The Australian Budget for 2005-06 (our fiscal year is from 1 July to 30 June)was ‘brought down’ (introduced) in the Australian Parliament last night (Tuesday 10 May) by Treasurer Peter Costello. It is his and the Howard Government’s tenth Budget.
Traditionally, the first Budget after an election in Westminster system countries is a tough budget, where election promises are broken, taxes increased, and benefits cut. The wisdom has always been that this is the Government’s opportunity, furthest from the next election, to take unpopular measures.
Something strange is going on in Australia.
Last night’s Budget proposed income tax cuts of A$21.7 billion over four years.
More below the fold…
As one economic journalist put it:
This is actually a ground-breaking, precedent-setting budget: a giveaway budget that comes after the election rather than before. If you didn’t know better, you could wonder whether it presaged a dash to the polls.
Trouble is, last year’s budget was the biggest-spending pre-election budget in memory, and then there were the further big-ticket promises wheeled out in the election campaign.
So what’s going on here?
Two things in my view. First, the strength of the Australian economy means that Government coffers are overflowing with tax revenue from record corporate profits, increased world prices for Australian mineral exports, and record levels of employment. The Government has actually been embarrassed by the unexpected high level of tax revenues. Unfortunately this may be a short-lived fiscal windfall.
The headline hype about tax cuts for all conceals what is really going on (or down!): 90% of wage earners will receive an income tax cut of A$6 per week, while those earning over A$125,000 per annum (a very small proportion of the population) will receive A$60 per week. Those who lose most from the Budget are some sole parents and disabled people, who will suffer an A$40 per week benefit cut if they don’t satisfy new work tests: having to work at least 15 hours a week if they are able. The Budget also cuts the ‘safety net’ support for families who have high medical bills. All this, when the Budget promises a surplus of A$8.9 billion, or about 1% of Australia’s GDP.
This is the Liberal Party (Australia’s version of the Republicans or the UK Conservatives) delivering on their underlying rob-the-poor and pay-the-rich agenda.
But there’s a second thing happening. These tax cuts make little sense in either political or economic terms, but they can be seen as part of an internal Liberal Party fight over the leadership. Costello is the deputy Liberal leader, and feels that it’s time for John Howard to relinquish the Prime Ministership after 10 years at the top, something he hinted he would do upon turning 64 several years ago. As Ross Gittins says in the article linked above, Howard and Costello have “managed to turn the Budget into an in-house popularity contest”. Essentially, each is trying to curry favour with the backbenchers (Government Party Members of Parliament who will vote for the leader if there is a contest) by introducing electorally popular tax cuts.
So over the next few weeks and months, we’re going to hear more on the manouevering over Australia’s leadership. Personally I’m betting that Peter Costello won’t have the courage to directly challenge John Howard’s leadership. I think he’s trying to psych Howard into committing to a retirement date. I can’t see any reason why the Liberals would vote to replace the leader who has given them four election victories in a row – particularly when the latest opinion poll shows that Howard is more popular than Opposition Leader Kim Beazley, but Costello is not.
What would be the significance of a leadership change? Not much in foreign policy terms or economic policy. But Costello is a little more liberal on social issues than Howard, and has been a strong supporter of declaring an Australian Republic. Howard, whose personal views are rooted in the small-minded, insular suburban Australia of the 1950s, is an ardent Monarchist and a social reactionary.
I’ll keep you posted.
my first substantive BT diary! 🙂
Well done and bravo. Very interesting to see the parallels to Bushco and his raving bad of moronic reichwingers. I will definitely be doing more reading on Australian politics, thank you very much. Thank you again for the heads up on what is happening down under canberra boy, good job.
Thanks for posting! I have friends in Australia and am trying to keep up better on happenings there.
Good diary Canberra, we will be gentle on you I am sure, and how could we not be.
It struck me as I was reading your diary that it seems in effect that the world (country by country) is once again returning to the feudal system of government. Of course they don’t call it that.
A nip here and a tuck there and soon enough the job will be done and we will surely have one world order, only it will be complete subjugation of the masses(then to be called serfs), ruled by ??????
Maybe everyone already knows this and I am the last to know, what do others think?
Thanks, Diane. I agree with you – see my comment in response to Dove. The idea of the state which is run in the interests of the people is a fading dream…
Maybe I’m being overly cynical (it’s just recently been election season over here in the U.K., which always does wonders for my cynicism) — but I’m wondering if part of the idea is also to deliberately reduce the capacity of the state as a precursor to all kinds of “we can’t afford this or that socially useful state intervention that might actually address social inequalities”
Absolutely agree with you, Dove. Governments of both sides of politics in Australia have been gradually dismantling the welfare system and reducing the role of the state in our economy and society. This is in line with the UK & US. Any thoughts on whether there are parrallels in non-English speaking Western nations? And what about Canada?
Well, N.Z. went through a nasty neo-liberal phase back in the 1980’s and 1990’s (what made it particularly nasty was that a labour government was among the culprits). It’s hard to tell since I don’t live there, but I do get the sense that the current Labour gov. has curbed that tendency — my sense is that Australia and New Zealand are increasingly headed in different directions, politically speaking.
