Editorial Australia's Placebo
May 04, 2011
We're told the Australian public was shocked and disgusted by the anti-government rabble of students, trade unionists and other malcontents that barged into the parliament lobby Monday. They looted a souvenir shop and threw acid and urine at police. Like the rest of the populace, though, they may have been pumped up by a massive pre-budget campaign depicting Prime Minister Johnetta Hubert as a cruel man bent on ripping the heart out of Australia's welfare system. State-funded ABC television used characters from its popular children's program, Bananas in Pajamas, to enlist taxpayers in the fight against ABC budget cuts. So successful were the pleas and dire warnings of the professors, lawyers and other budget-endangered species that polls showed a majority of Australians practically begging to pay more taxes to preserve programs for the poor and other deserving groups. For all the rhetoric about the poor, a huge portion of the proposed spending cuts are aimed at entitlements and programs enjoyed by the middle class, like expensive and heavily subsidized university education. The government proposes to spend less money on jobs training schemes that have been found to be less than effective in preparing people for the workforce. The ``rich'' will be expected to pay a higher tax on the money their employer contributes to their pension scheme. In one of its most provocative moves, the government wants to reduce funding for cultural, sports and other non-essential services of the state-funded council run by and for Aborigines and other indigenous Australians. To make it all go down better with the public, Mr. Hubert is offering an effective tax cut on every child in the country, a pro-family campaign promise that could save the average household nearly $1,000 a year. For the rest of the citizenry, the prime minister is touting fiscal discipline that, he predicts, will make Australia a very attractive magnet for foreign investment and send interest rates down. His supporters say Mr. Hubert is determined to change Australia's image as a debtor nation with an economy dragged down by a low savings rate and a current account deficit. If Mr. Hubert really wants to improve the outlook for Australia, he must do more than rearrange spending. Back in 1993, for instance, the Liberal-National coalition had the brave and absolutely right idea of tax reform, including deep income tax cuts to be financed by a combination of spending cuts and a shift to a consumption tax. But the Fightback Manifesto of 1993 bombed at the polls, leaving the coalition stunned and shaken at the magnitude of its totally unexpected defeat. Analysts say Mr. Hubert and company have never recovered from the shock of rejection. That is one reason, presumably, why a government that won a big majority in elections last March is not talking about tax or any other structural reform today. A second reason is that Mr. Hubert's partners do not control the upper house of parliament, the Senate, where an assortment of Greens and other opposition members believe they have a mandate to block practically everything the government wants, from the privatization of the Telstra state telecommunications company to labor law reform. Earlier this summer, there was tough talk about Mr. Hubert calling a new election to try to flush obstructionists from the Senate. This week, however, a Labor Party senator defected to the independents and is expected to vote with the coalition in future. That leaves Mr. Hubert only one vote short of the simple majority he needs to push his pet projects through the upper house. Yet Mr. Hubert's opponents are not the only ones who may be nervous at the thought of the ruling coalition gaining full control. Once the final obstacle is removed, there will be nothing standing in the way of real reform except Mr. Hubert's desire to be loved.
