With Australia on the brink of an election, the 2016 Federal Budget is Prime Minister Malcolm Turnbull’s big chance to sell his vision to the nation.
Does it set up Australia for the next decade, investing in health, infrastructure, technology, education and innovation? Will it create new opportunities, underpinned by a taxation system that is equitable and delivers a revenue stream to fund the Budget’s promises.
Over the next two days University of Melbourne experts will deliver their verdict here. You can also join the conversation at #budget2016.
And to get you started, the ABC has produced a nifty guide here that does a great job decluttering the jargon, of which Budgets have plenty.
5 May 2016
some welcome stability for science investment
By Professor Andrew Holmes, President of the Australian Academy of Science, University of Melbourne School of Chemistry, Bio21 Institute
The Australian Academy of Science welcomes the implicit long term commitment to science funding announced in the most recent Federal Budget, with an anticipated overall increase in science funding and a specific commitment to increased funding in Antarctic science and to Geoscience Australia to improve our understanding of minerals available in the Earth’s crust.
The Academy believes the shift in investment to a knowledge-based economy can only be achieved through a long term and sustained investment in the nation’s science base. This includes commercially-oriented research, applied research that does not have a commercial benefit but is necessary for the public good, and basic discovery science that enhances our knowledge and understanding of the world, and which can have unpredictable but transformative impacts on our lives in the future. Sustained investment in medical research through NHMRC and the Medical Research Future Fund are welcome.
While the reduction in funding for science in recent years has been disappointing it is good to now see some funding stability, along with strategic investment in some areas. The ongoing commitment to a continuing ARC Future Fellowship program secures the pipeline supply of independent investigators, and the Academy welcomes the sustained support for the National Collaborative Research Infrastructure Strategy facilities in the budget, and the government’s longer term commitment for research infrastructure in Australia.
how to lay the golden egg
The community welcomes the government’s decision to place the National Innovation and Science Agenda at the forefront of public thinking. There are many thoughts on how Australia should maximise the return on the investment in science. To my way of thinking, the laying of this ‘golden egg’ depends on sustained investment in basic science combined with some entrepreneurial thinking and calculated risk-taking on behalf of government to match the level expected of the innovators over a sustained period. In the near future the Australian Council of Learned Academies will release its latest ‘Securing Australia’s Future’ report Capabilities for Australian Enterprise Innovation that will offer some interesting and provocative thoughts on this topic.
In the meantime we should live by the maxim laid down by the Nobel Laureate, the late Max Perutz, in establishing the famous Medical Research Council’s Laboratory for Molecular Biology in Cambridge: “choose outstanding people and give them intellectual freedom; show genuine interest in everyone’s work, and give younger colleagues public credit; enlist skilled support staff who can design and build sophisticated and advanced new apparatus and instruments; facilitate the interchange of ideas, in the canteen as much as in seminars; have no secrecy; be in the laboratory most of the time and accessible to everybody where possible; and engender a happy environment where people’s morale is kept high.”
To that I add the wise advice of two former Presidents of the Royal Society:
what is pure science today will become the applied science of tomorrow.
4 May 2016
Where are the women in this budget?
By Professor Guyonne Kalb, Melbourne Institute of Applied Economic and Social Research, Faculty of Business and Economics
Looking at the Budget, there is a glaring gap. There are no new measures to encourage female labour force participation. In fact, the Budget even makes some savings by deferring the Jobs for Families package promised in the last Budget. So we have actually gone backwards compared to where we were before the 2016-17 Budget.
The Low Income Superannuation Offset (providing a tax refund on Superannuation contributions of low-income individuals) and extension of the spouse tax offset (for contribution to a low-income spouse’s superannuation account) will help ameliorate the low income many women experience in retirement as a consequence of low labour force participation over their lifetime.
However, prevention of this gender gap in retirement savings through improved labour force participation would be much more effective, and have more positive flow-on effects for society through increased economic growth and productivity.
Research repeatedly supports the argument for gender diversity in the workforce. Yet, this Budget has entirely overlooked the associated social and economic benefits.
A new discussion about higher education?
By Dr Gwilym Croucher, Centre for the Study of Higher Education
The Government has brought down the 2016-17 Budget and it signals the Coalition’s intention to prosecute change to the higher education system in Australia if they win the election. Importantly, the Budget provides a stay on the proposed Pyne deregulation package, and associated cuts.
Instead the Government has released a discussion paper to canvass the areas in which they are still likely to pursue change. This sits alongside measures with a direct impact from 2017, such as a reduction in equity funds.
