Social policy aspects of the Budget—introduction

As discussed elsewhere in this Budget review, the Budget’s expenditure and tax cuts amount to approximately $70 billion over four years. A large amount of this expenditure has been directed towards what can be broadly described as social policy areas (for example, education, health, community services, income support and Indigenous affairs). It includes approximately $3.5 billion on education, $3.6 billion on payments to families and older Australians and $2.3 billion on health, over four years. The tax cut of $31.5 billion over four years which will favour low income earners is anticipated to ‘improve incentives to work among low-income earners and second-income earners considering returning to work after a period of caring for children.’[1]

Much of the initial media commentary on social policy aspects of the budget was positive—for example, welcoming increased expenditure on education and health and medical research as investments in the future, and increased funding for Indigenous health and housing as directed towards an area of obvious need. However, some reviews were less positive in their assessments. For example, in his review of the Budget, Peter Saunders, Social Research Director at the Centre for Independent Studies, opened with the following questions:

What was the overall rationale driving Peter Costello’s 12th budget? What fundamental objectives was he trying to achieve? What key principles informed his decisions?[2]

His answer was that:

 … it (the Budget) has no rationale; there is no clear objective; there are no guiding principles. Good governments establish a predictable environment so people can plan their lives and make rational economic decisions. But in this and previous budgets, money gets withheld or handed out capriciously, arbitrarily, unpredictably.[3]

One does not necessarily have to agree with this conclusion to appreciate the point that questions about the policy context and rationale for particular budget measures provide a useful starting point for any budget analysis. Much of the media analysis of the Budget appeared to eschew this kind of approach in favour of analyses of the political or economic context of the budget as a whole. Very few analyses of particular portfolio areas went beyond the question of whether interest groups believed the amounts pledged to be enough.

This section of the Budget review examines the policy context for a range of measures in social policy related portfolios in the Budget. It seeks to provide a clearer understanding of the background, rationale and policy direction for these measures and therefore a better understanding of the Budget from a social policy point of view. In addition to the question of whether funding commitments are adequate, the types of issues examined include how funding will be spent, whether particular measures are consistent with previous approaches, the apparent rationale for particular measures and the likely success of particular measures.

Key points from the analysis include:

  • the Budget includes expenditure in a wide variety of social policy areas that has been well-received by relevant interest groups and commentators
  • several measures make improvements to existing programs such as the expanded assistance for jobseekers with special needs and changes to enable more timely delivery of the Child Care Tax Rebate
  • nevertheless, in some cases, improvements to programs may not be sufficient to address key problems (for example, funding for expanded assistance for jobseekers may not be enough to meet the need for such assistance)
  • some measures appear likely to stimulate demand for particular programs or services, raising questions about how this demand will be met (for example, there is no evidence that payments to individuals to encourage apprenticeships will be complemented by increased payments to the states and territories to provide apprenticeship training)
  • on closer examination, some measures can be regarded as less substantial or significant than portrayed by some commentators (for example, the Higher Education Endowment Fund, and the Medicare dental health measure)
  • there has been a continuation of policy directions familiar from recent years, including the use of one-off cash payments to provide financial assistance to certain groups of people; a preference for Commonwealth programs over state and territory programs in the fields of school education and vocational education and training; and the continued move towards ‘mainstreaming’ of Indigenous policy and service delivery and
  • there are several areas in which, given the size of the budget surplus, opportunities for fundamental reform have not been pursued or commitments have fallen far short of what some regard as required (for example, Indigenous employment, health and housing, prevention of chronic disease, and dental health).

This last point is particularly important when one considers the large amount of ‘unexpected’ revenue available to the Government in this and previous budgets. The 2007–08 ANZ Federal Budget Report (ANZ Report) estimates that the total of such ‘windfall gains’ for this and the next four years is around $70 billion, a figure matching the 2007–08 budget commitment. For the nine years covered by this and the past four budgets it is $398 billion.[4]

The authors of the ANZ Report, while describing the Budget as a ‘good election year budget’, noted that ‘nonetheless, we find it impossible not to wonder whether future generations of Australians might not look back upon the nearly $400bn of windfall gains that have been redistributed through this and the preceding four Budgets and wonder whether we could not have had rather more far-reaching reform, for that enormous sum.’[5] While the personal tax system is identified as one area requiring far-reaching reform, from the point of view of social policy program expenditure, one might also reasonably suggest similarly fundamental reforms/commitments, such as closing the gap in life expectancy between Indigenous and non-Indigenous Australians, a comprehensive strategy for reorienting the health system towards preventive healthcare, and a comprehensive dental health strategy.



[1].     S. Eslake, ‘Lots of redistribution spiced with some reform’, ANZ Federal Budget Report, 9 May 2007, p. 3,, accessed on 17 May 2007.

[2].     P. Saunders, ‘Peter Costello is just like Santa on steroids’, Australian, 10 May 2007,, accessed on 17 May 2007.

[3].     ibid.

[4].     S. Eslake, op. cit., p. 2.

[5].     ibid., p. 3.