The 2014 budget. A lot of people are talking, writing or protesting about it, and I’ve resisted writing about it until now because I’m no expert economist, nor have I read all of the Budget Papers. However, I couldn’t resist the opportunity to have my own little bitch about the budget… and apart from being clear about the fact that I’m not going to try and give an unbiased opinion nor attempt to consider the whole budget, I want to be clear about something else from the outset – a budget which causes the more disadvantaged to suffer the most, and have high income earners barely scathed, causes me great concern. It concerns me when people can’t see that not only should you help the most disadvantaged simply because that’s the humane thing to do, but when you invest in the most disadvantaged, this will create stability and positive returns to the economy as a whole anyway.
In the budget overview, the Government explains that it wants to make sure that the budget doesn’t remain in deficit and is focused on ensuring that Government finances are projected to be on a clear path to credible surplus, but without increasing taxes (the rich make a sigh of relief), and instead by cutting back on government spending (the rich say ‘pfft, whatever doesn’t bother me’ and the poor say ‘now I can’t afford my rent, thanks for that’).
I read in Budget Paper No.1: “The Budget will redirect taxpayers’ dollars from spending that is consumed today to productive investment for tomorrow. It will do this while supporting the most vulnerable, and taking significant steps towards ensuring that government can live within its means. The decisions in this Budget will move Australia towards equality of opportunity for all.”
I literally laughed out loud when I read this, and let me explain why, by referring to two areas I feel most passionately about – education and foreign aid.
The first reason why I laughed – the Government is effectively abandoning needs-based funding for our schools, by cutting funding to schools with the most vulnerable students, and instead continuing with a funding system which ignores the needs of students, saving around $30 billion over the next 10 years. The needs-based funding which is going to be abandoned was built on the premise that education outcomes should not be driven by wealth and all students should have access to high quality education regardless of their background. By making this cut, instead of ensuring equity in our education, the Government has chosen a course that will only further entrench disadvantage by helping to grow achievement gaps between the disadvantaged and the advantaged, rather than help in closing them because the underfunded public schools will continue to fall further behind.
Also, whilst the Government will continue to make loans available to eligible students, university fees will become uncapped (causing universities to be able to charge what they want), the Government will charge an interest rate which reflects the cost of Government borrowing on these student loans which will be much higher than the current indexation applied which reflects inflation, and the minimum income threshold at which people need to start repaying their loans will be lowered by 10%.
While it’s not clear at this stage just how high university fees will become (although I’ve heard that some courses could increase by around $100,000), the ability for universities to charge whatever they want will create competitive pricing – which in my opinion is completely inappropriate for this industry, particularly if you don’t think education outcomes should not be driven by wealth.
Let’s assume that those universities with high reputations and more prestige use this status to justify higher prices, while less reputable universities lower their prices. It would then seem safe to assume that those students who come from wealthy families will attend the former universities, with the support of their family, while the less fortunate will feel they have no choice but to choose the latter. Five years later when those students are competing for graduate roles at the most reputable law firms, banks or accounting firms etc, obviously the people who have degrees from the more prestigious universities will have better chances at those graduate positions. I’m sure you can see a cycle developing here without the need for me to explain it further.
If your argument is that disadvantaged students can decide to get bigger loans if it’s important to them to go to the universities charging higher fees, the fact that people will need to start repaying their loans, with interest, as soon as they start earning around $50,000 means you’re much less likely to choose a university with the highest fees, because you know you’ll struggle paying it back by yourself later. Not to mention the growing gaps in achievement which occur before tertiary level education, which means it will be much harder for disadvantaged students to gain the scores required to even get into university.
Whilst I don’t intend on covering all aspects of the debate which could occur around education, I will raise one further point. Some people have said to me, it’s ok that not as many people will be going to university, and it’s ok if those more disadvantaged people don’t go to university because we need people in trades, for example – but I really think that by saying this, you are really missing the point. Sure we need people in trades and other service roles within our society which don’t require a tertiary education, but I personally do not want to be part of a society which only provides access to the best education (and as a result, most likely the highest paying jobs) to those who come from families that can help support that choice financially.
These education cuts suggest to me that the Government does not at all embrace the importance of education and equal access to it by everyone – which is important not just for individuals but also productivity of society. Education is a tool of empowerment, give this tool to those most disadvantaged, and they’ll hopefully use it to help lift themselves out of shitty circumstances, which will mean they will also be able to contribute to economic growth.
The second reason why I laughed – the Government is stripping $7.6 billion out of the foreign aid budget over 5 years, by keeping foreign assistance funding at its current levels, increasing in line with inflation, instead of allotment based on a percentage of GDP. This cut also follows a number of other cuts that have already been made to foreign aid in the last couple of years.
Let’s put this into perspective, foreign aid represents just over 1% of the Government’s spending – a mere 34 cents for every $100 of Australian income is spent on foreign aid (as a comparison, in the UK the amount is 72 cents).
This means that work that is done in some of the poorest countries in our region will need to be cut back and if you’re an Australian saying, ‘Yeah but look at our terrible economy, what about us, it’s our money’, whilst you sit in your comfortable home eating your delicious dinner… I would say stop being selfish and realise that Australia is actually one of the wealthiest countries in the world, and if we can afford to help those less fortunate (which we can), then der, we should.
Also, even if you are unable to see that we should be helping our poor regional neighbours simply because we can and so therefore we should, it is in Australia’s best interests to invest in our poor neighbours – poverty undermines stability within its region, not just the country. Foreign work that is possible because of aid helps to reduce poverty, and as the number of people from our region living in poverty reduces, the region as a whole becomes more secure, fostering economic growth and trade and investment opportunities. Oh, not to forget foreign aid assists with fewer people dying as a result of malnutrition or lack of access to health resources.
Oh, and although I said I would only talk about education and foreign aid, I want to explain the third reason why I laughed. Not only is the Government planning on raising the age of eligibility for the dole from 22 to 25, unemployed people under 30 will have to wait 6 months to be eligible for the dole, and will only be able to claim it for 6 months before the payment is cut for another 6 months. They will also have to do at least 25 hours per week under a work for the dole program in order to receive payments for those 6 months.
The Minister for Employment said: “We sell our young people short if we allow them to drift into welfare dependency.” Um, no Mr Minister for Employment, you’re selling the young people short who depend on these payments by causing them to be homeless and allowing them to drift into learned helplessness and depression, and then become more likely to give up on finding employment and/or a home.
Seligman’s Learned Helplessness Theory came out of an experiment which involved shocking dogs, and he observed that because in the first experiment the dogs learnt there was nothing they could do to avoid electric shocks, in the second experiment, even when they had the chance to move away from the shock, the dogs simply gave up and laid down, doing nothing to move away from the shock. Dogs that hadn’t been through the first experiment were quick to jump away from the shocks. Seligman described this condition as learned helplessness – not trying to get out of a shitty situation because the past has taught you that you are helpless and have no control.
There have since been other studies which have shown how learned helplessness can lead to depression because it contributes to raising stress levels, thereby reducing the ability of a person to learn new things, and decreasing a person’s effort.
Sanity and Cigarettes 