious injury of many more.
The class action brought the issues to a conclusion in a more timely fashion than individual actions could have done. But given the extent of the harm to each individual, the settlement amount for each person is likely to be significantly lower than they might have received in an individual claim.
The action was only peripherally about the money, though. The case provided a platform to lay bare the ugly reality of conditions in detention and the role of the Commonwealth and its contractors in producing and sustaining those conditions over many years.
A new way to hold government to account
In this case, private litigation was able to play a significant role in holding the government to account in an environment in which traditional accountability mechanisms fail to cut through. There are several reasons for this.
First, the case was able to produce new information about conditions on Manus Island. Once the class action was on foot, it provided a platform for expert witnesses and detainees to testify to conditions in detention free from the constraints of other types of investigation. It provided access to sensitive documents, such as the detail of government contracts with detention centre operators.
In contrast, the Australian Human Rights Commission only investigates detention abuses on Australian territory. And it is difficult for NGOs to investigate conditions in the detention centres. They need permission from governments to visit centres, and findings in their reports are easily denied by governments.
As a result, the best information on conditions in detention is through reports of those working in the centres, or through leaked documents.
As Slater and Gordon lawyer Andrew Baker said following the settlement, the case provided a strong reminder of the role the legal system can play in:
… holding governments and corporations accountable.
The case may herald the beginning of a period in which the Commonwealth will be forced to account for its offshore detention policy through protracted legal action.
What remains unclear is how many Manus Island detainees opted out of the action, and are thus free to bring individual claims. In light of the government’s decision to settle the claim, detainees outside the class action – and detainees on Nauru – may look to bring individual actions for negligence and false imprisonment against the Commonwealth.
If the treatment of these people was particularly bad, and they manage to reap a significant compensation settlement, this may open alternative pathways to settle in Australia. They might, for example, be able to apply for an investor visa, which requires a $1.5 million investment in a state or territory upon nomination.
There are no doubt many obstacles to such an application. This includes the ability to meet the health requirements for the visa – which might be compromised due to the applicants’ treatment in detention – or understanding Australian values, which may well seem very confusing to those subjected to offshore detention.
However, that such an application could even be contemplated highlights the perversity of Australia’s treatment of asylum seekers. It brings into shocking relief the distinction drawn between the same person as an asylum seeker and as a migrant with the means to invest in Australia’s economy.
The 2017 federal budget was pitched as a fair budget, but much depends on your definition of fairness. Reviewing the policies through a gender lens, there is little to address the entrenched economic disadvantage experienced by women.
Australia was known for being a pioneer of policies that are sensitive to the impacts on different genders, but that 30-year history came to an end in 2014 when the Abbott government announced it was abandoning the practice. Rather than see this analysis disappear, the National Foundation for Australian Women (NFAW) stepped in and partnered with academics like us, to analyse the budget through the gender lens. We review the effect that each announced policy will have on women’s lives: their economic status and well-being.
We found there were no measures designed to specifically address gender inequality and the related women’s entrenched financial vulnerability.
It’s a relief that the government has abandoned the so-called “zombie measures” which included changes to the family tax benefit and paid parental leave measures. These measures would have had a direct impact on women by adding to the effective marginal tax rate. They would also have reduced the female workforce participation rate, having a long-term effect on the economic well-being of women and their families.
However the budget still includes measures that have a disincentive effect in the workforce. The increase in the Medicare levy will affect those on incomes greater than A$21,644. For those with eligible children, the Family Tax Benefit A payment rates are frozen for two years and those who pay child care fees receive will continue to face high effective marginal tax rates (EMTR’s).
A flat increase in taxes or levies will particularly impact low income earners. Women are overrepresented in the lowest income levels, so changes to government benefits and increases in taxes have a disproportionate affect on women. Recently released ATO statistics show the median income for women was A$47,125 in 2014/15, while for men the amount was A$61,711.
And the recent reduction in penalty rates has already been identified as disproportionately affecting women.
These changes hit those earning well below the average wage, and are particularly harsh for women. Combined, these changes could lead to effective marginal tax rates of possibly 100% or higher for some women, particularly as Family Tax Benefit Part A begins to decrease at A$51,903.
