It didn't take long for new treasurer Peter Costello to sound the lament, as every incoming government now does, about the cupboard being bare. We've been told by the treasurer that there is an underlying deficit of $7.6 billion. Not that this deficit was really "news"; economists had been predicting this for some time.
However, Costello has sought to make as much mileage as possible out of the deficit "news" by using it to launch the Coalition's extensive campaign of cutbacks. With the active support of the big business press, the Coalition has launched a series of "softening up" exercises: every day for the last week or so, the media have been uncritically itemising those areas which are most likely to face the chop. They are also running a vicious anti-"dole bludger" campaign.
Documents from the Finance Department, outlined by the press, reveal how $20 billion could be "saved" by cutting government expenditure.
The list includes: $7.4-$9.5 million by increasing the Medicare levy; $364 million from cuts to job programs; $1.5 billion from social security; and raising $749 million from increasing charges for higher education. These are some of the proposals that the newly established razor gang — the Expenditure Review Committee — will be looking at.
The Coalition hopes to scare the public with the rumoured cuts beforehand. Running the line that a "responsible" government has to implement these cuts, because of the bigger than expected deficit, is a convenient divide and rule strategy. Those in areas which aren't affected quite so badly will breathe a sigh of relief. The areas which will come under greatest attack include workers' rights, social security and education and training.
But is the economy in such bad shape? According to economists and the March 20 ABS national accounts statistics, inflation remained steady in the last quarter and "productivity growth" remained strong. Higher than previously expected growth has also been forecast by 1997-98, in part due to a strengthening of the US, German and Japanese economies.
So why are we being told that we have to accept such enormous cuts to government programs and services? The simple answer is more profits for big business. Even the Coalition admits to this. But, it hastens to pretend, this will produce more jobs and, in the longer term, everybody will benefit.
However, under 13 years of hard Labor (which used the same argument), profits went up but spending on new capital equipment went down. The corporate tax rate went from 49% to a low of 33%, but unemployment reached the 10% mark. So much for the "trickle down" effect.
Now big business is urging the Coalition to push ahead with "micro-economic reform", a euphemism for cuts and limiting workers' democratic rights, regardless of the growth forecasts. As the March 21 Financial Review put it, the Coalition "has to ensure that it doesn't become seduced by the benefits of growth and so be tempted to take a softer line on spending cuts".
But the ruling class wants the Coalition to go even further. Consumption or value-added taxes, which disproportionately hit the less well off, are already in effect, and there is a growing chorus urging the government to extend them. The Financial Review is suggesting that the service industry be slugged next.
The budget deficit has come about because both Labor and Coalition governments refuse to tax the rich. Raising the corporate tax rate to at least 49% would do much to eat into the $8 billion deficit. That is the only way of making the "trickle down" effect really work.