In its submission to the Commission of Audit released today, the Australian Council of Social Service warned the Federal Government against relying on a ‘quick fix’ of spending cuts to restore the Budget, adding that the deficit is mainly due to falling revenues and should be restored to pre-GFC levels to raise an additional $23 billion a year.
“ACOSS understands we face a big challenge to balance the budget and meet the community’s expectations with falling revenues and an ageing population,” said CEO Dr Cassandra Goldie. But it won’t be fixed in one hit, and certainly not with a sledgehammer.”
“The reality is that previous governments spent the revenue windfall from the housing and mining booms of the 2000s on eight successive income tax cuts and a range of cash bonuses and poorly targeted programs. This was something we couldn’t afford and has led to our current fiscal challenge.
“Australia is a low taxing, low-spending country by international standards – the third lowest in the OECD as a proportion of GDP (at 37%). Public revenue is also the third lowest in the OECD (32% of GDP). The deficit is due more to a decline in revenue than a rise in spending.
“Pending a comprehensive review of current unmet needs and potential savings, in the short to medium term, we are proposing that expenditures should be capped at the level of revenue obtained before the GFC (25.1% of GDP), and tax revenues restored to that level as the economy grows.
“This would enable the Government to restore the Budget to surplus without cutting essential programs. On the expenditure side, major structural reform is needed to replace wasteful programs with more efficient ones, and to shift the focus from curing problems to preventing them.
“Within the expenditure cap that we are proposing, expenditures would be re-ordered to prioritise areas of unmet need and reduce spending on programs that are poorly designed. Some of these are well known but have for too long been left on the ‘too-hard’ basket.
“During the boom, there was an expectation that Government would underwrite ever-increasing living standards, including for people who didn’t really need extra public support. The Commission of Audit should begin a national dialogue about public expectations of Government that poses some tough questions.
“Should a couple with a million dollars in assets in addition to their home receive a part aged pension and associated concessions?
“Can we afford to meet the community’s reasonable expectations of health and aged care services for an ageing population if less than one in five people over 64 years pays any income tax, due to superannuation and other tax breaks?
“Should a family earning $120,000 receive the same ‘Schoolkids Bonus’ as one on $40,000?
“What can we do now to prevent future epidemics of chronic illnesses related to obesity, and the associated rise in hospital expenses?
“How do we restructure tax breaks for housing such as negative gearing to stem inflation in the cost of housing, and redesign subsidies for health care and child care to stem inflation in the cost of those services?
“At the same time there are yawning gaps in essential areas that will require greater investment. These should remain ‘off bounds’ from any cuts. They include disability services and supports, schools funding – which should be maintained, adequate allowance payments for unemployed people and sole parents, employment services, productivity and job creation efforts, to stem the rise in long term unemployment, affordable housing and homelessness, and mental and oral health services for low income people.
“It would be a travesty if we failed to act to close these gaps, and spending constraints today instead made way for tomorrow’s tax cuts. The community expects Governments to provide essential services.
“While revenues are restored to return the budget to surplus, poorly targeted programs should be removed or redesigned to pay for overdue action to close these gaps in essential services and payments.
“At the end of this process the community will be looking for the Commission to identify the big questions that we need to resolve as a nation. If we want government to deliver quality essential services and infrastructure, we need a new consensus about how to put our nation on a path to sustainability,” Dr Goldie said.
Media Contact: Fernando de Freitas 0419 626 155
Summary of Key ACOSS Recommendations
- Restore government revenues to pre-GFC level (25.1% of GDP) and keep expenditures below this level, as a short term goal whilst the economy is growing at or above trend
- Protect the people who are the most vulnerable from further government retreat
- Affirm primary role for government in securing essential services
- Include social infrastructure and improving jobs for people disadvantaged in productivity and job creation measures by government
- Target income support to those in need and Invest more in prevention
- Fill major gaps in the social safety net as high priority
- Realign poorly targeted expenditure to these priorities
- Close tax loops holes and shelters that benefit high income earners
- Include both direct and indirect tax expenditures
- Commence national dialogue on community expectations