The long awaited housing package will have some benefits for women. But community organisations will need to be vigilant in ensuring that the new National Housing and Homelessness Agreement ensures that funding is guaranteed for the homeless and for women fleeing domestic violence.
Where a person is in receipt of the age pension, the downsizing initiative will reduce it, so single women are more likely to lose entitlements if they access this benefit. For example, a widow maintaining a home that is bigger than she now needs, will not be able to benefit from downsizing with this policy.
The increase in the Medicare levy to fund the National Disability Insurance Scheme (NDIS) is also a mixed outcome. The primary carer for a person with a disability will benefit from access to the NDIS, as the additional funds for services will relieve financial and emotional pressure on the carer. But because women are still more likely to be the primary carer for a family member with a disability, this measure will disproportionately improve the lives of women.
Despite the commitment to fully fund the NDIS there are no measures to address workplace conditions. The caring economy is still largely based on women, whether they provide paid care or unpaid care.
Women working in the care sector still endure historically undervalued pay rates and working conditions, whether in the NDIS, childcare or aged care. The current consumer directed care model encourages the use of casual workers, which further reduces economic security for these women.
This year’s budget delivers some significant improvements in infrastructure, disability support, health and housing. These are welcome because they place a higher weight on the provision of government services, than unfair policies aimed at arbitrarily reducing the surplus.
The 2017 budget contains initiatives that help alleviate some of the worst aspects of its predecessors. However, it doesn’t radically turn things around for women.
Successive Australian governments are usually judged on how they balance the budget and spend taxpayers’ dollars. The stereotypes are that Liberal governments keep a tight hold on the purse strings, while Labor governments are spendthrifts.
While total government spending has increased from around A$240 billion in 1998-99 to a predicted A$451 billion in the 2016-17 financial year, it’s also accompanied by an increase in revenue from around A$250 billion to A$417 billion over the same period.
But the pressure on the budget under a Turnbull government is more acute now than ever before, because spending is outpacing revenue. It’s now at an estimated 26.6% of GDP in 2016-17, higher than at any point since before the start of the millennium.
When you look at the mix of government spending over the past fifteen years, you start to see some of the drivers of the growth.
To compare spending over time, we have adjusted for the effect of inflation by using real measures.
Social security continues to dominate government spending at A$161.4 billion, constituting around 35% of all government outlays on latest figures. This has fallen from a high of 39% during the Rudd government stimulus package in 2009-10 and is similar to levels at the beginning of the millennium.
In the graph below “other” spending includes the distribution of GST revenues to states and territories as well as spending in areas such as job seekers assistance, industrial relations, vocational training, tourism and immigration. This constitutes the second highest share of government spending, at 18% (A$83.4 billion) of the total spend. General revenue assistance to states and territories accounts for two thirds of spending in this category.
Governments spend almost as much on defence and public safety (around A$32.6 billion) as they do on education (A$34.3 billion), although the states ultimately pick up most of the education bill.
The global financial crisis saw a temporary blip in the mix of general government spending. Social security spending rose by 22% in the year to June 2009, and education expenditure jumped 60% a year later as a result of Rudd’s economic stimulus package.
Government spending on public debt interest has more than tripled in real terms to A$15.4 billion since the start of the global financial crisis, and now accounts for 3.7% of all government spending.
Many of the changes in real government spending between 2008 and 2010 were driven by the impact of the global financial crisis, which resulted in a slowdown in economic growth, rising unemployment and a negative hit on the sharemarket.
The Rudd government response was a stimulus package. The main spending increases came from a combination of accelerating public debt interest, increased payments to assist the unemployed, but mainly the government’s stimulus measures channelled through increased spending on education, housing and cash payments to families.
If a spending measure is truly temporary, a rise in real spending should be followed by an equivalent fall in subsequent years when the spending runs out or the program ends. This is evident to some degree for the social security and welfare and fuel and energy portfolios, but less so in other areas.
