“The only function of economic forecasting is to make astrology look respectable.” - Attributed variously to US economists, John Kenneth Galbraith, and Ezra Solomon
Today is budget day. The fourth in two years. 2020 was delayed by Covid; May 2021 was terrible; March 2022 pre-election sought to shore up the LNP’s inevitable decline. Now, post-election, we have the first Labor budget in ten years.
Budgets are important statements of intent. In my review of the May 2021 budget, I said: “There's usually nothing in an Australian budget for the architecture and design industry. And this year is no different”. I suspect that last sentence will ring true again: this year is no different, but for completely different reasons.
It's not that design itself should be funded, but support is needed in the public realm: civic buildings, social housing, and good infrastructure. You would have thought that amongst the cash splash, something could be set aside for bettering our cities and to address the effects of climate change. I suspect there will be very little this time.
Simply put, the failure is twofold: there isn’t enough money for those things; and even if there was, the Feds are not interested as they can’t see a role. Taking each issue in turn.
Not enough money
Building and infrastructure accounts for more than 10% of our GDP. It is obsessively market driven, leading to great fortunes, (the wealth of 8 of 20 of the richest Australians is derived from property, and 20% of Australians have more than one house) but it also creates ever-expanding inequality. Good social democracies redress those inequalities through the ‘public sector’, funded by taxes.
Income in the public sector is measured by the ‘Tax to GDP ratio’, or Tax/GDP, in other words how much of the wealth created each year in the economy is for use by the government, on the common or public good. Our Tax/GDP of 27% is very low in comparison to all other OECD countries where the Tax/GDP is 33-40%. (Only the USA is lower at 24% - hence their dependence on philanthropy for public good.)
Our governments have insufficient funds for the work they should undertake, so the budget becomes about priorities and choices for those limited resources. Some areas, such as defence, are sacrosanct. Others, such a social welfare, are underfunded. And the constant whine is that we must repay the debt, run up by years of deficits, (how many times have you heard it’s a trillion dollars?).
Given that this new, supposedly social democratic government, with its progressive left of centre ideology, won’t pay decent social support above the poverty line in ‘Jobseeker’, you can bet there will be nothing for the cities and housing in this year’s spendathon.
Not enough to care
What if there was more income from tax? What if Australia, hooked on ‘tax relief’, not only forgoes the Stage 3 tax cuts, but entertains tax increase across the board? What if we abolished negative gearing, capital gains tax, raised mining royalties, increased wealth taxes and hit multinationals? Would the Feds be interested in doing some good for our towns and cities? Probably not.
A rundown of various economic areas shows the Feds don’t care about what they don’t control.
Most infrastructure issues are state based, be it dams or stadiums, and the federal government sees its role to stay out it as much as possible, so the states have considerable autonomy on infrastructure issues, and are expected to look after themselves. Until that is, they need big funds, and they go cap in hand to the Feds to build big things, co-funding highways, and the ridiculous idea of inland rail.
But we are currently in the unusual situation that all this infrastructure is a just too much – at least in relation to increasing inflation, and the pressure on supply chains. Maybe a slowdown is needed.
Cities are remote in governance from the federal sphere, being the province of local councils, which is divide and conquer territory; greater Sydney has upwards of fifty different fiefdoms. The new government is staying out of those local issues, seeing them as LNP rorts (now with their own Wikipedia page). They claim stopping them will save $10bn and help clean up politics.
But, as the saying goes, all politics is local, and not all the projects were rorts. Some are essential improvements, and many would benefit the livability of our places. Funding them will attract hypocritical arrows from the LNP, so we can expect Labor to mostly stay away, to the detriment of urban design improvements. Again, the states will need to step up.
And then there’s the housing crisis. One third of all Australians are renters. Many are increasingly in housing stress; homelessness is on the rise. Despite being a huge social issue, recently highlighted during Covid, there will be nothing effective allocated for social housing in this budget.
Housing is traditionally a state responsibility, and sadly Labor is following the LNP in standing back. The $560mn allocated for social programs and ‘housing’ in this budget is cosseted – agencies must tender or bid for the money, and then it is only for operations. It won’t meet day one of their promise to build more social housing, not one new house.
So, let’s just give up
I think we should give up expecting the Feds do something on cities, infrastructure, and housing. Why? Two reasons. Firstly, most of the action is with the states, and there are elections coming up in the two most populous. It’s time to get the states to take up the cudgels on these issues, particularly social housing. They are a better bet to change course and effectively address the issue, not the Feds.
And because, as I said at the start, building is 10% of the economy, and it can look after itself; as can the blokes, some of the best paid in the country. Inflation and supply chains would improve.
Just this once it would be good to see money taken out of road, rail, and rorts, and given to the poorly paid workers. To the teachers, the aged carers and child carers. The Feds need to lead the way and pay big increases to the feminised workforce. Let’s support people, not projects; high heels over hi-vis; for process over products. That’s my hope for the budget.
Tone Wheeler is an architect / the views expressed are his / contact at [email protected]
*BTW, the title image has a great story: it’s the design of the original $10 note by graphic designer Gordon Andrews. Francis Greenway, our first architect, is featured along with his drawings. What many forget is that he was an emancipated convict, sent to Australia for forgery. If we can put a convicted forger on our banknotes, it gives one hope.
