Budget 2014: Scientific, environment organisations respond to planned cuts

By environment and science reporter Jake Sturmer, Lexi Metherell and Alex McDonald

Updated October 06, 2016 12:13:20

Photo: Environment Minister Greg Hunt says funding announcements will boost Australia's role in Antarctica. (AAP: Alan Porritt)

Map: Australia

Australia's environment and science sectors have been slashed by hundreds of millions of dollars, with agencies axed and programs scrapped.

Scientists say Treasurer Joe Hockey's plans to cut funding to programs and abolish environmental bodies will be crippling.

Despite the widespread cuts, Environment Minister Greg Hunt says a funding allocation to Australia's Antarctic programs will improve scientific research and services to the region.

Read more about how prominent scientific projects, initiatives, agencies and research organisations have been affected by the 2014-15 budget.

CSIRO

The Federal Government has cut more than $110 million to the budget of Australia's national science organisation.

'No strategic thought'

Budget cuts to CSIRO and other science agencies suggests a lack of strategic vision, industry commentators say.

The CSIRO has had a $111.4 million funding cut over four years and will also have to find an extra $5 million over that period as part of a separate efficiency dividend. The overall cuts will result in the loss of around 400 jobs.

The CSIRO Staff Association's acting secretary, Michael Borgas, said the cuts were "short-sighted" and "destructive".

"They will do lasting harm to CSIRO and the capacity to deliver new inventions and crucial research for the next generation of Australians," Dr Borgas said.

The Government has provided $65.7 million to operate the new research vessel RV Investigator, but Dr Borgas said the CSIRO would be required to contribute $21.2 million.

In an email to all staff, CSIRO chief executive Megan Clark said it was a "difficult" budget.

It mentioned cuts to work focusing on radio astronomy science, carbon capture and storage, and sensor development research.

"Appropriation investment in manufacturing and minerals will be maintained, however we will reduce costs to meet anticipated reductions in external partner investment," the email said.

"CSIRO remains committed to deliver impact to industry, the community and a sustainable future for the nation."

ARENA

The abolition of the Australian Renewable Energy Agency (ARENA) will save the Government $1.3 billion, a move environmentalists say is a backwards step for the nation.

Audio: Listen to the chief scientist discuss the budget (The World Today)

ARENA was set up two years ago with bipartisan support as an independent agency to improve the competitiveness of renewable energy technologies and their uptake.

It has already committed to 181 projects worth close to $1 billion.

In the budget statements, the Government said $1 billion over eight years would remain available to support existing "priority" projects.

However, the funding agreement for some of its programs does allow the agency to terminate or reduce the scope of projects "if there has been a change in Commonwealth government policy".

The Department of Industry will take over ARENA's functions, with $30 million each year allocated over the next two years.

ARENA said it would continue to operate in the short-term because the Government could not make any significant changes without repealing the ARENA Act in Parliament.

Ethanol cuts

The ethanol and biodiesel industries face grant cuts worth millions of dollars in a tough budget for alternative fuels.

The Ethanol Production Grants program will be scrapped from July 2015, with projected net savings of $120 million over the next four years.

The Federal Government plans to save $156 million over the next four years through a range of changes to the taxation of biodiesel.

The main savings will be made through cuts to the Cleaner Fuels Grant Scheme, which will be abolished.

A program focused on harnessing the power of algal synthesis and biofuels will be scrapped.

The Government says the $5 million program can be abolished because alternative fuels, including advanced biofuels, will be considered in the context of the 2014 energy white paper.

The changes are certain to concern local producers of ethanol as well as industries like sugar, and may discourage further foreign investment in the local industry.

While industry assistance to the local ethanol and biodiesel sectors will be cut, the excise on their products will also be reduced to zero from next financial year and will rise gradually over five years until it reaches 50 per cent of the "energy content equivalent tax rate".

The local industry will continue to be protected, however, with the higher tax on imported ethanol and biodiesel to remain.

As expected, there is no change to the controversial diesel fuel rebate, where farmers and mining companies get a rebate on excise of around 38 cents a litre for diesel used off-road.

External Link: Budget 2014 major savings

Antarctica

A new Antarctic icebreaker worth up to $500 million is one of a handful of spending commitments within a sector that is facing widespread cuts.

It will replace the ageing Aurora Australis. That vessel was involved in the operation to rescue the stricken Akademik Shokalskiy when it became stuck in Antarctic ice last year.

The new icebreaker will be based in Hobart and is likely to be built overseas.

We are committed to bolstering the role of Hobart as a transport centre for expeditions to Antarctica.

Environment Minister Greg Hunt

It will have an enhanced icebreaking capability, greater cargo capacity, and be able to "undertake critical marine science within the sea ice zone".

"This plan will ensure Tasmania's position is enshrined at the centre of Antarctic research and services to the region," Environment Minister Greg Hunt said.

"We are committed to bolstering the role of Hobart as a transport centre for expeditions to Antarctica."