For example, the 45% rise in fuel and energy spending in 2008-09 was primarily driven by the introduction of the Energy Efficient Homes package within the Rudd stimulus suite. The scheme ended in February 2010, resulting in a 33% drop in spending.
On the other hand, spending on education rose by A$16 billion as part of the Rudd stimulus package, but remained A$10 billion higher than pre-global financial crisis levels in subsequent years.
Overall government spending has continued to grow since 2010-11, but less dramatically than during the heart of the global financial crisis, by around 8% in real terms over the five years to 2015-16.
Social security and welfare spending constitutes the largest spending commitment of any government budget. It has risen by 70% in real terms over the past fifteen years, from A$91 billion at the turn of the millennium in 1999-00 to A$155 billion in 2015-16.
The biggest welfare spending is for assistance to the aged, families with children and people with a disability. Together, these three items make up almost 85% of all welfare spending.
The 2008-09 Rudd stimulus package had a substantial yet temporary effect on welfare spend, with “bonus” cash payments to families in the 2009 calendar year increasing assistance to families by around A$10 billion. Additional cash payments were also made to students, pensioners and farmers under the stimulus program. And 8.7 million Australian workers earning $100,000 or less also received a cash payment.
Australia’s ageing population and increases in both disability prevalence and disability support are the main driving forces behind welfare spending growth. These factors will continue to exert pressure on future government budgets, especially with the full rollout of the National Disability Insurance Scheme (NDIS).
More than 40% of the government’s 2015-16 health budget of around A$71.2 billion was committed to community health services spending. At A$28.7 billion, spending in this sector has nearly doubled since the start of the millennium and by a quarter since the start of the global financial crisis in 2008-09.
This stems from the need to deliver medical services to a growing – and ageing – population, and the increased prevalence of chronic disease. In this respect, Australia is little different to most countries around the world.
Specific measures contributing to this growth included the expansion of health infrastructure, the costs of enhanced primary care attracting higher Medicare rebates, and indexation of health related payments to states and territories. Pharmaceutical spending increased by 12%, from A$1.4 billion year-on-year to A$12.1 billion in 2015-16.
Education spending rose dramatically during the global financial crisis, with spending on primary and secondary education increasing 81% to A$24.7 billion in the year to 2009-10 as part of the economic stimulus package.
Rudd’s “education revolution” led to a 12% growth in education spending in the 2008-09 budget, quickly followed by a further 61% spending increase in 2009-10 as part of the economic stimulus package. Spending in the following year fell as the temporary stimulus measures came to an end, but overall, education spending has remained significantly higher in real terms than pre-global financial crisis levels.
Spending on the university sector rose to around A$10.9 billion over the same period, but has remained relatively stable since.
Federal government money given to the states and territories
The federal government committed A$60.8 billion in general revenue assistance to states and territories in 2015-16, almost all of which came through the distribution of GST revenue. General revenue assistance spending rose A$3.8 billion in real terms in 2014-15, up 7% on the previous year, but has since stabilised.
Spending on superannuation interest has grown by a quarter since the end of the Howard years, reflecting the increase in the government’s superannuation liability. Lower public sector wages and employment have led to superannuation interest payments stabilising over the last two budgets to around A$9.4 billion in 2015-16.
Immigration spending rose between the Gillard and Abbott governments to a peak of A$4.7 billion in 2013-14, but has since fallen back to around A$3.8billion in 2016 dollars.
Much of the growth in immigration spending occurred during the Rudd and Gillard governments, by an average of 23% annually. This compares to an average of 7% during the previous Howard years. Additional government spending on detention facilities for irregular arrivals was the principal reason for this spending growth.
Natural disaster relief spending spiked between 2009 and 20-11 to assist with the damage and recovery costs from the Black Saturday bushfires in Victoria in 2009, and the 2010 Queensland floods.
Government approaches to supporting various industries has typically been applied on an ad hoc basis. Budget spending on specific industries has risen from A$3.2 to A$5.6 billion in real terms. Agriculture, forestry and fishing typically received a greater share of industry spending during the Howard budgets, reaching a high of A$4.8 billion in Swan’s final 2007-08 budget.