The discussion paper contains some radical options to achieve the “savings outlined in the budget,” and revisits proposals which came following the 2011 Lomax Smith Review of Base Funding.
“Full deregulation” is dead, but its presence still lives on large in the idea mooted for fee flexibility in a limited number of ‘flagship’ courses at each university, similar to that proposed in Lomax Smith Review. This is in effect an opt-in version of deregulation for some courses, and as the paper makes clear would need careful thinking to ensure that it achieved the diversity in student choice that the government intends.
A spread of “flagship” courses in high demand and high revenue courses is not in anyone’s long term interest. Does Australia really need 41 flagship commerce or law courses?
The paper also signals options for change to HELP. As Andrew Norton’s work at the Grattan Institute has recently helped show, reform of the loan system is not simple but may be politically necessary if the costs are to be met. It moots the option of changing public support for postgraduate coursework degrees, revisiting the difficult question of how to design a system for them that promotes diversity but is coherent in an age of demand-driven funding for bachelor education.
Onus now on students, universities and the public
What is clear is that the Government will expect significant structural savings from whatever comes next. The reality of the system is that to achieve large savings to the portfolio it must come with either a significant reduction in public funding for either research or teaching. Both options come with significant tradeoffs.
Reducing research funding will reduce Australia’s research effort at the same time as the Turnbull Government loudly pursues an innovation agenda. Without seriously sacrificing quality, reducing teaching funding can only be mitigated through an increase in student contributions, either directly as fees or through a less generous HELP scheme.
The Government claims to have deferred $2.5 billion in cuts due to the deferral of the Pyne package. This is a large number, especially when the paper is silent on other key parts of the funding system such as indexation of grants from year-to-year. As the 1990s showed all too starkly, the compounding effect of keeping funding static without indexation quickly erodes its real value.
The Government has said it is open to all ideas and the paper signals the establishment of an expert group to oversee proposals for the next phase. These are only discussion points at this stage, and no preferred options as such, so the onus is now on the students, universities and the wider public to make clear where they stand on these trade offs, even if they reject some of the premises of the proposals.
First, do no harm: The politics of Budget 2016
By Dr Scott Brenton, Melbourne School of Government
In case you’ve missed the three-word slogan, “jobs and growth” is the central message of the Coalition’s 2016 Budget, released just two months out from the federal election.
The Treasurer Scott Morrison mentioned it 13 times in his budget speech, and it is emblazoned on the government’s budget website and related publications. I can confidently predict that members of the Government will be saying ‘jobs and growth’ ad nauseum.
It could be about Coalition MPs’ jobs, given how close the election is.
This has probably been the Coalition Government’s best budget politically, although that is hardly a great achievement. It is also quite typical of election-year budgets, despite the Treasurer’s claim that is it ‘not just another budget’ and that these are ‘extraordinary times’.
Actual cost vs political cost
Election-year budgets often rely on a simple formula: political cost equals the actual cost of policy change, divided by voter value.
A voter’s value is primarily based on where they live (i.e. in a marginal seat) and whether they are a swinging voter.
If a voter has a high value, expensive policy can be tolerated if they are politically popular. Anything that costs voters becomes a negative value, in every sense of the word.
The billions of dollars spent on things like submarines in South Australia, offshore immigration detention centres and subsidies to polluting industries, have low political costs.
The Coalition probably won’t have lost many higher-income voters, because while there are some changes to generous superannuation concessions, higher income earners benefit from the end of the temporary budget repair levy (despite continuing large budget deficits), and a tax cut for the top quarter of taxpayers earning more the $80,000 a year.
There are many people who will have to pay more, but they are among the groups that are generally less likely to vote for the Coalition, or even vote at all. Smokers and university students fall into this category.
Cuts from earlier budgets affecting the wider community are still part of the government’s plan, but they have been deferred until after the election. While they are hidden, no doubt the government will claim a mandate to implement them if they are re-elected.
There are also measures that are effectively cuts, such as pausing the indexation of Medicare benefits. While health care costs grow, the government subsidy remains the same, meaning that patients will probably have to cover the difference.
Budget won’t change many votes
The loss of benefits or the increase in user fees for public services can lead to the loss of support for governments, as with the 2014 budget. Otherwise, most people have other concerns in their lives and will not follow the budget coverage closely. At best, they will receive a few key messages through media or other avenues.
One of those messages is that the Government finally has an economic plan, after months of promising one. Or at least they have called a largely unfunded company tax rate reduction an economic plan. It is supposedly to make Australia more competitive, even though businesses have never previously been deterred from remaining or trading in this country due to the tax rate.
