In contrast to federal government claims that all Australians are sharing the fiscal burden, more than 60% of the spending cuts and revenue measures revealed last night will be borne by low- and middle-income earners or are regressive in nature, while corporate Australia will enjoy a multibillion-dollar windfall courtesy of an array of Coalition commitments.
Of the $36 billion in high-profile spending cuts in the budget, low- and middle-income earners, the unemployed or students, and people in developing countries, will wear $20 billion of them, with another $4.7 billion in regressive measures, like the GP co-payment, across the whole community. Of the $7 billion in new revenue measures, the $2.2 billion fuel excise is regressive, while the $3.1 billion deficit levy, aimed only at people earning over $180,000 — or more correctly those unable to structure their tax affairs to get their taxable income below $180,000 — is the sole measure aimed at high-income earners.
And while the budget papers were less forthcoming on the details relating to corporate tax changes, we know from the Parliamentary Budget Office that the corporate tax levy on large corporations — which will raise nearly $13 billion over forward estimates — will be offset by $19 billion via the Coalition’s planned company tax cut and removal of the carbon price, plus whatever revenue the mining tax would have raised.
The government will give a $200 million handout to the business welfare outlet Export Finance and Insurance Corporation (instead of following the Commission of Audit’s recommendation to shut it down). Large United States defence contractors were also big winners last night, with the government bringing forward $1.5 billion in defence capital spending from 2017-18 across the next three years. The only substantial area where corporate assistance was cut was — you’ll be astonished to learn — in renewable energy, with the Australian Renewable Energy Agency abolished, as part of the government’s ongoing war on renewables and climate change.
And last night’s budget also revealed the latest Treasury projections for the cost of superannuation tax concessions, which in total will exceed $50 billion in 2017-18. That’s not the amount of revenue that could be obtained from removing those concessions, but Treasury estimates in its annual Tax Expenditures Statement suggest 90-95% of that foregone revenue could be obtained through their removal.
The bulk of that $50 billion in 2017-18 will flow to high income earners — and the higher your income, the more you will get. The Australia Institute showed in 2009 that the top 5% of income earners obtain 37% of all superannuation tax concessions. The multibillion-dollar rise in superannuation tax concessions — which cost “just” $30 billion this financial year — is thus primarily a multibillion-dollar handout to high-income earners, primarily those above $180,000 a year. In fact, the cost of the deficit levy to people on those incomes and above — just over $3 billion — will be entirely swamped by the increase in tax concessions on superannuation from this year ($30 billion) to next alone ($36 billion).
None of those concessions were touched last night by the government; Treasurer Joe Hockey’s only move on superannuation has been to abandon a Labor plan to tax super earnings over $100,000 per annum.
This is the true nature of last night’s budget: low- and middle-income earners are bearing the burden, while corporations and high income earners will not merely not share it, but will come out better off. The path back to surplus laid out by Hockey could have been considerably shortened with a willingness to require corporations and high-income earners to contribute as much as low- and middle-income earners, students and the unemployed. Such groups, of course, are more effective at fighting back than, say, poor people in Asia-Pacific countries, who will miss out on $8 billion of aid, or the unemployed, who will have to spend six months at a time relying on charity rather than obtaining Newstart, saving $300 million a year.
And while the government has shown some courage in being willing to reintroduce petrol excise indexation and reduce indexation of the pension, the courage needed to take on corporate Australia and high-income earners is entirely missing. We were promised a hard budget, a tough budget in the tradition of 1996, but it is the budget of a bully, who prefers targeting the weak rather than matching it with someone able to inflict some real hurt, the budget of the vindictive, that of a party that has stored up grievances in opposition and has finally had the opportunity to give vent to them.
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