Growth in industry spend slowed during the Rudd years, picking up again with the Gillard and Abbott governments, with a greater preference towards spending in mining, manufacturing and construction projects.
Spending on housing and community amenities has increased from A$2.7 billion to A$7.6 billion, reaching a high of almost A$12 billion in the Rudd years. Spending in this portfolio increased with the Rudd stimulus package, incorporating a number of housing affordability measures including the First Home Buyers Grant Scheme and a boost in investment in social housing.
Spending on sanitation and protection of the environment also expanded rapidly during the Rudd/Gillard government, relative to the Howard years. The establishment of the Climate Change Action fund introduced by Rudd in 2009-10 and the Clean Energy Futures package in 2010-11 have been the main drivers behind this increase. Spending in each has been pared back since the Liberals came to power with Abbott at the helm.
Commonwealth spending on transport and communications projects has more than doubled from A$3.1 to A$7.5 billion over the last 15 years. Spending remained relatively stable under Howard’s government, and then got a further injection on roads in the last two Swan budgets. The Rudd government continued this trend, with Gillard following suit with increases in both road and rail projects.
Spending in this portfolio has been clawed back since the Abbott government, falling from A$9.2 billion to A$7.8 billion between the final Labor government budget (2013-14 financial year) and the first Liberal government budget (2014-15 financial year). The most recent Turnbull/Morrison budget has reaffirmed spending commitments under this portfolio, committing to more than A$11 billion in 2016-17.
The Howard/Costello years were characterised by good economic times, with an extended period of strong revenue growth, yet this prosperity wasn’t matched with any significant spending growth. In fact, overall government spending fell as a share of GDP – from 25.7% in 2000 to 23.6% in 2006-07 – the lowest share since the start of the millennium. And the combination of strong revenue and limited spending commitments under Howard drove down public debt, and public debt interest payments.
We saw some pretty dramatic increases in real spending when Rudd came into power in December 2007. Rudd’s first budget in 2008-09 saw some substantial spending commitments in the area of education but nothing exorbitant.
However, the major turning point in government spending has been driven by the response to the global financial crisis. There were significant spending commitments over the course of the crisis, some of which are still present.
Spending on public debt interest has increased to A$15.4 billion since the global financial crisis – more than the spending on transport and housing combined. And it’s projected to increase further to A$18.7 billion by 2019-20. This just emphasises how high the stakes are for Scott Morrison in delivering a credible budget repair strategy.
The spending of incumbent governments inevitably draw from the commitments of previous administrations, especially for those programs – in infrastructure, education or housing – that involve medium-term funding commitments.
The growth in real spending in areas that directly affect households – social security, NDIS, health or pensions – is an issue that no government can ignore. NDIS costs have been hugely underestimated already, and social security and health spending will inevitably increase with the ageing population.
Set against this context, it’s clear that a piecemeal approach to budget repair is unsustainable. A drop in revenue has ramped up budget pressures, and highlights the compelling need to return to a sustainable spending path and a credible budget repair strategy.
The Turnbull government cannot shy away from making the big decisions that secure a sustainable future for Australia. And the roadmap towards a sustainable future has to include revenue as well as spending as part of the recovery narrative.
The graphs in this article were created by The Conversation’s Multimedia Editor Emil Jerayatnam
Australians are concerned about housing affordability, so much so that 45.4% say they would be willing to see the value of their home stop growing to improve the situation, only 31.8% of those polled wouldn’t. An ANU poll shows 51.7% of Australians are also in favour of removing tax concessions like negative gearing.
The poll surveyed 2,513 people (representative of the population) and found 63.6% were willing to see an increase in supply of public housing. Only 32.3% are opposed to relaxing planning restrictions.
With these numbers in mind, it is perhaps surprising that state and federal governments have done so little of any substance in housing policy for decades, if anything they’ve contributed to the problem rather than improved the situation.
Potential policy changes that many believe will improve housing affordability, including removing or reducing tax incentives such as the capital gains tax discount or removing supply impediments, have all been considered too politically difficult by the current government.
