After the events of the past year – a big-spending federal election campaign, the September 11 attacks on the US, the Afghanistan war and the high cost of meeting the challenge of boat people and Australia’s East Timor operation – it was inevitable that Federal Government expenditures would blow out, pushing the Budget into deficit.
Australia’s strategic environment has suddenly become more difficult, and will require significant increases in defence spending over the next ten years, as foreshadowed in the last Defence White Paper.
What was more surprising was the decision of the Federal Government to curb spending on the Pharmaceutical Benefit Scheme (PBS) and the Disability Support Pension, then blame them on 40-year projections of what will happen if the blow-out in expenditure is not addressed.
There are real concerns with the massive growth in government spending in both areas; but it has little to do with issues raised in the Intergenerational Report, which the Treasurer, Peter Costello, tabled in Parliament in the Budget Papers.
The PBS has grown as a result of expensive new drugs, particularly anti-cancer drugs, and the use of “brand name” drugs, rather than generics, as a result of the costly marketing campaigns directed at medical practitioners by drug companies.
Criticism of the Government is largely based on the fact that the maximum cost of drugs under the PBS will rise from $22.40 to $28.60. This rise will adversely affect both families (where there will often be several children needing prescriptions) and self-funded retirees, who do not get concessions, but may have frequent recourse to prescription drugs.
There is a strong argument for a gradual rise in cost of prescription drugs, if only to deter over-use, but a 27 per cent rise is extravagant, and should be reversed. Indirectly, it is another disincentive to families, and will discourage population growth, which the Government claims to be concerned about.
One consequence of corporate mergers in the biomedical field is that there are comparatively few drug manufacturers, and for many prescription drugs, virtually a monopoly. The Government has tried to curb costs through its Pharmaceutical Benefits Advisory Committee, that recommends which drugs should be subsidised; but with few suppliers of many drugs, it has limited effect.
If the Government wants to address this problem, it needs to encourage domestic pharmaceutical companies, such as Sigma, to conduct medical research and produce out-of-patent drugs within Australia.
The Government’s attempt to crack down on the number of Disability Support Pensions follows the massive increase in beneficiaries over the past ten years. As pointed out elsewhere in this issue, a major cause of this is that many older Australians, suffering long-term unemployment, have been shifted onto Disability Support Pensions.
The collapse of manufacturing industry, and the shift towards service industries which often want young people in part-time work, have led to the decline in employment opportunities for older Australians.
Once again, the solution is to rebuild Australia’s manufacturing industries, with the consequent multiplier effect on employment for Australians in service industries. Interestingly, the West Europeans and Americans, whom we follow slavishly in less important areas, have long understood that sustained industry policies are essential.
The Government’s Inter-generational Report, which painted a gloomy picture of Australia’s welfare services over the next 40 years as the population ages, described what has been obvious to almost everyone for years.
The Government seems to accept as inevitable that nothing can be done about this problem. It accepts the birth rate will fall from 1.75 per cent currently to 1.6 per cent by 2042, and apparently believes the process is inevitable and irreversible.
While a similar demographic pattern is well-established in Western Europe, it is interesting to note that, in the US, fertility levels are above two per cent.
It is certainly true that if present policies continue, Australia’s birth rate will continue to slide. But repeated surveys have shown that most women would like to have more children, and many working mothers would leave if they were not under financial pressure to remain at work.
While the Government’s “baby bonus” – paid to first-time mothers to recover some of their tax when leaving the workforce to care for a child – is welcome, it does little to address the costs incurred (and income foregone) in raising children.
The fall in Australia’s fertility over the past 40 years almost exactly mirrors the adoption of anti-natal policies by governments, which reward women as workers and consumers, but penalise them as mothers.
If we want to reverse the trend over the next 40 years, the appropriate course of action is, I would have thought, obvious.
- Peter Westmore is President of the National Civic Council