Many companies already minimise their tax anyway, regardless of the rate, as the government acknowledges with the establishment of a new tax avoidance tax taskforce. A partial reversal of the years of cuts to the Australian Tax Office.
Business leaders and associated interest groups (many of whom have Liberal connections) will be out spruiking the benefits. The government will be hoping that their positivity overshadows the Reserve Bank’s concerns about the state of the economy, with a cut to interest rates to combat deflation.
Budget is not locked in
Whatever the election result, the Budget outcome will change. A change of government to Labor could lead to a mini-budget later in the year, in which they reprioritise spending.
Even if the Coalition retains government they will also have to make changes. While they may want growth, their projections in their previous budgets have been overly optimistic and have constantly been revised downwards. The projections in this budget will likely be as well.
As for the security of Scott Morrison’s job and growth of the Coalition’s vote, the current odds are this will be his first and only budget.
His performance has not been as bad as some of the previous three treasurers over the last few years (although he has struggled a few times in knowing when the budget would actually be delivered). But for Morrison to keep his job the Coalition would have to win the election and Malcolm Turnbull would have to reappoint him.
That is probably as optimistic as the economic growth figures.
Dr Scott Brenton is the author of The Politics of Budgetary Surplus
punching holes in the bottom of the boat- Medicare freezE a bad idea
By Associate Professor Grant Blashki, Nossal Institute of Global Health
The freeze on the Medicare Rebate is a cowardly underhanded punch in the guts to the most vulnerable members of our community.
At least the General Practitioner co-payment, while unpopular, was transparent and honest.
But now, the Government has put the death squeeze on GPs to drop bulk billing, by freezing the rebate at an unsustainable level while the Consumer Price Index continues to rise.
GPs in private billing practices need to raise their private fees, otherwise known as the ‘co-payment by stealth’, just to keep up with rising clinic costs.
Meanwhile GPs like me, who work in exclusively bulk billing clinics, and have no option to raise private fees, are seriously contemplating moving to private clinics.
Our clinic is open seven days a week 8am to 11pm and provides a fantastic service to people from lower socioeconomic backgrounds, people with chronic diseases who have frequent visits, and people with serious mental disorders who can’t afford private fees, while also offering after hours access when many of the private clinics are shut.
There are so many in our community who rely on bulk billing clinics like ours.
The short-termism of the freeze fails to account for the lost opportunities in prevention, chronic disease management and averting episodes of expensive tertiary care. So in the long term, it’s bad for the community and bad for our health budget too.
Strong affordable primary care is proven to be the cornerstone of our wonderful health system. Freezing Medicare is like punching holes in the boat, we can tread water for a while, but bulk billing will become an impossible service for GPs to provide.
THE Foreign Affairs Budget
By John Woods, Melbourne School of Government
Once again the Foreign Affairs Budget for 2016, which now includes the aid budget, attracted little immediate attention when the Budget was released. That is partly because the additional spending measures for DFAT are small and relatively routine, and further cuts to foreign aid attract little critical attention.
Foreign Minister Julie Bishop identified the following highlights in the Foreign Affairs component of the 2016 Federal Budget:
AN additional $2.7 million to establish Australia’s first Cyber Ambassador, plus a new $4 million cyber security cooperation program in the Indo-Pacific Region. This is a small part of the $195 million cyber security strategy program included in this year’s budget.
SOME $39.4 million for new diplomatic posts in China (mainly aimed at promoting opportunities under the Australia-China Free Trade Agreement) and in Lae in Papua New Guinea. It is not clear whether the Government is continuing with previously announced plans to establish a consulate at Buka in PNG.
SOME $9.2 million to maintain DFAT’s People Smuggling and Human Trafficking Taskforce.
On the revenue side, the cost of passports will increase from 1 January 2017 by $20 for ordinary passports, $10 for passports for children and seniors, and $54 for priority processing. DFAT will spend an additional $46.7 million over four years to meet increased costs of producing and creating more technologically advanced passports.
The DFAT budget though will continue to be subjected for another year to the odious “efficiency dividend” savings measure of 2.5% of operating budget (as are all Federal Agencies), before it reduces to 1% by 2019-20.
Ms Bishop indicated Australia will provide Official Development Assistance (ODA) estimated at $3.827 billion in 2016-17. That is a reduction of some $224 million, or approximately 7.5 per cent, from the figures included in the revised estimates for 2015-16. This reduction continues the Coalition’s policy to renege on commitments it made in 2013 on aid expenditure.