The government has justified this by playing to the fear that the value of people’s home may decline or that more liberal planning arrangements may mean that new buildings may spoil the look and feel of local neighbourhoods.
The latest ANUpoll shows Australians are very concerned that future generations may be locked out of home ownership. Three quarters believe home ownership is part of the Australian way of life.
In terms of their own investments we found that nearly 68% of homeowners cite emotional security, stability and belonging as a reason for becoming a homeowner. In terms of security factors, 51% cite financial security, 42% refer to “renting is dead money” and 41% cite security of tenure and being able to “bang nails in the wall”.
Of those families who have an investment property (17% in this poll) the primary motivation for the investment was a “secure place to store money” (27.4%) closely followed by rental income (24.3%). Only 11.9% cited negative gearing as the primary motivator and 13.7% were motivated primarily by the capital gains discount.
Housing remains easily the most popular investment vehicle, with 30% saying their preferred investment for spare cash would be an investment property, followed by 18.5% preferring to upgrade their own home. Only 12.6% preferred shares as an investment.
In spite of recent talk of a housing bubble the general population is not particularly concerned with immediate price drops, with 85% expecting house prices to rise over the coming five years. Only 5.4% expect prices to fall and just 1.7% expect prices to decrease a lot.
If interest rates were to increase by 2 percentage points, 6.4% of mortgage holders expected to be in “a lot” of financial difficulty and 16.7% in “quite a bit”. Only 27.9% would be in no difficulty. While financial difficulty does not mean default, in mortgage markets it may not take a large share of loans to default to cause financial problems for an economy.
As pointed out earlier negative gearing was the least cited reason for property investment which suggests removing the incentive would at least not make a dramatic difference to the level of housing investment in Australia.
The ANUpoll shows that the public are concerned about housing affordability and where policy is directed at improving affordability they are likely to be supportive. The policy options, be they demand side – reducing tax incentives, or supply side – building more dwellings and/or relaxing planning restrictions, are available, but greater political nerve may be required to undertake such options.
Given months of polls that show Labor ahead and damaging internal disunity, the politics of this budget are extremely tricky for the government to manage.
It is not just that Tony Abbott’s sniping is causing political headaches for Prime Minister Malcolm Turnbull. Some of the government’s budget problems go back to the 2013 election.
In that campaign, Abbott suggested the budget deficit problems would be easily fixed by simply getting rid of Labor, and the government could somehow do so painlessly without cutting health, education or pensions.
However, as then-treasurer Wayne Swan had noted, Australian budget deficit problems were very complex and included substantial falls in government revenue due to the global financial crisis and the end of the mining boom. They weren’t just due to government spending.
Opponents criticised the size of the Rudd government’s expenditure, including its economic stimulus package designed to counter the GFC. Nonetheless, Kevin Rudd argued that Australian government debt was in fact relatively small compared with many other Western countries in a post-GFC world.
Once he won office, Abbott had to face the difficult realities involved in reducing the deficit. The substantial 2014 budget cuts, including to areas Abbott said would be protected, infuriated many voters and contributed to his poor polls and political demise.
The Abbott government’s woes went beyond the failure to fix a difficult budget situation. Other than attacking Labor, it wasn’t clear what its positive vision for the Australian economy was in terms of how to transition after the mining boom, and how to develop new jobs and new industries at a time of rapid economic and technological change.
Replacing Abbott with Turnbull was meant to provide us with such a positive economic vision. However, Turnbull’s mantra of living in innovative and “exciting times” failed to convince many voters. As one anonymous Liberal MP noted, it actually made some voters highly nervous about what was going to happen to their jobs.
However, the Coalition’s narrow win suggested many voters still weren’t convinced the government knew how to ensure job security and a good standard of living in challenging times. In particular, many voters remained unconvinced that substantial business tax cuts would drive the economic growth and improved government revenues that were promised.
Fast forward to the 2017 budget, and the Liberals are desperately trying to develop a more convincing economic narrative around good economic management, nation-building, and fairness.
Despite their attempts to blame past Labor policy and more recent Labor intransigence at passing budget cuts in the Senate, Liberal ministers are still having trouble explaining how government debt has increased from A$270 billion under Labor to some $480 billion under the Coalition.
