Labor’s obsession with driving the budget into surplus will not only mean unpopular cuts, it could tip Australia into recession. Is it any wonder working class people think Labor is so useless?

In its efforts to outdo the Liberals on “spending restraint” Labor has committed itself to a budget surplus, despite the obvious signs that the economy is slowing down. But in these circumstances, it will require serious cuts to government spending.

Wayne Swan plans to cut government spending by $40 billion to achieve a $1.5 billion surplus next financial year. This is a bigger cut than the 1996 horror budget handed down by John Howard in the first year he came to power.

As Tim Colebatch wrote in The Age, “Labor will pull 2.6 per cent of GDP out of the economy. That is two and a half times the fiscal contraction imposed by the Hawke government in 1986-87, or the Howard government in 1996-97.”

Labor is preparing to deliver big cuts in the next budget, but we can fight back

Some news is surfacing about where the government’s axe is likely to fall. The Financial Review reported that the aged care industry has been told to expect up to $1 billion a year in cuts to nursing home subsidies.

Federal public service departments have already cut 1500 jobs in recent months. Now the Gillard government plans to increase the service-wide budget cuts or “efficiency dividend” to 4 per cent next year, a cut of $500 million. This means more jobs will be axed.

Even mainstream economists are critical of this neo-liberal madness. Taking such a large amount of spending out of the economy, when, outside the mining sector, it is flat lining, threatens to cause a recession. Former Reserve Bank board member Warwick McGibbin warned, “It could be very dangerous.”

It is exactly these kinds of austerity cuts that have driven up unemployment in Greece and Spain, pushed their economies into recession and brought hundreds of thousands of workers onto the streets in protest.

The slowdown is already creating job cuts. The disgraceful scenes at Toyota Altona when 350 workers were escorted off the factory floor by security guards could be a sign of things to come. Another Melbourne car component manufacturer, APV Automotive Components, has appointed an administrator to oversee job cuts after standing down 126 workers without pay.

Digging their grave

Labor’s failure to boost spending on welfare and public services was an important factor behind its thrashing in the Queensland election. Federally, it talks of delivering a disability insurance scheme, an aged care overhaul and a dental care scheme, in a desperate effort to find some popular policies. But its neo-liberal budget priorities mean it is willing to sacrifice badly needed services on the altar of fiscal conservatism.

Labor is still committed to cutting corporate tax for big business by $16 billion over the next decade. That’s $16 billion that could go to aged care, Denticare and more.

The Greens have also pointed to cutting fossil fuel subsidies which in 2010-2011 cost the government about $12.2 billion. And then there is the $22 billion a year that is spent on the military. Not to mention increasing the mining tax to its original rate, which would provide another $1.6 billion a year.

Wayne Swan was full of tough talk in The Monthly about the 0.01 per cent billionaire miners, but it was just posturing.

The Bank for International Settlements records Australia’s banks as the most profitable in the world, making billions of dollars profit a year, yet there is not a word about a tax on their super profits. Instead he sits on his hands while they jack up interest rates. In 2011 Westpac alone made a record $7 billion profit while sacking 400 permanent staff.

New Greens leader Christine Milne is right to criticise Labor’s push to balance the budget. The Greens should vote against any Labor proposals to cut spending.

But forcing Labor to expand spending on social services will also require a concerted campaign outside parliament that mobilises union members and working class people in protests and strikes.

Bowen Basin miners are showing how to stop the mining companies cutting conditions while they rake in the billions.

The Victorian nurses have shown how determined strike action can defy the courts and defend services against government cuts. The rallies against the job cuts and the attack on education at Sydney University and other campuses show it is possible to resist.

Julia Gillard, Wayne Swan, car and mining bosses are singing from the same song sheet, determined to make workers shoulder cuts to keep the profits rolling in. While they say “cutback”, miners, nurses and students are showing how to fight back.

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