Breaking down the Budget

11 MAY 2015

CSU experts have predicted tax pressure and spending cuts in the 2015 federal Budget, and urged the government to protect low-income earners.

2015-16 BudgetCharles Sturt University (CSU) experts have predicted tax pressure and spending cuts in the 2015 federal Budget, and urged the government to protect low-income earners.

CSU experts in economics, higher education, politics, childcare, social equity and foreign aid are available for analysis and comment.

Economic perspective

- CSU Professor of Economics John Hicks from the School of Accounting and Finance in Bathurst said the key item in this Budget is likely to be the mechanism for increasing tax revenue.

"Finding increased revenue has its political risks. Any change to GST will invoke an electoral backlash while changes to the taxation of superannuation risks alienating the baby-boomers who are all closing in on retirement," said Professor Hicks.

"Thus, a blow-out in the deficit is likely. However, in the longer-term, the continued growth of China's economy and its increased sophistication, as opposed to the mining investment boom, should provide business opportunities for Australians in many areas, but particularly services. Growth in this area will see the corporate tax take rebound somewhat in the coming years."

- Professor of Economics Kishor Sharma from CSU's School of Accounting and Finance in Wagga Wagga is expecting the Budget will deliver widespread spending cuts.

"Falling prices for minerals have caused the deficit to surge. This is likely to force the government into making significant cuts to spending across all areas including the sectors that are crucial for regional Australia, such as upgrading infrastructure," said Professor Sharma.

"The government should seriously revisit in the Budget how to rehabilitate our agricultural sector, which contributes significantly to rural income and employment. This is particularly important to prevent regional decline and further pressure in our urban centres."

Professor Sharma said that while the falling Australian dollar is good news for exports, markets that absorb our goods and services such as China and Japan are still struggling to boost their own growth.

Early education and childcare reform  

- Professor of Early Childhood Education Jennifer Sumsion is from the CSU School of Teacher Education in Bathurst. She is also Director of the University's Research Institute for Professional Practice Learning and Education (RIPPLE). Professor Sumsion made a submission to the Productivity Commission's Inquiry into Childcare and Early Childhood Learning in 2014.

"Early Budget announcements suggest changes are ahead for early childhood education and care arrangements. However it is important that quality and excellence in early childhood learning is not    compromised in any reforms in the system," said Professor Sumsion.

Higher Education

- CSU Vice-Chancellor Professor Andrew Vann is calling for fair and equitable funding for higher education. Changes proposed last year, including undergraduate fee deregulation have not passed the Parliament, leaving funding for the higher education sector in limbo. Professor Vann said universities currently have no certainty around revenue levels for 2016 and beyond, which is making planning very difficult. 

"Last year the federal government proposed to deregulate domestic undergraduate fees for Commonwealth Supported places.  Whilst this idea had been widely canvassed, the sector and the public were surprised that the government did not engage in a consultation period first as recommended by the Commission of Audit. The legislation for this change has not passed the Senate and does not look likely to do so," said Professor Vann.

"However, the government is continuing to count the savings from these measures as part of the budget estimates and these include a 20 per cent cut to government funding for universities.  A short-term fix has been found to continue funding for the National Collaborative Research Infrastructure Scheme, but the Minister has not explained where this funding will come from and has promised to announce it in the Budget.

"It is plain from the state of the federal Budget that our economic future cannot rest solely on minerals extraction.  Australia needs skilled and innovative graduates to improve our social, environmental and economic conditions.

"In response to community and government demands, Australian universities have expanded dramatically and have improved efficiency at the same time as increasing student success and research outcomes. 

"It is really an amazing success story, but it has created a lot of pressure on institutions and staff.  We need a predictable, fair and equitable funding regime to allow us to continue to make what is a critical contribution to the future of our nation."

Social equity

- Dr Marie Sheahan is a lecturer in the CSU School of Humanities and Social Sciences in Albury-Wodonga.

"I think the important issues are looking at whether any changes to social policy, health funding, pensions or education exacerbate social inequality. Any cuts should not fall heavily on low income earners and those already disadvantaged," said Dr Sheahan.

"There is a clear concern in the community that there are very high income individuals and companies that minimise taxes which erodes our tax base and has led to the gaps between the very rich and the poor. The Australian public is literate in relation to these issues and concerned about inequality and tax minimisation by the wealthy."

Political implications

- Last year's federal Budget "went down like a lead balloon" and the Federal Treasurer the Hon. Joe Hockey will be hoping for a better response this year, according to Associate Professor in Political Science Dominic O'Sullivan from CSU's School of Humanities and Social Sciences in Bathurst.

"Economic management was a key platform for the Abbott Government in the lead up to the 2013 election," said Professor O'Sullivan.

"The 2014 Budget was widely criticised and the government has failed to gain the support needed to get the measures through the Parliament.

"Abbott and Hockey will need to get the balance of this Budget right to satisfy the electorate and put to bed speculation of leadership change before the next election.

"It shows the challenge of coming up with a budget that's politically savvy while still being economically responsible."

Australia and foreign aid

- Foreign aid has contributed disproportionally to budget savings in 2014 and 2015. CSU research associate at the Centre for Applied Philosophy and Public Ethics Dr Kylie Bourne argues there are more than just moral reasons for giving aid and Australians need to consider the role it plays in promoting peace and security in the region.

"Australia is a wealthy, developed nation, yet our Asia Pacific region is home to two thirds of the world's poor, with more than 700 million people living on less than $US1.25 a day," Dr Bourne said.

"Levels of poverty in our region make it especially difficult for poor nations to deal with natural disasters, such as tsunamis and cyclones. The Australian aid program focuses not just on short-term poverty alleviation but on longer-term capacity building in developing countries.

"Over the last two years, Australia's aid budget has contributed disproportionately to forecasted savings. Although adding up to only 1.22 per cent of government spending, the cuts to aid accounted for over 20 per cent of projected savings. In 2014 there was a 33 per cent cut to multi-year aid budgets and Australian aid was approaching its lowest level since 2005-06, despite an estimated 40 per cent growth in GDP since that time and despite the economy's weathering of the global recession that so troubled those of other developed nations. 

Since the execution in Indonesia of Australians Andrew Chan and Myuran Sukumaran, there has been public pressure to reduce aid to Indonesia, the largest benefactor of Australian aid. Dr Bourne said that such cuts would place diplomatic strain on the important relationship between Indonesia and Australia and might be counter productive in targeting those most in need.

"Australia's aid program in Indonesia focuses on infrastructure, sending children to school, improving health care and on providing practical initiatives to improve the lives of women," she said.

"The program also helps Indonesia prepare for and try to prevent natural disasters. Cutting funding to these kinds of vital works only punishes the poor and makes peace in our region harder to achieve".

Media Note:

Contact CSU Media to arrange interviews.

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