Fortunately for them, Treasurer Scott Morrison now argues there is “good debt” and “bad debt”. Good debt covers areas such as infrastructure that assists economic growth. Bad debt apparently covers areas such as welfare.
Morrison is partly belatedly accepting advice on infrastructure-funding debt from bodies such as the International Monetary Fund, while trying to argue that the government’s new debt policies will be very different from past Labor economic stimulus ones.
Needless to say, these areas of “good” and “bad” debt aren’t quite as simple to define as Morrison suggests. Furthermore, so called nation-building infrastructure spending is sometimes more electoral pork barrelling than economic necessity. Doubts have already been raised over the economic, rather than political, benefits of a second Sydney airport and inter-capital city rail links.
Meanwhile, Turnbull struggled to explain whether Labor’s National Broadband Network was good or bad debt in terms of building necessary infrastructure.
Australian businesses that are struggling with Turnbull’s cheaper version, with its continuing use of 19th century derived copper wire technology or 1990s pay-TV-derived hybrid fibre coaxial cable technology may be wondering whether the Coalition should have discovered “good” infrastructure debt earlier and supported Labor’s more expensive fibre-optic to-the-premises model.
After all, under Rudd, the NBN was meant to be the nation-building 21st century equivalent of 19th-century government infrastructural expenditure on building railways.
Consequently, the government faces questions about whether its economic policy positions have been consistent, particularly given past Coalition rhetoric about debts and deficits.
Furthermore, while Morrison apparently characterises it as bad debt, providing temporary welfare benefits for those who lose their jobs because of economic downturns or restructuring helps keep up consumption levels. This in turn means it potentially has flow-on benefits for the private sector, as well as the individuals concerned.
It is a central lesson of the Keynesian economics that Robert Menzies’ Liberal Party embraced at its foundation, but was rejected under John Howard in the 1980s.
Does all of this mean that Turnbull is now acknowledging a lesson of the 2016 election: that neoliberalism is harder to sell than it used to be? Are his backdowns on “small-l” liberal values now being combined with back-downs on some of his long-held free-market values?
That seems to be going too far at present, especially given the government’s continued belief in the “trickle-down” benefits of corporate tax cuts and attacks on welfare expenditure.
However, there is some nuancing taking place as Turnbull tries to throw off the image of “Mr Harbourside Mansion” who loves hobnobbing with bright young technology entrepreneurs, and instead stress he is in touch with the concerns of ordinary voters.
Consequently, and much to Labor’s outrage, the government has now repositioned itself as an advocate of equal opportunity and fairness that supports a Gonski-lite needs-based education funding model.
While the government’s cuts to higher education will still have a negative impact on universities, and particularly students, the measures are less harsh than those in the 2014 budget.
It seems likely there will be some attempt in the budget to assist first home buyers. Various options have been canvassed.
Turnbull has already tried to position himself as taking action on household energy costs by criticising renewable energy costs and ensuring gas reserves. Meanwhile, there are suggestions the government will improve Medicare benefits in an attempt to counter Labor’s controversial “Mediscare” campaign at the last election.
All budgets are about politics, not just economics. But this budget will be even more so. Not all the measures are working out politically. Abbott is already threatening dissension over the impact of the education measures on Catholic schools.
This is a government in trouble. On one side it faces internal disunity and pressure from Labor’s emphasis on reducing inequality and fostering “inclusive growth”. On the other it has One Nation’s mobilisation of race and protectionism to appeal to the economically marginalised.
Then there is Cory Bernardi, the Greens, Nick Xenophon and a host of independents and other groups to consider.
After all, the budget is only the beginning. The next test is getting key measures through the Senate, perhaps even wedging Labor by deals with the Greens, so that the Coalition is in a stronger position to face the next election.
The federal government has confirmed it will build Sydney’s second airport after the Sydney Airport Group, owner of Kingsford Smith, announced on Tuesday it would not take up its right of first refusal to construct and operate the Badgerys Creek airport.
