Woroni applied for media access to the Abbott Government’s first budget, and from 1.30pm until 7.30pm Alex Catalan-Flores and Luke Mansillo furiously and carefully dissected Treasury materials in order to formulate a comprehensive analysis of what could become the most intimidating budget the Australian public has faced in a long time. Below are some of the major areas from which the Abbott Government plans to rectify the “budget emergency” that looms over our country, and that way bring prosperity back to the Australian people.
The Temporary Budget Repair Levy
The government is introducing a compulsory levy on income applicable to high-income earners from 1 July 2014 until 30 June 2017. It will be paid by individuals whose taxable income exceeds $180,000 at a rate of two per cent. By the end of 2017, this levy is projected to raise $2.95 billion in revenue.
The Abbott government will open up the HECS-HELP to students studying diplomas, advanced diplomas, and associate degree courses at universities, private colleges and TAFEs. Graduates will begin to repay their HECS-HELP debts when they are earning $50,638 from 1 July 2016 (equivalent $47,743 in 2014). This is a drop from the $53,000 (2014) threshold after which student debts were to be repaid. For the first time higher research degrees will no longer be free as universities will be able to charge $3,900 for each year.
The higher education sector should expect over the next 5 years a defunding of $1.5 billion in 2017-18 compared to 2012-13 when controlling for inflation and population growth. This makes up half of the $3 billion of education sector defunding when controlling for these measures.
Institutions will be able to set their own fees and student loans will move from being indexed to inflation (CPI) to “reflect the cost of Government borrowings … with a maximum rate of 6%.” The present rate is 2.9% which is the inflation rate.
The ANU’s Vice Chancellor, Professor Ian Young, has recently called for the Group of Eight to reflect Stanford University and the Ivy League universities. At Yale University, the annual tuition is $42,000. If this aim of quality and fee costs were implemented a Bachelor of Arts with honours would cost $168,000.
The government acknowledges Australian universities are underfunded and their decline of global rankings, noting that only 5 Australian universities are in the top 100 Times Education Reputation Rankings.
The government points to the median gross lifetime earnings of universities graduates and year 12 completers, where there is a $1 million difference in life time earnings. However it is well established that social workers and nurses earn significantly less than lawyers and medical practitioners.
The government will reintroduce Commonwealth Scholarships. Universities will be required to direct 20% of the additional revenue raised to support access for disadvantaged students. The treasury documentation provided no definition or criteria for what constitutes ‘disadvantaged’but listed low socioeconomic, indigenous and regional backgrounds.
For students already studying the existing arrangements will remain until the end of 2020.
Health and Human Services
The Abbott government estimates that in the 2015–16 bracket, health expenditure will be $68.2 billion with their proposed reforms. In the absence of any change, health expenditure would have been $70.1 billion. In their budget expense measures, the government estimates that they will be making savings equivalent to $1.9 billion. The lion’s share of these savings originates from the new contributions that previously bulk-billed patients will have to incur, equivalent to $7 per standard general practitioner consultation and out-of-hospital pathology and imaging services. These contributions will account for 61.3% of the savings made by the Abbott Government in healthcare. Pausing indexation of some Medicare Benefits Schedule fees and the Medicare Levy Surcharge will constitute 19.9% of the savings, and 15.9% will come from the increase in Pharmaceutical Benefits Scheme co-payments and increasing the Medicare safety net thresholds. It becomes obvious that the government is not reducing healthcare expenditure by cutting programs, but rather is subsiding their own spending through compulsory exactions of money from the public and placing additional limitations on those now eligible for welfare payments.
The Abbott Government is bringing the CPI-indexation for a number of payments and programmes to a halt for two to three years. These include eligibility thresholds for transfer payments, thresholds for the Medicare Levy Surcharge and the Private Health Insurance Rebate, and Medicare Benefits Schedule fees. This ultimately has the effect of reducing transfer payments by disqualifying people from said payments. Individuals’ wages increase with inflation in order to cover their costs of living, but since the eligibility thresholds for welfare will not be indexed to inflation individuals currently on welfare will be seen to be earning increased income. Inflation has increased the cost of living and wages accordingly, but not the eligibility thresholds, so people will no longer qualify for the welfare transfers for which they previously qualified. The same measure is being applied to Official Development Assistance funding, Local Government Financial Assistance, and another 112 government programmes. With these measures in place and several others, the government will allegedly reduce expenditure on Human Services from $281.6 million to $164.1 million.
It should be mentioned that these savings are going towards the $20 billion Medical Research Future Fund (MRFF), a capital-protected pool of money from which the government plans to fund medical research at an increasing rate until 2020. The government is injecting $1.1 billion into this fund on 1 January 2015, with distributions of $20 million going to researchers in the 2015-16 bracket. These distributions will increase to $500 million in 2019-20, and to $1 billion from 2022 onwards. In their words, the MRFF is a “permanent revenue stream dedicated to funding vital medical research”.
The Abbott government’s monetary commitment to environmental preservation will increase from $36.9 million in the 2014-15 bracket to $170.2 million in the 2017-18 bracket. This net increase is primarily due to the government’s $2.55 billion Emissions Reduction Fund, an incentive-based emissions abatement scheme aiming at reducing emissions by 5% below the 2000 level by 2020. The exact details of this scheme were unavailable in the budget materials provided to Woroni. Woroni is waiting on comment from officials in the Emission Reduction Fund taskforce. Details will be published in a future edition.
Foreign Affairs & Trade
The government has estimated to make savings equivalent to $1.4 billion in the 2015-16 bracket, $1.8 billion in 2016-17, and $3.7 billion in 2017-18. Over 85% of these savings for each bracket consist in “re-prioritised funding”of Official Development Assistance (ODA). The government will be maintaining the level of ODA at its nominal level of $5.0 billion for the 2014-15 and 2015-16 brackets, and only pegging it to inflation from 2017. The government will also be removing a $2 billion provisions previously set aside for ODA spending in 2017. In addition, the Abbott Government is reversing previous decisions to join the African Development Bank Group and the International Fund for Agricultural Development, as well as placing a cap on departmental costs for the Department of Foreign Affairs and Trade to administer ODA equivalent to 5% of DFAT’s total ODA budget.