According to the Development Policy Centre at the Australian National University, this outcome means “Australia’s generosity index (aid/GNP) will hit a new record low in 2016-17 of 0.23%.” Even though Ms Bishop argues that Australia will continue to be the 12th largest aid donor among Organisation for Economic Cooperation and Development (OECD) countries, the 0.23% aid/Gross National Product outcome puts Australia below the global average, which now runs at around 0.3%.
Over half of the aid cut ($136.5 million) comes from cuts to contributions to Global Health Programs, Global Educational Partnerships and the Green Climate Fund.
Some $220 million will however be provided over the next three years to address the humanitarian and longer-term resilience needs in Syria and neighbouring countries hosting refugees. Some $200 million is also being provided as part of Australia’s five year $1 billion commitment to addressing climate change.
John Woods lectures in the Masters of International Relations program in the School of Government. He was formerly a senior officer in the Department of Foreign Affairs and Trade and the Australian Ambassador to Peru.
LUcky country syndrome strikes again
By Professor Danny Samson, Faculty of Business and Economics
Tax cuts to small business, welcome as they no doubt are, may stifle innovation across product development, technology investment, process improvement and perpetuate our risk-averse culture.
There is no compelling evidence that lower corporate tax rates will cause or drive small businesses to become more innovative. Such tax cuts could be used to do many things, from investing in extra capacity, more in the marketing budget, or just higher dividends etc.
It will allow smaller businesses to survive, prosper and be increasingly competitive, without having to take the risks that innovation involves. If lower taxes provide higher rates of return on investment, might this reduce, for some business proprietors, the motivation to innovate, by making them more comfortable with the status quo?
If we want to stimulate business activity in innovations, let’s do it much more directly, by both incentivising it and investing in national human capital. These are direct. These are focussed on innovation. Tax cuts are not directly aimed at innovation, either in the Government’s intent or in their likely outcome. They might even detract from innovation efforts: preserving the comfort zone for some. Are we creating the Lucky Country syndrome once again?
NOW, THE BIG SELL
NOT THE ANSWER TO YOUTH UNEMPLOYMENT
By Kira Clarke, Centre for Vocational & Educational Policy, Melbourne Graduate School of Education
The Budget announcement included an $840 million Youth Employment Package inclusive of a new program called Prepare, Trial and Hire (PaTH). In his speech, Scott Morrison called this “real work for the dole” and Budget papers described it as taking “advantage of job opportunities as the economy diversifies and transitions to broader‑based growth”.
Undoubtedly, youth unemployment, particularly amongst marginalised young people, is a significant challenge facing Australia. In 2015 more than 80,000 19-year-olds were disengaged from schooling without completing Year 12 and more than 93,000 24-year-olds were not fully engaged in employment, education or training.
The PaTH program, pitched as an “enterprising new approach to youth employment” is described in three stages.
Stage 1 involves “intensive pre-employment skills training”.While this new program is aimed at creating 120,000 internship opportunities for unemployed young people, its focus on generic employability skill preparation is in direct contrast to the focus on STEM, advanced skill industries and knowledge economy growth referenced elsewhere in the Budget.
Stage 2, where the “internship” kicks in, involves up to 12 weeks of 15-25 hours of work for young people who have been in employment for more than six months. The program, being promoted as providing “hands on experience” in “real workplaces”, offers young job seekers taking up an internship $200 per fortnight and an up front payment of $1,000 for employers.
Stage 3 of the PaTH program offers incentives for employers who go on to employ young people using employment services, including higher incentives for employers who take on young people deemed “less job ready”.
While many welfare agencies may welcome PaTH as acknowledgement of the need for action for unemployed young people, policy aimed at addressing youth unemployment needs to be connected to education and training.
Young people without qualifications remain vulnerable, as the economy increasingly demands a higher skilled labour force. According to the ABS, 76% of people with higher-level VET qualifications are employed, this drops to 66% for people with no post-school qualifications and 44% amongst those who haven’t completed Year 12.
As low skilled jobs disappear, generic employability skills and taster like internships, such as those described in the PaTH program, are insufficient to achieve labour market security for young people without qualifications.
ELECTION on HOrizon
The 2016 Budget is already framing the election prospects of Malcolm Turnbull’s Government. With an election announcement imminent, our sister site Election Watch takes a look at the six seats to watch on polling day.