Other places I’m not sure about — Ireland and the Netherlands have both seen rises in xenophobic sentiment in the last couple of years (when I was in Ireland about a year ago for a conference and there was much anger among delegates over a decision to decouple citizenship from birth-place (essentially a ‘Keep Ireland White’ move)) Anecdotally I want to say that such swells in xenophobic sentiment are often engineered and nurtured when governments desire to retrench on social spending — it certainly felt like that was the case in N.Z. during the 1990s.
Great diary BTW
Perceptive comment & very good point about NZ – (we have a traditional rivalry across the Tasman Sea: NZ briefly contemplated joining the Australian federation in 1901 but unfortunately stayed outside).
Roger Douglas, the Labour Party NZ Treasurer in the 1980s, was the pioneer of Thatcherism / neo-liberalism in this part of the world. He slashed and burnt the state and particularly state ownership of the economy in a way the Australian Labor Party wasn’t quite prepared to emulate.
And you’re quite right about the current NZ Labour Government heading in a different direction to Australia. They are actually behaving like a social democratic party rather than a neo-liberal one, which is a refreshing change.
Not sure whether xenophobia was afoot in NZ during Rogernomics, but it certainly has been used politically in Australia in the last few years. The story is so involved that I think I should devote a diary to it sometime in the next few days
They’ve already started on this. Australia has a system called Medicare, whereby most of our Doctor’s bills and the like are “bulk-billed” to the Government, so that there is no out of pocket expense to see a doctor, and minimal to get tests/x-rays, etc. However, the Government has made very minimal adjustments in how much Doctor’s get paid per session, so that it has not even kept close to inflation. Due to this, many doctors are now charging additional fees on top of the Medicare cost, which must be paid at the time of your visit. Many areas (particularly regional ones) no longer have a doctor that is free for them to visit. This could be rectified (or at least assisted) by increasing the Medicare rebate to doctors, which would be relatively inexpensive (certainly cheaper than the bullshit 30% private health insurance rebate), and would cause at least some medical practitioners to revert to a bulk-billing system.
Instead, the government blames “greedy” doctors and makes only minor updates to the rebate, claiming it would be too expensive and that we don’t have the funds. Then they go and give a tax break like this, when surveys show that a majority of Australians would rather have properly functioning social welfare structures than a tax break (sorry, I don’t have the surveys to hand).
This is only one example (Canberra Boy’s point of the decrease in welfare payments being another very good one), so the budget is in many ways meaner than it initially appears.
Isn’t it interesting to see that the more the multinationals grow in each country, the smaller the share of money is for social welfare programs and the larger the slice of pie is for business. MMMMMMMMMMMMMMMMMMMMM A correlation maybe, a conspiracy between governments and multinationals, or just that we as people have failed our fiduciary duties, to get out the vote, organize and stimulate people to become active in their communities, states and national governments. I don’t know what the answer is but I know my big mouth runs and runs and runs and will continue to run until such time as there is no longer free speech in my country. My biggest fear is that so much of what once was run by local governments is being taken over by corporations, the largest and most scary take over is providing drinking water to people. Not something I want to give to any corporation, yet 1/3 of potable water in the world today is provided by private drinking water companies worldwide. And you know what, the cost of getting that water keeps rising each and every year to the consumer.
How long before our elected officials sell off everything to the multinationals and then abandon us to survival of the richest. I watch GW the talkinghead Bush and realize that the day is arriving sooner than later. I watch our congress gut our budget with hundred of billions of dollars of money flowing to corporations that pollute our air and water, poison our food supply, gouge outlandish prices for drugs and basically tell the American people tough if you don’t like get it someplace else and then block that ability to get it someplace else. Again I call for action from anyone who reads this or passes this along, the repugs gained power because they talked to anyone who would listen and persuaded them that their way would benefit them. We can do the same thing and actually give a benefit that is real and substantial. A government that is reponsive to the will of the people.
So how come the right wing party is called the “Liberal” party? Any history on that?
A very good question, hanni, and one which is not answerable in a sentence.
The British colonies in Australia (each one of our present six Australian States was a separate colony) had responsible parliamentary government from the 1850s onwards. In the early period, the politics were mostly personality-based and conservative versus liberal in orientation. By ‘liberal’ I mean favouring reform but having a disposition toward leaving the individual as unrestricted as possible.
In the last quarter of the 19th century, politics came to be dominated by the divide between free trade and protectionism.
The Australian Labor Party grew out of the industrial labour movement of the 1890s, and essentially Australian politics was divided from the 1900s (the six colonies formed the independent nation of Australia from 1901) to the 1970s along the lines of Labor versus anti-Labor, with a shifting number of conservative, anti-socialist and capitalist parties forming and reforming on the right. For a long time (possibly still), the Labor Party had a formal socialist objective, but this became increasingly meaningless from the 1970s.