The Government has set aside an additional $24 million over three years from 2014-15 for a new Antarctic Gateway Partnership between the Australian Antarctic Division, the University of Tasmania and the CSIRO.

The budget also contains ongoing funding of $45.3 million over four years to maintain the Airlink service between Hobart and the Wilkins ice runway near Casey station, plus a further $13.4 million over four years for fuel and other logistical support.

The budget also commits $9.4 million for 2014-15 to ensure the continued operation of Australia's three Antarctic and one sub-Antarctic station.

Carbon capture and storage

The bid to establish carbon capture and storage (CCS) as a viable technology has been dealt a blow, with cuts of $495.3 million to the CCS Flagships program over three years from 2017.

That will leave the program with $191.7 million over seven years.

The cuts are likely to stymie a number of planned CCS demonstration and proposed commercial projects in Australia.

Cooperative Research Centres

Scientists bidding for funding from the Cooperative Research Centres (CRC) Program have had their hopes dashed, with the next round of funding under the program cancelled.

The move is a result of $80 million in cuts over four years to the CRC Program, announced in the budget.

The 24-year-old CRC program was established to bring together industry, researchers and governments to collaborate and leverage public and private funding to deliver practical breakthroughs.

Despite the cuts, the CRC Program has survived a Commission of Audit recommendation that it be abolished and its funding rolled into the Australian Research Council.

But after the budget was handed down, the chief executive of the CRC Association, Tony Peacock, tweeted: "Much worse than we even imagined for CRCs. Round 17 cancelled, $80m cut. Gutted, I'm afraid."

More on this story:

Don't know your structural deficits from your bracket creeps? Ahead of the Federal budget ABC News has decoded all the economic jargon to help you understand what is in store this year.