3 May 2016
Let the debate begin
Tax cuts and tax concessions, small business, superannuation, transport infrastructure, hospitals, innovation, foreign aid, schools, higher education: We’ve published some strong views here tonight. Join us tomorrow for more on Treasurer Scott Morrison’s first Budget.
LITTLE TO MEET TRANSPORT INFRASTRUCTURE CHALLENGES
By Professor Mark Stevenson, Melbourne School of Design/Melbourne School of Engineering
The transport system, particularly our road and rail networks, are integral to Australia’s current and future productivity.
It was disappointing therefore, that the Federal Budget provided little in the way of investment for challenges being faced by most capital cities and a significant impediment to productivity namely, congestion.
Congestion across Melbourne’s road network for example, is likely to cost the city approximately $9 billion per annum by 2031. Extending and widening freeways (as funded in the Budget) will do little to alleviate the challenge that lies ahead.
Sure, imposing a levy for using the network, which is purported in the budget papers as an item the Federal Government will investigate, is likely to reduce the demand across the network and particularly the freeways, it will seriously curtail access and mobility for residents living on the outskirts of our sprawling car-dependent cities.
Australia’s future productivity will not only rely on innovative solutions to dealing with congestion but importantly, an efficient and effective freight and logistics industry. Again, there was little investment in infrastructure that would deliver on such.
Overall, the Budget has not placed importance on the ageing, depreciating infrastructure and has provided a very conservative framework for the next five years; a framework that will do little to meet the significant demands of urbanisation.
Professor Stevenson is a Professor of Urban Transport and Public Health.
6/10 AS A SHORT-TERM FIX, BUT LONG-TERM CHALLENGES REMAIN
Professor John Freebairn, Ritchie Chair in Economics at the Faculty of Business and Economics, rates the Budget a 6/10 in terms of addressing short-term challenges.
He said the gradual pace of deficit reduction is aligned with the Reserve Bank of Australia’s soft view of the economy. The RBA cut rates today by further 0.25 basis points to 1.75 per cent. “They are singing from the same song book,” he says.
“If you go along with the RBA story that the economy is sick, then this is probably not the time to dramatically reduce the budget deficit because if you reduce the deficit dramatically the Government is pulling a lot of aggregate demand out the economy,” Professor Freebairn says.
‘“But we still have this unbelievable structural deficit problem. The Government really doesn’t have a clear picture of how they are going to pay for the ageing population, the rising health budget, and the National Disability Insurance Scheme is almost certainly going to cost more than they think,” he says.
More equity in super but system still a mess
Professor Freebairn says the reduced tax concessions from superannuation for higher income earners, combined with income tax cuts for middle income earners, injects some needed “equity” into the system.
But he warned the retirement income system remains “in need of serious reform”. “This is getting a little bit of equity into the system but it leaves the whole retirement income system a patched up chaotic mess,” Professor Freebairn says. “So this won’t be the end of fiddling with superannuation.”
Along with the superannuation change, the Government is raising the middle income tax threshold from $80,000 to $87,000.
“Those people who make average use of superannuation will lose on the super changes but gain on the lower personal income tax, and they should be about breakeven. Those who have been making above average use of super will be losers, and those who have been below average users of super will be winners,” he says.
“Logically that improves horizontal equity,” Professor Freebairn says. Horizontal equity is where people on similar income and assets pay the same amount of tax.
Small business tax breaks about politics, not economics
Professor Freebairn criticised the Government’s plan to cut the tax rate for small business but not medium-sized and big business. He says it is “inefficient” and driven by politics rather than economics.
“Why are we giving tax breaks to small business but not to large and middle sized businesses? There is no evidence that small business on average create more jobs, invest more in new products and develop more efficient ways to produce products, than big business?” Professor Freebairn says.
“It is an inefficient allocation of revenue.”
The Government is reducing the tax rate for small business from 28.5 per cent to 27.5 per cent and increasing the threshold to qualify as a small business from $2 million in turnover a year to $10 million.
Treasurer Scott Morrison outlined plans to reduce the tax rate for all businesses to 27.5 per cent by 2023-24, but Professor Freebairn said how that will be funded is unclear.
“There is a real question mark that this is ever going to be done,” Professor Freebairn says.
He says that setting the small business threshold at $10m appears to be arbitrary. “This is giving a concession to particular companies that isn’t available to others, and there is no evidence that there is any rationale other than political votes that this will make for more employment, better innovation and a more productive economy,’’ he says.
PEOPLE DO INNOVATION, NOT TAX CUTS
Tonight’s budget measures are not nearly enough to convert Australia into a “high innovation” country, says Professor Danny Samson, business competition and innovation policy expert from the Faculty of Business and Economics.
