Andrews government budget breaks a little from the usual neoliberalism

Treasurer Tim Pallas presents the Victorian government's budget
By Joe Montero

The budget just handed down by Victoria’s government is relevant to the whole of Australia. It represents a small shift away from the neoliberalism that has long been the consensus in Australia’s parliaments.

The opposition, big business groups, and substantial parts of the media have been quick to accuse the government of class warfare. Of course, this crude sensationalism is wrong. is budget merely represents a minor upwards redistribution of burden, after years of it going the other way. Besides, the accusation misses the point.


Photo by James Ross/AAP: The Victorian premier, Daniel Andrews at the state’s budget lockup where the budget was unveiled

So, what is the budget about? The answer is that it centres on the belief that the budget deficit be brought down. In this respect, it carries on with tradition, except that it applies only to the $35.5 billion debt incurred through the government’s role in dealing with the Covid Pandemic. It does not apply to a major part of government spending, which goes under the title of the “state building” debt.

Treasurer Tim Pallas compared the state building debt to a mortgage, and the other, to a credit card debt that must be paid off. This makes sense. Debt that works to create value to cover it is not a problem. Debt that does not do this is a potential problem. Businesses rely on borrowing and routinely make this distinction. Why shouldn’t government do the same?

Investing in services and infrastructure adds to the economy and its potential, as it adds to the standards of living and quality of life for all. These goals are surely worthwhile.

The Andrews government has invested on developing infrastructure like the new underground rail loop

There is a one important difference between useful business and government debt. The first is private and the second is shared by society. The revenue generated by the value created comes in the form of profit for one and mainly as taxation for the other. These distinctions that justify this some debt, a reality that has been ignored for far too long.

The real issue is how the value created by government investment in creating social value will be collected. Either the burden will be put on those who are less able to carry it, or it will be worn by those with the greatest capacity to shoulder some of the responsibility. This is a question of whether the aim is to strive towards equality.

In a family, parents look after their children. Those who are better off help those who are not so well off. We can look on society as a bigger family where the same values apply. Victoria’s 2023 budget is important because it takes one step down this road.

In concrete terms, this means a modest increase in payroll tax to be paid by large and medium businesses. This will raise $8.6 billion over 4 years. Overseas investors also get to contribute a 4 percent tax, as do elite men-only clubs. Property developers and other corporate landlords will get to contribute their share. This will raise around $2.2 billion. None of those affected are going to suffer too much. And they are the groups that profited from the pandemic. Private schools will also pay. Gambling tax will increase form 5 percent to 10 percent. Luxury cars priced at over $100,000 will attract more tax and gold mining companies will face a royalty of 2.7 percent from next year.

On the other hand, there will be some offsets. Stamp duty and business insurance duties will go.

The alternative would be to push the burden downward, towards those already at the margin by cutting services, to where the burden imposes much more suffering. This has been the style of all government across Australia for a long time.

There are few new gives in this budget. There are modest upgrades for regional parenting centres, rebates and zero interest loans for solar panels and $30 million for the Victorian Treaty process and the establishment of the first Peoples Assembly for community discussion on this process.

The cutting down of the state’s forests for timber will be stopped. In addition to protecting biodiversity, this will channel investment towards much better uses. Campaigners have been fighting to this for a long time, and the government has finally listened.

There is a downside to this budget, and this pulls in the opposite direction. Public service jobs will be cut by 4,000. There is no new support for renters and first home buyers facing the affordable housing crisis. Care must be taken to ensure that the tax on property developers and other corporate landlords are not passed on in the form of higher rent. More funding of public and social housing is needed. The cost of public transport could have been reduced to lower the burden of travel, discourage car usage, and provide more incentive for a greener economy. Investment in alternative energy production could have been stepped up.

These failures will impose a burden on society, at a time when most are going backwards.

There could have been more on health, housing, and training, for example. This would have required more revenue raising. But the Andrews government was not prepared to go this far.

Another problem is that projections based on an assumption of a healthy economy when there are already problems and worrying storm clouds on the horizon, generated by both existing weaknesses in the economy and the global one.

But even with these negatives, this remains a step in the right direction. One that can be learned from, to do even better in the future.

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