Several reports analysing the impact of last week’s first budget by the Labor government have further laid bare the reality that it contains the deepest cut to working-class living and social conditions since World War II, while benefitting the wealthiest households.
Social inequality, already accelerated by the COVID-19 pandemic, will soar. The lion’s share of the parental leave and childcare measures, as well as the massive income tax cuts, is going to higher-income families, while wages and welfare payments are decimated by sky-rocketing bills for energy, food and other essential items.
Prime Minister Anthony Albanese contemptuously hailed the budget as “good for families, good for children, but also good for the economy by boosting women’s workforce participation and boosting productivity.”
Albanese’s emphasis on “productivity” underlines the Labor government’s intent to satisfy the dictates of big business and the financial markets for an intensification of the decades-long driving up of output and profits at the expense of workers’ jobs, wages and basic social services.
The prime minister said the budget had “provided targeted cost of living relief to Australian families.” In reality, the measures are “targeted” at enriching affluent households, while pushing more workers, including mothers, into the workforce on low pay in order to try to make ends meet.
Modelling conducted by the Australian National University’s Centre for Social Research and Methods found that the “stage-three” income tax cuts, which overwhelmingly benefit higher income earners, will be the main driver for soaring inequality from 2024-25, when the tax cuts are due to commence.
The research shows the Labor government’s policies will see the top 20 percent of households getting an extra $12 billion a year in disposable income in 2024-25. That is an average of $5,740 a year for every household in the top 20 percent.
By contrast, the bottom 20 percent of households will get only an extra $40 million in disposable income in 2024-25—an average of $17 a year for each household.
The “stage-three” cuts, for which Labor voted under the previous Liberal-National government, introduce a virtual flat tax system, with a 30 percent rate from incomes of $45,000 a year all the way to $200,000.
That will slice $252 billion off federal government revenues over a decade. Combined with higher interest payments on the $1 trillion in government debt, mainly caused by business handouts during the first two years of the pandemic and soaring military spending, that will mean deeper cuts to health, education and other essential social programs.
This inequality is amplified by a gradual increase in Parental Leave Pay from a maximum of 20 weeks to 26 weeks, and a rise next July in child care subsidies from 85 to 90 percent, with tapered subsidies only cutting out at incomes of over $530,000.
Most of the childcare subsidies, set to increase by $1.5 billion in 2024-25, will go to the top 40 percent of households when ranked by income, as will the parental leave cost of around $700 million in 2024-25.
For example, couples with children in the highest income category will receive the largest average gains in disposable income in total in 2024-25 ($9,763 a year). That compares to the lowest income families with children, who will only gain $194 from the three budget measures.
Similarly, residents of wealthy suburbs of Sydney, Melbourne, Perth and Brisbane will gain up to nearly $6,000 per year on average. That is about six times the average in working-class suburbs. Those living in the poorest region, Great Lakes in the Central Coast of New South Wales (NSW), gain just $236 per year, or about 4 percent of affluent Ku-ring-gai in northern Sydney.
Looking at the beneficiaries of the three policies combined, the top 20 percent of households gain around 59 percent of the total gains, and the top 40 percent gain around 86 percent.
Beyond any supposed “gains” from the three policies, millions of working-class households will be much worse off as a result of the government’s refusal to provide any relief from surging inflation and mortgage interest rates.
Modelling published by the Weekend Australian estimates that average wage earners will be $5,000 a year worse off, and up to $13,000 if they are mortgage holders.
Westpac bank has upgraded its expected peak in the official inflation rate to 8.5 percent in December, up from the 7.75 percent predicted by Treasury. That would lead to a drop in purchasing power of $4,994 in 2022-23 for a household on the annual median income of $90,800, the equivalent of a 5.5 percent pay cut.
With some economists predicting the Reserve Bank of Australia’s headline interest rate will be raised from 2.6 percent to 3.1 percent by the end of the year, the nearly $5,000 drop in real wages for the median income household would be exacerbated by a 35 percent, or $7,800, increase in annual interest bills.
Taken together, that would reduce the purchasing power of the median income household to $77,998—a drop of about 14 percent.
These estimates are seriously understated because the inflation rate for “non-discretionary” items, including food, electricity, gas and petrol, is already running at 8.4 percent and set to soar. The budget revealed that household electricity prices are expected to rise by 56 percent over the next two years, and gas prices by 40 percent, while wages remain stifled compared to inflation.
An Australian Broadcasting Corporation feature article estimates that a 56 percent power price hike will increase an average quarterly bill in NSW from around $419 to $650, or some $53 a week.
As the WSWS has warned, the budget is the opening shot of a further offensive against the wages, jobs and social conditions of working-class households in order to impose the dictates of the financial markets.
The growing nakedness of this assault in the eyes of workers is triggering nervous commentary in the corporate media. Doubts are being expressed about the Labor government’s capacity to deliver the measures necessary to impose the full burden of the global capitalist economic crisis fuelled by the ongoing COVID-19 pandemic and the escalating US-instigated war against Russia in Ukraine.
Writing on the weekend in the Murdoch media’s Australian, which has backed the Albanese government, editor-at-large Paul Kelly warned that blaming the previous Liberal-National government for the crisis “has hit the exhaustion point.” After the budget, “Labor cannot duck responsibility for the condition of the country.”
The corporate media is demanding that the government go much further in slashing social spending, including on health and disability services. Saturday’s Australian Financial Review editorial put Albanese on notice that “repairing the budget and rekindling productivity growth will decide the fate of his government.”
Labor was elected in May with less than a third of the vote and its support dropping to near record low levels in working-class electorates. It is depending heavily on the trade unions to keep suppressing workers’ demands for wage rises to match inflation and the opposition of health workers, teachers and other workers to low pay, intolerable workloads and budget cuts.
But after decades of betrayals of workers’ struggles, all the pro-business unions themselves are widely discredited and their membership has shrunk to around 14 percent of the workforce, and 5 percent among young workers.
To organise a counter-offensive throughout the working class, the Socialist Equality Party is urging workers to establish rank-and-file committees, independent of the unions, and unify their struggles with workers globally through the International Workers Alliance of Rank-and-File Committees.