You can keep your surplus: How to reimagine the Budget
As young people, it is incumbent upon us to dream of alternate possibilities for the Budget, for a system of government with radically different priorities.
Treasurer Jim Chalmers revealed today, after much speculation, that the Budget is in surplus. This is the first surplus budget in fifteen years. Not that he was all that proud of it: in delivering his Budget, Chalmers opted not to announce the size of the $4.2 billion surplus, simply saying it was “small”.
Perhaps he knows that over the year in which that surplus was recorded, young people have starved, been kicked out of their homes, and condemned to skyrocketing student debt. When the government sells this Budget as being the product of “responsible economic management”, students should not accept it. A budget surplus is all but worthless to the daily lives of Australians. It represents the money that could, and should, have been spent on increasing the wellbeing of the most vulnerable in the Australian community.
As young people, it is incumbent upon us to dream of alternate possibilities for the Budget, for a system of government with radically different priorities. Ending the national love affair with budget surpluses is the first step towards that end. A comprehensive rethink of the tax system, to substantially raise revenue from society’s wealthy, and an equally comprehensive spending plan to improve wellbeing and redistribute wealth is the natural second step.
The pursuit of budget surplus has a long history on both sides of politics. When Chalmers said in the lead up to this Budget that “our responsible economic management is all about spending restraint,” he revealed why governments, going back to (at least) the Hawke government in the mid-1980s, seek surpluses: they are valuable tools of political rhetoric. They represent responsible economic management because, the theory goes, it is irresponsible to spend more than you earn in any given year. That is how we, as citizens, are expected to behave — allowing deficits to be weaponised as evidence of a government’s economic recklessness.
Naturally, this is of appeal to Liberal governments, who claim to be better at “economic management”. But as we see in this Budget, surpluses are arguably more attractive to Labor governments seeking to sell themselves as a viable party of government. In its attempts to triangulate at the 2022 election, Labor has tied itself to the economic logic championed by the Liberals, leaving them little scope to adequately redirect the priorities of the federal government. Despite concerns about “structural deficit”, Australia is not a particularly indebted country, when compared with countries such as the United Kingdom and the United States who have debt-to-GDP ratios of 101% and 129% respectively, who still have functioning economies. Australia’s gross-debt-to-GDP ratio will peak at 36.5% in 2025-2026, the Budget revealed. So, Australia could more or less quadruple its debt, without increasing GDP at all, and still maintain a AAA credit rating, all without tanking the economy.
According to Modern Monetary Theory, governments like Australia — who control their own currencies — do not have to worry about debt, because they can simply issue money to pay it back. Because that money can be used to pay for the goods and services produced in Australia, and because the Australian economy is assumed under capitalism to continue to grow, that money will continue to be of value to those holding the debt. And if, as those supporting the pursuit of surplus argue, inflation begins to rise after the issuing of more money, governments are able to rein in inflation by increasing taxes.
Implicit in the way Chalmers has approached this Budget — playing down the size of the surplus just recorded whilst emphasising the projected deficits in the next few years — is an acceptance that budget surpluses are something to be desired. For Labor, there is political worth to this, beyond merely being a label of competency. Chalmers’ emphasis on the “structural” nature of upcoming deficits (all of which are only $30 billion or so) seems to be done to justify higher taxation in the future. Or at least, a “national conversation” about tax.
It is true that Australia needs substantial tax reform. It collected the tenth lowest tax revenue of OECD countries in 2020. Not only does it simply not raise enough revenue, it raises it in the wrong places. Income tax will bring the government $326 billion in 2023-2024, just shy of half of all revenue collected. While this is good and necessary to an extent, successive governments have failed to broaden the ways we tax people to focus on accumulated personal wealth and corporate revenue.
Ending negative gearing would raise the same amount of money as ending the stage three tax cuts (approximately $245 billion over ten years). A carbon tax would raise $42 billion a year. A windfall coal and gas profits tax would raise $40 billion a year. The Greens’ 40% tax on super profits would raise $288 billion over ten years (even considering lost revenue). This is all to say, there is substantial amounts of revenue for the government to raise, without significantly affecting ordinary people. The stage three tax cuts are enormous, and profoundly wrong, but there may well be even bigger issues with our system of tax.
Implementing almost any one of these measures would cure Chalmers’ “structural deficit.” As such, if Labor were serious about being a truly left-wing party of government, they would do two things at once. They would first advocate for wide-ranging tax increases, and consequent spending. It could raise welfare above the poverty line, add mental health and dental to Medicare, make higher education free, and implement a range of other eminently achievable demands. Labor could concretely begin to build a better world. By making this argument independently of tacit admissions as to the necessity of surpluses, Labor would challenge a political-economic orthodoxy that only reinforces the Liberal Party’s claims to be the “natural party of government”.
For all the analysis on Budget night, Honi sees the possibility for something radically different. A world that the torrent of conventional analysis released tonight cannot imagine. Labor should drop its surplus. It should drop its talk of “structural deficit”. It should commit instead to a just and equitable taxation system that will truly benefit the country. It may well help itself politically along the way.
For a recap of what the Budget included for students, and in-depth analysis on Budget’s promises on the issues facing students, click here.