Abbott Budget Stuck in Bygone Era

Ian Varrender

The Treasurer has argued that lower income groups merely are losing benefits the country no longer can afford while the wealthy are being slugged a higher tax. Both he and the Prime Minister claim that makes it fair, that everyone is sharing the burden.

But it is not that simple. Negative gearing alone is anticipated to cost the budget about $4 billion in lost revenue each year, according to the Grattan Institute. And the wealthy have found it devilishly simple to slash income tax by directing their earnings into superannuation and then pulling it straight out.

Research from the National Centre for Social and Economic Modelling, published this week by Fairfax Media, found the poorest 20 per cent of households would contribute $2.9 billion over four years while the richest 20 per cent would lose $1.8 billion.

The closer you look at this budget, the more it disappoints, the clearer the inequity and the injustice of it all becomes. The inequity isn't simply along socio-economic lines. It is also generational. The young bear the brunt of some of the harshest cuts.

The great tragedy is that this budget tinkers. It shaves here, slices there, slugs an unsuspecting bystander in the wings. There is no overarching vision. And that can be sheeted home to the fact that the Government appears to have little understanding of the underlying problem. Either that, or it chooses to ignore it.

The challenges facing Australia cannot be solved by mere bookkeeping. During the past decade our economy has undergone a major structural transformation that has spawned new sources of wealth but laid waste to vast areas of the economy.

We are now primarily a minerals and energy exporter, industries that are capital intensive but employment light and that largely are foreign owned.

The manufacturing industries that once soaked up vast numbers of semi and unskilled workers in the post-war era no longer exist as new technology has diminished the demand for raw labour and a higher currency has shifted many of those industries offshore.

Service industries - where most of the population now is employed - also are looking to shift jobs offshore via new technology.

We risk creating a vast pool of unemployed and underemployed. That may sound enticing to business leaders hoping for the day when they can slash wages. But the long-term social costs could be severe.

Then there are the demographic shifts. Our population is ageing. That will create an incredible burden on the public purse for health and welfare payments in the future.

But we have a superannuation industry controlled by the four major banks that gouges enormous fees - more than $23 billion last year - from the savings pool.

Do we target the private superannuation system and attempt to reform it? No, we leave it and every other powerful vested interest to dictate policy that will ensure short-term benefits for those with the means to wield influence.

Do we tax miners? No, we hit unemployed youth. Do we ensure the generation coming through will be equipped for the challenges of the modern world? No, we cut education funding.

Funding for research and development has been slashed across the board, apart from a whimsical medical research fund that will be funded by the demise of free health care.