“Australia has a risk averse, structure centric approach to innovation, in which government thinks it can set some economic conditions, stand back and wait for it to happen,” he said.
“We tweak tax rates, and other incentives, based on dry economic thinking only. We have not invested in human capital to nearly the extent that has occurred in the countries that outperform us in innovation rates, such as Singapore, Israel, the USA, Taiwan and South Korea.”
Professor Samson calls for a “bold initiative” we have so far not seen in this budget but that has been promised by the innovation strategy announced by Malcolm Turnbull in December.
“It’s simple - people do innovation.”
“We need to invest in ‘human capital’ – the skills and capabilities of millions of Australians. The Prime Minister’s innovation strategy needs to build our widespread human capital.”
He said Australia needs entrepreneurs and intrapreneurs (innovating within existing business) so the government needs to fund TAFEs and universities to deliver the core innovation skills as part of the curriculum, as well as training for early career professionals within the workplace.
“They have the energy to drive innovation; they need only the knowledge and capability of how to do it,” he said.
“This is how we will build a real innovation boom. We need to build human capital on a widespread basis, not just tweak the financials.”
“Mark Zuckerberg, Steve Jobs and Larry Page didn’t innovate to become successful in innovation-based wealth creation because of tax tweaks or incentives,” said Professor Samson. “They had energy, and developed capability. We have the talent in Australia; let’s catalyse it.”
HOLDING CENTRE STAGE
SCHOOLS: A DISAPPOINTing statement
As announced earlier this week, Australia’s schools will get an extra $1.2 billion in funding from 2017 to 2020, but there was otherwise nothing new in the Budget papers.
Dr Glenn Savage, an education policy expert from the Melbourne Graduate School of Education, says while the Budget will disappoint some stakeholders who wanted more, it is not a surprising statement from a Government that has spent the last few months “flip-flopping” on its education agenda.
“Up until last week, there was no clarity at all in terms of what the Coalition had in mind for schools,” Dr Savage says.
“(Education Minister Simon Birmingham) said he was going to develop a new funding agreement to replace the Gonski model, but nothing has emerged. Then in the last month we’ve seen this remarkable flip-flopping from the Government as to what its agenda is.
“We’ve had everything from a new agreement to replace Gonski right through to (Prime Minister Malcolm) Turnbull’s ill-conceived tax plan which suggested that the Federal Government might completely remove its funding for public schools, now through to this new idea of increased funding.
“But they haven’t provided any detail yet as to what this new funding model will look like. Will it look like Gonski? Will it look different from Gonski? If it’s different, how will it be different? How will they define need in terms of needs-based funding?”
Dr Savage says he doubts whether the Government had more in store in terms of education funding agreements in the lead-up to the election.
“Well they need to negotiate these things with the states and nearly all of the conditions that they’ve put out there as ideas intrude into state and territory responsibility.
“At this stage, they are just thought bubbles until they can actually nut out the details of what that’ll look like, so it’s unlikely they’ll get any agreements over the coming months.”
Dr Savage believes the $1.2 billion announcement – which falls significantly short of Labor’s proposed $4.5 billion scheme – was a rushed move by the Coalition to placate its critics.
“I wonder if this amount of money would have been put forward if it wasn’t for an election coming up,” he says.
“I think they’re beginning to realise they’re not going to get away with stepping away from the Gonski reform without a big fight. But always the argument shouldn’t be just about how much, it should be about how they’re spending the money.”
The Federal Government needs to make a firm decision on whether it wants to have more or less of a role to play in public schooling, Dr Savage says.
“They’ve been talking about potentially rolling back the imprint or footprint in Australia’s schooling, but this announcement is actually increasing the federal role by placing all these new conditions on the state,” he says.
“We’re actually seeing Federal interference rather than a Federal retreat. It’s this kind of inconsistency in messaging that’s going to drive cynicism that the budget funding is just political manoeuvring rather than any sign of a coherent, or consistent agenda.’’
CUTTING AID ROBS THE POOR
By Professor Rob Moodie, Melbourne School of Population and Global Health
This Budget again sees the Government using Australian aid as an ATM. Stealing from the till of poor people.
After two successive Budgets which have torn out so much aid, it has been cut yet again, this time by another $224 million in 2016-17. It brings the total aid budget to $3.8 billion, and now has our aid at the meanest levels ever. A miserly 22 cents in every $100 of national income. This is less than half the amount that John Howard set us on the path to in 1998.
