Welcome to Eureka Street

back to site

Selling the silver

The largesse in the Budget and the redistribution of monies back to the electorate shouldn’t have proven a surprise, even if conventional wisdom is that budgets following elections are the ones in which governments make tough decisions. The economic cycle is out of sync with the political cycle and the money has been rolling in, thanks to high commodity prices, the high value of the dollar and company profits which have grown far faster than the economy. It won’t always be like this. Large tax cuts are one way of keeping the accumulation of surpluses from ultimately getting into the hands of an interventionist Labor Party, making any reversal of the structural changes in the economy all the more difficult. So too is locking up spare money in Futures Funds, and handing over their control to independent boards.

The Futures Fund has the appearance of great prudence, just like the efforts to cut government debt. Public servants contribute to their superannuation, but at nothing like the rate which it costs. The difference is paid out every year from consolidated revenue. In about 20 years, according to the actuaries, the accumulated liabilities will be about $100 billion—not all, or course, to be paid out at once. Is it not simply good management to put aside money now so that those liabilities can be met? Especially while there are large surpluses? Does it not make further sense that the proceeds of assets sales, such as the remainder of Telstra, are put into funds given that they are no longer needed to retire debt? If the proceeds of Telstra’s sale were simply to fund government spending, would that not be, in Lord Avon’s words, selling the silver to pay the grocery bill?

It certainly is a good idea to put money into assets and infrastructure which provide the nation with a net return. But it is by no means certain that treating the proceeds as investment money to be played with on national and international stock exchanges—or in inflating the value of real estate, as will happen if it is locked up in a ‘commercially-focused’ fund run ‘independently’ by business—will produce a better result for the nation than investing it in roads and railways, schools and universities, hospitals and health-care facilities; perhaps even, given the source of the proceeds, in communications and technology.

The alternative argument—that we should tighten our belts, and reduce people’s expectations of what government or community can deliver—is often code, not for saving for the future but for dismantling the welfare state. Anyway, why restrict our savings for public servants’ and politicians’ pensions? Why not all aged pensions, or the costs of running universities and technical colleges? Or road maintenance?

Cutting into welfare is also an essential part of the Budget strategy. There are moves to get invalid and single-parent pensioners back into the workforce by changing a system of entitlement into one of discretion based on efforts to find jobs. The original ideas were far tougher. Under the direct influence of John Howard, however, many existing beneficiaries have been quarantined from the changes, and the system will be buttressed by cash, initially at least, for education, retraining and child-care assistance. In a decade, John Howard has completely changed Australia’s social security system from one of entitlement and rights to, at best, a safety net for the temporarily dislocated. It’s as revolutionary as the Hawke government’s shift from systems of universal entitlement towards targeting, means testing and the non-stop search for shirkers and bludgers. The changes, under Howard, have involved the effective privatisation of many of the state’s delivery services, and most of the changes have been popular in traditional Labor constituencies. Even those changes, begun under Labor but furthered by Howard, of returning a great deal of the cost of tertiary education to the consumer.

The government continues with attempts to rein in public health costs, and will find it easier after July 1 with its Senate majority, to cap rising costs of pharmaceuticals, subsidised medical capital and types of health care. Health-care costs are rising faster than inflation, not only because of the slow ageing of the population, but because technological change and improvement are producing better outcomes. The demand for hip replacement surgery is growing faster than mere ageing would suggest, because such operations are increasingly effective in extending people’s mobility and making their lives more comfortable. Likewise, new drugs are more effective in controlling lifestyle conditions, such as hypertension and high cholesterol. Yes they are expensive—very expensive—and in many cases there was simply no provision made for them a decade or two ago. But then, no one predicted what a difference the mobile telephone would make, or that we would, on average, triple our expenditure on takeaway food.

The government response suggests that demand can be contained by rationing services, by putting limits on the number of new health machines allowed to be used or by requiring greater amounts of co-payment. Economists tend to regard ill-health as a mere cost whose utility is unable to be easily measured.

Yet health is a major part of the economy. Its outcomes, whether in good general health for all, in successful intervention in cases of trauma and ill-health, or in the orderly care of older and less mobile, or less abled, citizens, is at the very least as important to the economy as the personal computer, the McDonald’s hamburger or the plasma television—all goods whose arrival on the market, or propensity to dip deeper into our pockets, excite no worry or concern at all.         

Jack Waterford is editor-in-chief of The Canberra Times.


Similar Articles

Braving our inner weather

  • Jenny Stewart
  • 25 April 2006

The journey towards understanding our depression can be the most worthwhile, and the most taxing, that we ever make


Paternal instinct

  • Leslie Cannold
  • 25 April 2006

Who’s the real father? Men’s rights, women’s quandaries and the truth about misattributed biological paternity.