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Vice Blog

The VICE Primer to the 2014-15 Australian Budget

There are a couple of ways the Government could get rid of the deficit altogether. But doing any of them would upset the most important people in Australia – Gina Rinehart and other rich people.
May 8, 2014, 4:46am

Yesterday the Finance Minister Mathias Cormann released a document called 'Labor's mess', a 64-page collection of press clippings (around 80 percent from their best friends at News Limited) and propaganda which is meant to make people feel like there's a problem with the economy and then be okay with paying more tax. Decorated with graphics of garbage dumps and storm clouds, it's not the most interesting read unless you love hating on Labor, but it gives you a sense that next week's budget isn't going to be about making life easier for anyone, it's going to be about punishing us for electing Labor twice in a row.

Australians owe more than $50 billion on credit cards. $35 billion of that is generating interest for banks. Default rates have been rising for the past few years. Lucky for us, there are websites that tell you how you can reduce your credit card debt – things like, pay off a little extra each month, change to a lower interest rate or spend less on other things. Good, if very obvious, advice.

Unfortunately there are no websites like this for the Government, which is why they had to pay a group of rich people $750,000 to write one for them. Tony Shepherd, who's the chair of the Commission of Audit, has been a director of Transfield Holdings – yes, it is the same company that artists refused money from because they also run detention centres on Nauru and Manus but heck we've given them so much already why not get them to tell us how to run the country as well – and seems like a nice guy, however it's not likely that he'll ever need an aged pension, his kids won't ever have a HECS debt, he'll never visit a bulk-billing doctor and his assets are dispersed amongst enough companies that he'll probably miss out on the high-income tax hikes that were confirmed yesterday. The other members are Amanda Vanstone (on a sweet parliamentary pension of over $100,000 each year), Peter Boxall who was Peter Costello's Chief of Staff when he slashed the budget, and then went on to head up the Department of Workplace Relations in order to implement the WorkChoices policies, Tony Cole who is a long time public servant who now advises superannuation companies in his spare time, and another public servant, Robert Fisher. All of these people are entitled to Government pensions – not the regular, $200 a week rubbish that normal old people get, but the deluxe versions. Amanda even has a gold pass – a taxpayer funded entitlement that lets her and a family member fly around the world first class 20 times a year – last year we spent $15,000 on her flights. Tony Abbott, Mathias Cormann, Joe Hockey – they've all got this to look forward to in a few years as well, long before they reach 70. The Liberal Party propaganda pack forgot to add that Julia Gillard abolished these perks for new MPs.

There's been a lot of talk about the Commission of Audit report and how it recommends we all just get screwed and pay for doctors and medicine and university and school and you won't be getting your pensions or family benefits anymore so just don't get sick and don't have kids. For the good of the Australian economy and to fix the budget emergency. And blame Labor for it.

Everyone has been really excited about sounding smart and saying that the Commission of Audit Report was really mean so that the Budget next week looks generous and fluffy in comparison. But if everyone is smart enough to work that out, it doesn't really work. So maybe they know we know what they're thinking and they're going to exploit it and it was all part of their evil plan. Regardless, retail spending is at its lowest levels in a year, which indicates a lot of people are taking seriously the prospect of big cuts in their disposable income. Unemployment looks like it will rise too. Maybe if they'd acted all happy about the economy people would be spending more, employing more people and then the Government would end up getting as much tax as they're going to get with this levy anyway. On the other hand, putting in this tax and then watching spending and employment decrease will mean they might end up with less than they started with.

There are a couple of ways the Government could get rid of the deficit altogether – abolishing rebates on diesel to mining and agriculture companies, getting multinationals and big mining companies to pay the same amount of company tax that everyone else does, including property in means testing for the pension (each year we pay $3 billion in pensions to people with over $1 million in assets). But doing these things would upset the most important people in Australia – Gina Rinehart and other rich people.

There are other things they could do to save money – negative gearing costs the Government $36 billion each year, with people on high incomes sometimes paying barely any tax. Meanwhile, poorer people who rent can't claim any of their expenses and have no chance of ever owning a home because there just aren't any left. If negative gearing were scrapped, house prices would go down, more people could afford to buy and rents would go down because there would be less competition. And this is pretty urgent – for a person on the minimum wage with no kids only 4 percent of available properties are affordable. There's stiff competition for them too, and they're usually not the nicest places to live. Scrapping negative gearing would do a lot more for the property market than the $1.3 billion the Government provides for affordable housing measures, and it would take away the need for a huge chunk of Commonwealth Rental Assistance, which it pays to 1.3 million households each year. Investors would freak out, but it's unlikely they'd quit their jobs to find lower paid ones just to avoid taxes.

Then there's the Pharmaceutical Benefits Scheme. The PBS costs almost $9 billion each year, including a proportion paid by consumers as co-payments. It's a good scheme because it means poor people can afford medicine, except that as a country we're getting massively ripped off by drug companies. The Grattan Institute compared the prices the Government pays here to those that are paid in New Zealand, and found that on average we pay six times more, sometimes 20 times more. We pay ten times more for the top ten drugs that are prescribed. By adopting New Zealand's pricing structure we could save $1.4 million every day for just one cholesterol drug. Why do we pay more? The Grattan report compared the systems – Australia's panel of experts has an unlimited budget and two of the experts are representatives of big pharmaceutical companies. New Zealand's panel has a budget to adhere to and has no-one with vested interests involved in decisions. But we can't do it because all the big pharmaceuticals have former Liberal Party staffers working for them as lobbyists.

It was hard to miss amongst all the talk of doom that Westpac increased its cash earnings by 8 percent, and the other banks are also having a splendid time taking our money through credit cards, personal loans and mortgages. The Parliamentary Budget Office, impartial analysts in Canberra, had a look at bank profits and found that if you added a 0.2 percent levy on assets over $100 billion it would raise almost $11 billion over the budget period. They'd barely notice it. The PBO has also shown that if the mining tax was put on all minerals at 40 percent of superprofits it would raise $35 billion over four years.

Then there's the small things that can still make a difference, like voluntary euthanasia. As Philip Nitschke points out, in Australia you can't make an argument without it being about economics. Nitschke refers to studies in Australia and Canada that show that in terms of the cost of healthcare, the highest cost patients are those in their last year of life. The Canadian study showed that 21 percent of health funding was spent on 1.1 percent of the population – old people. For those who are over 85 almost all the money spent goes on hospitals and aged care. Not all of these people are ready to die, but a lot of them are. While it might upset hardcore Christians like the Social Services Minister, Kevin Andrews (and the Prime Minister and half the Parliament), it makes rational, economic sense to let people who don't want to live, die.

No, instead of any of these things we're going to see cuts to benefits and services, a temporary levy (which will simply mean people will spend less and reduce growth in the economy) and an increase in the retirement age. Only a third of men and a quarter of women aged between 60 and 65 have enough superannuation to support themselves at the moment. That is, people who are already rich won't have to retire when they're 70 like the rest of us. Increasing the pension age is targeting people who are in low-income jobs, and they're more likely to be in jobs that are physical. Which could have an economic benefit in that they'll work themselves to death and not need a pension at all.

The Commission of Audit report wasn't about preparing us for the budget. The temporary tax on the rich is. This is their share of the burden – next Tuesday the rest of us poor buggers will find out what ours is.

Follow Carly Learson: @carlylearson