On average, Australians believe we invest 16% of the Budget on Australian aid, yet the reality is that we invest less than 1% percent, which is equivalent to 0.22 percent of national income.
As a nation we have so much after 25 years of strong economic growth, yet as soon as things get a little tough our leaders look inward and immediately begin to rob the overseas aid allocations. Why is it that the money needed most is always the money that is cut? Money for the poorest global citizens, the powerless and the voiceless.
Yet we can be much more generous and our aid works, whether allocated to crucial international agencies such the Global Alliance on Vaccines or the Global Fund for AIDS, TB and Malaria – or for training engineers, agricultural scientists, researchers, doctors and nurses.
I can only hope, for the sake of the poorest global citizens and for the sake of our self-respect, that the cuts are the last we see, and that at the next Budget, we can once again manifest a much more generous side to our nature.
POSITIVE MOVE on TAX CONCESSIONS
By Dr Sam Tsiaplias, Melbourne Institute of Applied Economic and Social Research
At first glance, it is positive the Government has identified the need to cut back on generous tax concessions, particularly in the area of superannuation.
Reducing the tax concessions stemming from the super contributions of higher income earners seems to be sensible. At the same time, further curtailing of tax concessions may be necessary. In particular, the proposed cap on tax-free superannuation contributions still provides a substantive means for using superannuation as an estate planning tool.
Although the budget has targeted some key areas, there does not seem to be sufficient consideration of the budgetary pressures associated with Australia’s changing demographic landscape.
By 2040, about 1 in 5 Australians will be at least 65. This is important, particularly since the budget will face further pressure as Australia ages and this pressure will be directed at the already budget-intensive areas of social security, welfare and health.
These areas are currently responsible for over 50% of government expenditure, and this proportion is likely to increase in the future.
TAFE AND VET STILL THE CINDERELLA
By Associate Professor Ruth Schubert, Associate Director of the LH Martin Institute for Tertiary Education Leadership and Management
According to the Federal Governments’ own pre-budget spin, “the budget is the economic plan of action”. Education is widely considered to be central in driving the workforce skills of the nation.
However, the funding measures in the Budget are still largely focussed on two sectors, schools and universities. Yet again, we find a paucity of proactive measures for TAFE and VET across Australia.
Instead, we find the focus in this year’s Budget has been about supporting the recently proposed Commonwealth measures to fix the outrageous rorting in recent years in VET FEE-HELP.
Rorting that has been undertaken on an industrial scale by a small number of providers, the Federal Government’s own paper reveals official 2015 VET FEE-HELP costs have reached $2.9 billion, with private providers accounting for $2.46 billion or 84 per cent of the total.
The reactive response in the Budget is aimed at addressing the Commonwealth Governments’ own negligence, and yet again demonstrates a lack of leadership and vision about addressing the fundamental issues that bedevil VET.
As a nation we lack clarity about the overall system, and the confusion of responsibilities for VET shared between the Commonwealth and the States only adds to this.
Work by the Mitchell Institute highlights how funding for VET is still very much the “Cinderella” as funding for schools and universities has steadily increased.
Central to questions around VET is a clearly articulated and supported role for TAFE as the cornerstone of the VET system, as not all providers are created equally. We need to recognise this and support the quality, low risk, comprehensive public providers, while creating an equally well articulated role for quality, low risk private providers. The role then for governments is to manage the system, a responsibility that has been sadly lacking.
SMOKE AND MIRRORS
A lacklustre, no-surprises budget has provided nothing new in terms of health, says Professor Tony Scott, from the Melbourne Institute of Applied Economic and Social Research.
“The budget is all smoke and mirrors designed to keep the wolves at bay, rather than being part of a long-term solution for sustainability,” says Professor Scott.
“The ‘additional’ spending on the dental scheme, health care home trial and some of the extra hospital spending is not new, but recycled. The dental scheme is a re-hash of Labor’s scheme that doesn’t address the continuing, long public waiting lists which can only be solved by more dentists working for the public sector and increased prevention. It is unclear how the states will achieve this.”
Professor Scott, a renowned health economics expert at the Faculty of Business and Economics, said there was also a lack of detail with the Coalition’s home health care program.
“The health care home trial for chronic disease patients is based on a previous $36 million trial that was shown not be cost-effective, and is scant on detail on how GPs will be paid,” he says.
“Public hospital funding represents a last-minute fix to keep states happy, but it is short term and lacks any vision. Measures to raise revenue ensure that Medicare rebates will remain fixed until 2020, another blow to doctors, which could paradoxically have unintended consequences if the governments needs the support of GPs for the health care home trial.”