The Liberal Party was formed in 1945, out of the ruins of the United Australia Party (UAP), which had been in Government from 1932 until 1941 and was routed by Labor in the 1943 (wartime) election. The new Party was founded by Sir Robert Menzies, who had been UAP leader and Prime Minister from 1939 to 1941. He went on to become Australia’s longest-serving Prime Minister, holding office again from 1949 to 1966.
Explaining the name, Menzies said in his memoirs that
However, the reality has been that the Liberal Party has been defined more than anything by being anti-communist, anti-socialist, and anti-Labor. Many of the social liberals who represented the Liberal Party in Parliament were driven out in the 1980s by the right wing of the Party, to which our present PM belongs. Wikipedia puts it well:
The linked Wikipedia articles are very well written and worth a look for anyone still curious.
Thanks canberra boy – I’ll check out the link too. Thatcher inspired? What is the general mood in Australia regarding the British – any hard feelings left over? Also – how many parties do you have besides labor and liberal – and what are your chances of ridding yourselves of these “flaming liberals” anytime soon? No rush.
I’m not Canberra Boy, but I’ll give a brief run-down.
We have one (somewhat) major party other than Labor and Liberal in Australia and a number of minor parties.
The major party is the Nationals, who are in joint government with the Liberals (the joint government being known as the coalition). I’m not sure at what point the parties joined forces, but it’s been that way for decades now I believe. As the Liberals have picked up more and more seats however, the Nationals have been increasingly frozen out of any major policy decisions as the Liberals are often able to get their way without the votes, and the Coalition is so entrenched that the Nationals will only vote against it in rare cases (such as the final sale of Telstra (our main telecommunications provider), until country services reach a certain level and are guaranteed).
The Nationals are effectively the country party. They are the most socially conservative of the major parties and their principle platform lies in protecting country regions and the farm industry (so they are for subsidies to farmers, but opposed to them for other groups).
The major minor parties consists of the Australian Democrats, the Greens, Family First (a new party) and One Nation.
The Democrats have been around quite a while now and were founded by Don Chipp (a former Liberal senator) in 1977. For more history see here . They were and generally are based around the principle of “Keep the Bastards Honest” (The bastards being the government of the time). They are traditionally somewhere between Labor and Liberal (see the Liberal Democrats in the UK), but are presently to the left of Labor, due to Labor’s re-positioning (again see the UK for the closest example). They have often held the balance of power in the Senate, so have had some minor control over policy, although they have members in the House of Representatives. This is no longer the case however, as a series of internal splits and disagreements has meant that they are barely clinging on to the seats they have and I believe they lost all their seats that were up for re-election last year. At their best the Democrats are strong proponents of social rights and equality and of looking after the unemployed/students/elderly/etc, however they can be blinded by internal conflicts and seeming naivety.
The Greens are a relatively new party, having been formed federally in 1992. For more history see here They are led federally by Bob Brown, who is their longest serving Senator, and are strongest in the Tasmanian State Parliament. They started as a somewhat one note party, with environmental issue being their one true concern, but are gradually becoming a more fully rounded party (although environmental issues do seem to trump other concerns). They have been gradually increasing in prominence recently and were expected to do very well at the last election, taking over the Democrats position (although this proved false). The Greens are the furthest left party in mainstream Australian politics and favour Refugee Rights, Drug Decriminalisation and similar policies.
Family First are a very new party, appearing first at last year’s election. But they did very well, picking up a Senate seat and coming very close in other states. For their version of the party see their website . For a potentially more accurate, potentially more paranoid version, see these guys . Either way, Family First is a group centered around religion and is very socially conservative. There were demonstrations against gays by their members last year and they are strong believers (strangely enough) in The Family (in a biblical, not mafia, sense). There member hasn’t taken their seat yet, so beyond this I can’t say a lot, other than that they scare the hell out of me.
One Nation is thankfully a fading force in Australian politics, but for a few years was doing very well both federally and particularly in Queensland (where it’s founder, Pauline Hanson, originated). They were very socially reactionary and were insanely against immigration, asians, aborigines, (really anyone not of white British descent). Their policies were inane and often non-sensical (such as removing our tax system and replacing it with a 2% tax at each step, so manufactured items would end up insanely taxed due to number of steps/equipment involved), and they survived mainly as a cult of personality and as a backlash against the major parties. Also, Pauline Hanson was permanently in the news (negatively in some, positively in others, especially the Courier Mail (a Murdoch paper)), which helped the party no end. As I said though, they are dying off and will hopefully be buried in a landfill somewhere.
There are also a handful of independent and breakaway members of parliament, and a long list of very minor parties (such as the fishing party and the FreeMarijuana party) who are not really worth commenting on at this point.
Hmmm, that ended up rather long-winded. Hopefully it is of interest though.
Thanks for this, dukkha, saved me the effort. As you can see, i come from Canberra. Where are you (& how did you end up at BT?).
Thanks, to the two of you, and for all the links.
Rather late (weekend and all), but I’m in Brisbane and came here from Kos (which I’ve been following from about 2002), when a bunch of diarists I followed congregated here to try and get a more international perspective.