With the 2018-19 Federal Budget freshly released, Griffith University asked some of its foremost experts about a range of crucial social and political issues to offer their analysis of the shape Treasurer Scott Morrison’s ledger has taken.
See below for a summary of key cornerstones of this year’s Budget, and use the links to read more commentary from our academics.
Dr Andreas Chai – Overview
1999 was a great year to be alive in Australia. Apart from Prince hitting the airwaves again, Powderfinger were still playing and topped the Hottest 100, the first Matrix movie was released and you could still get a flat white for under three dollars. In terms of the Federal Budget, 1999 marked the start of a remarkable period in which the Federal Budget accumulated approximately $90 billion dollars between 1999-2008.
2018 is starting to look a lot like 1999, at least in terms of international commodity prices. While global growth remains sluggish and domestic business investment is stuck in a low gear, the underlying cash balance of the Federal Government is projected to reach surplus in the coming quarters thanks to the strong performance in commodity prices, such as an iron ore.
Professor Fabrizio Carmignani – Economics
The context of this federal budget is characterised by a favourable alignment of political and economic incentives. Given 2018 is an election year, the political incentive for the government is to strengthen its consensus by adopting “expansionary” budget measures such as lowering taxes and increasing expenditure (possibly targeted to key constituencies). At the same time, with the Australian economy still running below potential, these same expansionary measures will help stimulate aggregate demand and close the gap between actual and full-employment potential Gross Domestic Product.
This alignment of incentives means that the government does not have to choose between what is good for the economy and what is politically convenient.
Professor David Grant – The Banks and Financial Services
Last year’s Federal budget produced an unwelcome surprise for the major banks in the form of the Banking Levy. The cries of pain from those affected are now long since forgotten and any remaining sympathy for their situation has dissipated given what has been uncovered by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. With the Commission revealing what is seemingly a systemic problem in the industry, attention has now turned to whether and how the banks and other major financial institutions might be penalised and further regulated.
Against this background, the 2018 budget becomes all the more interesting; not because it does anything to single out the banks and others in the financial services sector for special (punitive) treatment as a response to their wrongdoings highlighted by the Commission, but rather because the budget is likely based on economic modelling and forward estimates that assume the sector to be in robust financial health. And that is a potential problem.
Professor Christine Smith – Regions
Although the 2018 budget has been portrayed as one which seeks to shore up electoral support for the government in the context of an impending election, there is not a great deal of additional money being promised for expenditure programs in non-metropolitan Australia.
There is a continuation of the Building Better Regions Fund, the Stronger Communities Program, the Roads to Recovery Program, the Black Spots Program, the Bridges Renewal Program and the National Highway Upgrade Program. However, there are no major increases in funding for these programs in the 2018-19 financial year.
There have been a number of major infrastructure projects announced and these will be very much welcome in the affected regions; however, the majority of the big-ticket items in this area are targeted at congestion-busting in greater metropolitan regions.
Professor Paul Burton – Cities
The problem with funding for cities is that it’s everywhere and nowhere. A great range of spending measures have an impact in and on cities, whether in terms of direct spending on urban infrastructure or less directly on people who happen to live and work in cities, and that represents about 90% of us.
But is that spending on public services and investment in infrastructure guided by a national policy for cities? Unfortunately, no.
Professor Andrew O’Neil – Defence and Security
The 2018 Federal Budget endorses another positive year of outlays for the Defence portfolio and security more broadly. The Defence Portfolio Budget Statement confirms that the Turnbull Government has authorised growth in real terms, which equates to 1.9% of GDP.
The Abbott Government’s commitment in 2014 to endorse an expenditure target in the Defence portfolio of at least 2% of GDP per annum by 2020-21 has meant this area of the budget has effectively been ring-fenced from cuts. The ambitious strategic guidance laid out in the 2016 Defence White Paper (DWP), coupled with signs of a deteriorating security environment in Asia, has reinforced the logic of this in the eyes of senior policy makers, and it’s unlikely this would change in the event a Labor Government was elected.
Associate Professor Albert Gabric – Great Barrier Reef
Researchers have recognised for over 25 years that poor water quality due to land use change and farming in the coastal hinterland is fundamentally incompatible with a healthy coral reef ecosystem.
The language in recent reports mentions maintaining and improving the reef’s resilience, even though the general concept of ecosystem resilience is difficult to define and even more difficult to measure.
The proposed Budget allocation of $500 million, while certainly welcome, is a very small step in confronting a classic “wicked problem”, which is by definition extremely difficult or impossible to solve.
Professor Patrick O’Leary – Society
The 2018-19 Federal Budget has the opportunity to make a social impact on equity, safety and restitution to people disadvantaged structurally by violence. Over the past five or so years, there has been significant attention to ravages of violence and abuse, particularly on children and women across the life course. The costs to society and restraint on human potential can never be underestimated.
History will see this era as revolutionary in awareness, but will it be disappointed by action? The Federation of Australia has a rare opportunity to say it has learnt from the past by showing it is acting for the future by resourcing innovation to prevent and respond to violence.
Dr Parvinder Kler – Unemployment
Long-term unemployment in Australia has increased since the Global Financial Crisis, ticking up from 14.8% of the total unemployed in January 2008 to 23.8% in March 2018 (Australian Bureau of Statistics). These figures mask (i) geographical variations whereby long-term unemployment is more pronounced in regional areas, (ii) age profiles, with older unemployed Australians finding it harder to gain employment, both of which are partially attributed to (iii) structural change within the Australian economy that has eschewed manufacturing and more labour-intensive jobs requiring less formal education to a more services-oriented economy that increasingly favours the educated and indeed female labour market entrants.
Thus, governmental response needs to be multi-faceted. Re-training programs have been a global staple of government intervention in equipping the longer-term unemployed to find work but it is a policy that has evinced very mixed results. A more holistic package of ‘re-inventing’ the long-term unemployed is needed, one which provides the recipient with a host of options to choose from.
Dr Liam Wagner – Energy
The 2018 Federal Budget includes incentives for the energy sector with the further development of coal, oil and gas. However, a lack focus on oil security diverts energy policy debate away from the availability of our energy supplies and onto back-pocket affordability. Oil supplies barely rated a mention in the 2018 Budget.
But, despite repeated warnings via the 2004 Energy White Paper and the more recent 2016 Defence White Paper, Australia has not maintained a sufficient oil reserve for 80 of the last 91 months. Despite the recent rediscovery of this issue by members of the government, little has been done in the past 14 years to increase our strategic oil supplies.