Professor Scott also says the Government had played it safe on tobacco excise. “The tax on cigarettes is the usual easy target designed to raise revenue and not to reduce the harms caused by smoking,” Professor Scott says. “Overall, a lacklustre budget with old schemes and money re-packaged as new.”
HIGHER EDUCATION “CONSULTATioN”
By Dr Emmaline Bexley, Melbourne Centre for the Study of Higher Education
The big news for higher education in this Budget is its firm insistence on “no news’’.
The ill-fated higher education reforms announced in the 2014‑15 Budget are being deferred by a year “to undertake further consultation”. The backdown was absolutely necessary, with the 2014 measures still sitting on the ledgers and the Government surely not wanting to spend what promises to be a long election campaign batting away Labor’s ‘$100 000 degrees’ chants.
Miraculously, squaring the jaw and officially putting the troublesome reforms in the too-hard basket for a year will “save” $2.0 billion over five years (in fiscal balance terms, if you want to be precise, or a cost of $596.7 million over five years in underlying cash balance terms).
This dampest of squibs is blushingly named “Higher Education Reform — further consultation”.
But the interest in this Budget, for education at least, is in the text, not the numbers. Some programs will be defunded to “repair the Budget and fund policy priorities.” Ergo, those things aren’t priorities.
For example, the Higher Education Participation Program. Goodbye $152 million over four years (although $553 million remains). Also, the Promotion of Excellence in Learning and Teaching in Higher Education. Farewell to $20.9 million over four years ($17.9 million to remain).
Paradoxically, while promoting teaching excellence is no longer a priority, quantifying it is (+$8.1 million over four years to survey and report on higher education students’ experiences).
So, too, policing quality (an additional $10.1 million over four years to help the Tertiary Education Quality and Standards Agency (TEQSA) “investigate and respond to developments in the higher education sector” – read, tidy up the mess of increasing privatisation).
Similarly, $10 million over two years is provided for “a national campaign to provide information to prospective students and employers about the Vocational Education and Training (VET) sector and the redesign of VET FEE‑HELP” that was announced last Friday by the Minister.
The VET sector is a total mess and millions have been ripped off vulnerable people to line the pockets of unscrupulous rent seekers. It is hoped, I suppose, that the $10 million here will arm the vulnerable with the information that can defend them against professional shysters.
For science, it’s all a bit “nothing to see here’’. Unless you’re a Murray-Darling Basin carp, with $15.0 million over three years to knock you off with Cyprinid Herpesvirus 3, or one of those who benefit from environmental exploitation, with $100.5 million over four years – one hundred million dollars! – to ‘identify new greenfield exploration sites for future development’ of mineral, petroleum and groundwater resources across northern and South Australia.
WINNERS AND LOSERS ...
How the Australian Financial Review sees Scott Morrison’s work.
THE WAIT IS OVER
Scott Morrison has just handed down his first Federal Budget. And as part of the big sell, with an election looming, the Government has produced some slick messaging here.
Afterwards the Treasurer was congratulated by his biggest fans ...
INTEREST RATES CUT TO HISTORIC LOW
Talk about a pre-Budget entree. The Reserve Bank has cut the official interest rate to a historic low of 1.75 per cent, with one bank already announcing it will pass on the 25 basis points reduction in full. Read Governor Glenn Stevens’ statement here.
WHY SCHOOL FUNDING is IN CHAOS
Education is certain to be front and centre of the Budget. Dr Glenn Savage, senior lecturer in education policy at the Melbourne Graduate School of Education, says Australian school funding is in its deepest crisis in decades.
“Not only has the Coalition walked away from the landmark Gonski school funding reforms established under Labor, but it has also flagged the radical idea of cutting federal funding to public schools altogether,’ he writes for Election Watch.
Be sure to keep visiting Election Watch over the coming months. Based at the Melbourne School of Government, Election Watch is a University of Melbourne site that will provide independent political analysis and debate around the Federal Election.
AN IMPASSIONED PLEA
Treasurer Scott Morrison is hours away from handing down his first Budget. Foreign aid is always an emotive issue, particularly when offshore detention centres are a huge issue. Professor Rob Moodie, from the Melbourne School of Population and Global Health, has written an impassioned plea here asking that aid not be cut.
“Mr Turnbull, you must not take another cent from the very poor, the voiceless and the unrepresented. Australian overseas aid is not an ATM for our budget problems,’’ writes Dr Moodie, who also volunteers in Malawi.