Sydney Airport Group chief executive Kerrie Mather said despite the opportunities the new airport would present, “the risks associated with the development and operation are considerable and endure for many decades, without commensurate returns for our investors”.
Next week’s budget will give details of the western Sydney project, which will be part of the budget’s major infrastructure focus.
The government has been paving the way for the airport project and its plan to inject funds into a Melbourne-to-Brisbane freight line by distinguishing between “good” and “bad” government debt. In broad terms, it says “good” debt is for investment that brings growth, while “bad” debt is borrowing for recurrent spending.
In a joint statement, Malcolm Turnbull and Urban Infrastructure Minister Paul Fletcher said the project was vitally important for western Sydney, Sydney, and the nation.
They said the airport would inject more than A$1.9 billion into the economy during the construction phrase. “It is expected to deliver 9000 new jobs to western Sydney by the 2030s, and 60,000 in the long term,” they said.
They said the government had been planning for either the acceptance or rejection by the Sydney Airport Group, and was “well positioned to move forward”.
Jennifer Westacott, chief executive of the Business Council of Australia, said often governments had to step in for the early stages of a nation-building project but that always should be a catalyst for private sector investment in the longer term.
The slogan for the federal government’s newly released multicultural statement – United, Strong, Successful – sounds somewhat like a soundbite from Donald Trump’s presidential campaign.
It starts with an untruth – that Australia is the world’s most successful multicultural nation. Canada would win that race on any rational criteria. But the new policy stays fairly much in the place where government rhetoric has been located for the past generation – social control and integration.
Labor’s last multicultural policy in government in 2011 began with similar statements about multiculturalism meaning a fair go. It noted the importance of reciprocity and recognition. It also emphasised the rule of law and the importance of English as the national language.
The policy created an anti-racism partnership. Its key message was social inclusion.
Since then, a parliamentary committee on migration unanimously supported key innovations in its 2013 report. These included a strong national research program, the promotion of multiculturalism as a policy of rights, responsibilities and obligations in community languages, the promotion of inter-faith and intercultural dialogue, and a focus on employment-related issues.
The Federation of Ethnic Communities’ Councils of Australia, a peak body of many multicultural groups, has criticised the Coalition government’s new statement for not tackling the need for either a national Multicultural Australia Act – which was first foreshadowed in 1989 – or a national language policy. This would mirror some of the benefits created for Canada by its own legislation from the early 1980s, and in the Australian states since 1978.
The statement accepts many of the traditional rhetorical elements of the multicultural narrative. “Fair go” reappears, for one. Three groups of values are presented – respect, equality and freedom. These grow from the seven values espoused by the Howard-era Citizenship Council report and the four principles in Labor’s policy.
However, the statement has no interest in social justice. Multiculturalism seems to depend on maintaining the Nauru and Manus Island offshore detention options in order to have strong borders.
In the examples given of how multiculturalism is being implemented, the anti-racism strategy created by the previous government and continued until now is no longer mentioned. The statement offers no new policy initiatives – only a beefing up of the surveillance and integration priorities.
“Multiculturalism” as a philosophy is never mentioned. “Multicultural” is defined through its application to a lot of people of different cultural backgrounds living in the same society.
The statement claims the government will “condemn people who incite racial hatred”. But the ongoing attempts by many government MPs to reduce the protections Section 18C provides against this suggest the level of racial hatred that will be condemned will need to meet a much higher test than now exists.
There is something for nearly everyone in the rhetoric. Even One Nation likes it. But there’s nothing for anyone in terms of new ideas or actions.
The statement’s main effect will be inaction. The critical need for an Australian Multicultural Act to ensure a strong espousal of values and strong and funded delivery to implement them has once more been rejected.
The sector is left without any program bite, just more rhetoric. Its limited and highly vulnerable projects can be abandoned at the government’s whim.
Multicultural Australia remains on the very edge of government, the most junior of the junior assistant ministries. It’s dependent for any movement on weak product champions for its cause scattered through other parts of government.
There’s much ado about not very much at all in this announcement. And key areas like anti-racism are always at risk of disappearing in the next round of budget savings.