Australian government “balances” budget at expense of disabled

Mike Head

A temporary spike in international iron ore prices and a $6.4 billion “under-spend” on disability and other welfare services enabled the Liberal-National government to declare last week that it had almost eliminated the federal budget deficit for the first time since the 2008–09 global financial breakdown.

The outcome illustrates the ongoing transfer of wealth to the financial elite at the expense of the working class, particularly its most impoverished and vulnerable layers. In effect, successive Liberal-National and Labor Party governments have imposed the burden of the 2008–09 crash on the back of the working class, even as another global economic crisis develops.

Most of the budget deficit, which peaked at more than $50 billion in 2009–10, was incurred by the last Labor government in order to prop up and guarantee the solvency of the banks and finance houses, including by boosting government infrastructure spending. Over the past decade, that cost has been extracted mainly via reduced social spending.

Treasurer Josh Frydenberg revealed last Thursday that the deficit for 2018–19 fell to $690 million, or 0.03 percent of the economy’s output. He declared the budget was “back in balance.” This was said by the corporate media to be a “big improvement” on the $14.5 billion deficit predicted by the government at the time of the May 2018 budget.

The result was perverse, however. Higher corporate profits, boosted by falling real wages for most workers, pushed company tax collections $4.6 billion higher. Much of the revenue rise was also thanks to the iron ore price averaging $US72 a tonne, compared to a forecast of $US55. This surge, which peaked at $US110 a tonne in July, was due to a catastrophic iron ore dam collapse at a Vale project in Brazil that killed more than 300 people and cut global iron ore production.

The budget figures underscored the reality of falling living standards. There was a $2.3 billion drop in the predicted goods and services tax (GST) revenue, reflecting lower wages and consumer spending. Total indirect taxation revenue, which includes GST, petrol, alcohol and tobacco taxes, was down almost $5 billion compared to the May 2018 estimate, due to reduced spending by working-class households.

In addition, the government “saved” $4.6 billion by under-funding the National Disability Insurance Scheme. It also made lower GST payments to the states and territories ($1.4 billion), cut outlays from the Disability Care Australia Fund ($1.3 billion) and reduced family tax benefit payouts ($0.7 billion)—making a total of $6.4 billion taken from social programs. Stagnant wages also resulted in lower wage-indexed welfare payments to the unemployed and pensioners, many of whom live in poverty.

The budget “balance” was achieved despite the economy growing by only 1.9 percent during the financial year—the deepest slump since the global financial crisis. This is part of a deepening worldwide downturn, compounded by the intensifying trade and economic war launched by the US against China and the collapse of a six-year housing bubble.

The slide toward recession has continued even though the central bank has cut official interest rates to a record low of 1 percent. Car sales and other retail spending indicators have continued to fall. Expecting worse to come, the financial markets are banking on further rate cuts, perhaps to 0.5 percent by next year.