Term	Definition
Deficit/Debt	The deficit is just the amount of money that the government spends beyond what it receives in a financial year. Just because you return the budget to surplus doesn't mean that the debt incurred by the previous deficits disappears. Any deficits, or shortfalls, instead are added to existing government debt, which currently sits at $319 billion. While $319 billion sounds like (and is) a lot of money, by international standards Australia's public debt is quite low, sitting at 21 per cent of GDP, the second lowest of the advanced economies - and that's just gross debt, which doesn't include the value of Australia's financial assets, such as the Future Fund. However while government debt can pose problems, it isn't quite the same as personal debt and can often serve a purpose. Governments take on debt by issuing bonds to investors that are paid a return, with ratings agencies allotting a credit rating to government debt. A high credit rating, such as the one Australia has, allows governments to borrow at a very low rates, with investors trading profit for security. Some economists argue this ability to borrow at a lower rate than the market should be use to fund infrastructure projects that are likely to make a profit, as well as boosting productivity.
Forward estimates	The forward estimates are a series of projections released alongside the budget predicting revenue and expenses for the next four financial years. As they rely on assumptions about revenue and indicators, they are often subject to change - as the mining boom unfolded the estimates often undervalued the amount of revenue, and after commodity prices peaked they have had to be revised downwards. But the estimates are seen as a useful way of showing the government's longer-term plans for spending.
Revenue collapse	Over the past few years there has been a significant drop in the amount of tax revenue coming into the government. There is some contention over the reasons behind the drop, but economists are united in saying that at least part of the problem facing the government in its quest to return to a surplus stems from a lack of revenue, rather than too much government spending.
GDP	The annual value of goods and services produced by a country. GDP is generally recognised as one of the key indicators of the state of a country's finances.
Nominal GDP	A version of the gross domestic product that has not been adjusted for inflation. This means the GDP will appear higher than it actually is, as it fails to take into account the devaluing effect of inflation. However it is also the measure of GDP that is closest related to government revenue and spending, as both are affected by inflation.
Terms of trade	Terms of trade measures the relationship between the prices a country receives for its exports and the prices it pays for its imports. A rising terms of trade means the nation is getting better prices for its exports relative to what it pays for imports, and vice-versa. Australia benefitted from rising terms of trade during the mining boom as the prices of iron ore, coal and other commodities surged, while the price of many imports such as electronics and clothes stayed steady or fell. Economists are cautious about drawing too many conclusions from high or low terms of trade figures, but trends in the movement of the terms of trade are useful for predicting changes in the standard of living.
Tax expenditures	Tax expenditures are sources of revenue the government goes without due to tax concessions. While they are not government spending, they represent significant losses of potential revenue for the government. In 2013-14 expenditures hit the budget bottom line to the tune of $115 billion, and while some of this is offset by increases in productivity and increased spending, it remains a significant source of potential revenue the government is missing out on. Among the most well-known examples of tax expenditures are superannuation concessions and the capital gains tax exemption on the family home.
Negative gearing	Negative gearing allows property investors to write the interest costs of their mortgages off as an income tax deduction against other sources of income, and has been blamed for soaring property prices as it subsidises loss-making real estate investments.
Superannuation concessions	Super concessions are tax breaks designed to encourage people to put more money into superannuation, in theory saving the government money down the track by reducing the burden these people will have on the public purse when they retire. Currently superannuation is taxed at 15 per cent, with super earnings not taxed at all once you hit 60 years of age. Employers are required to put aside 9 per cent of an employee’s income into a super fund. The superannuation concession allows people to voluntarily contribute more to their superannuation and still be taxed at the rate of 15 per cent, well below the majority of tax rates. The concessions have been criticised for disproportionately benefiting the wealthy, who get a much bigger discount on their normal income tax rates than those in lower tax brackets. With many wealthy people likely to be ineligible for the pension on reaching retirement anyway, critics argue that the concessions cost the government far more in lost revenue than it would cost to support wealthy individuals with the aged pension. According to the Australia Institute, superannuation concessions cost the Federal budget $35 billion in 2013-14 (with that number expected to rise to $50.7 billion by 2016-17), of which 30 per cent ($10.5 billion) goes to the top 5 per cent of income earners.
Debt Levy	The debt levy has been proposed as a possible means for the government to pay back the budget surplus, and is expected to hit people earning more than $80,000 or $180,000 a year, taking an extra 1 per cent of their annual income. The Government, including Prime Minister Tony Abbott, is claiming it does not constitute a broken promise, as the levy will not be permanent (and so is different from a tax), but widespread polling indicates this won't wash with the public.
Middle class welfare	Middle-class welfare is a term used by economists and commentators to refer to the increase in tax breaks and welfare payments for those on higher incomes that came in under the Howard Government. The private health insurance rebate for higher income earners has been singled out as an example of this. The majority of the policies labelled 'middle-class welfare' were maintained by the Rudd and Gillard governments, with any attempts to wind them back labelled "class warfare". But some economists have argued this has significantly contributed to the collapse in tax revenue.
Parameter variations	Parameter variations refer to the budget’s assumptions about the economy (such as growth, inflation and unemployment) and how these will affect revenue and costs. The parameter variations in the MYEFO were vastly different to those set out in the PEFO, leading commentators to question whether they were massaged to provide a worst-case scenario, giving the Government more freedom to implement unpopular cuts and space for a miraculous recovery in the upcoming budget.
The age of entitlement is over	A term first mentioned by Treasurer Joe Hockey in a speech to British Conservatives in early 2012 that has become the informal motto of his time as Treasurer. Despite following up his debut of the term with an attack on Labor’s attempt to wind back the health insurance rebate, Mr Hockey has signalled that in order to get the budget back to surplus, sacrifices must be made by all, from businesses to the man or woman on the street. Whether this commitment goes beyond political rhetoric to actual structural reform is a question many expect to be answered in Tuesday's budget. So far the government's unwillingness to bail out the car industry, and public speculation about a debt levy on high income earners, indicate this may be the case.
Efficiency dividend	A reduction in funding for Commonwealth government portfolios designed to drive efforts to increase efficiency. First put in place by the Hawke government, the dividend is based on the rationale that without market demands there is no pressure for government departments to find ways to save money through efficiency, and was originally labelled a dividend as it aimed to return revenue to the taxpayer. The dividend only aims to reduce expenses around the operation of a department, not the overall funding, and so is applied before budgets are indexed to account for increases in wages. There has been speculation an efficiency dividend will be applied to the ABC and SBS (which have previously been exempt) as a way of reducing funding to the broadcasters without breaking an election promise made by Tony Abbott that there would be no cuts to either organisation.
Structural deficit	A structural deficit refers to a situation where the current tax structures of a country will fail to cover the expenses, even when an economy is performing at its peak. Governments commonly run deficits in times of economic downturn as a means of insulating the economy and ensure services are not impacted, with the understanding that surpluses during peak times will help pay down the debt incurred by going into deficit. Working out whether a government has a structural deficit is complicated by the changing nature of sources of revenue and costs for governments, but governments and economic organisations try to remove the influence of temporary impacts on the budget bottom line to assess the long-term prospects for the economy. In the MYEFO the structural deficit was estimated at 2-3 per cent of GDP.
Fiscal drag	Fiscal drag refers to when excessive taxation or a lack of spending by the government puts a dampener on the economy. Bracket creep is a form of fiscal drag that occurs when tax rates do not keep up with wage increases in the economy, pushing wages up to a higher bracket, and resulting in the government taking more tax revenue. Tax brackets are designed to be indexed to account for increases in inflation, however the indexes are usually set manually, and leaving them stationary while wages grow allows the government to increase the amount of revenue it takes from taxpayers without raising taxes. Warnings from accounting firms KPMG and PwC have fuelled speculation that the government is planning on letting bracket creep do some of the heavy lifting when it comes to recovering revenue.
Bracket creep	Fiscal drag refers to when excessive taxation or a lack of spending by the government puts a dampener on the economy. Bracket creep is a form of fiscal drag that occurs when tax rates do not keep up with wage increases in the economy, pushing wages up to a higher bracket, and resulting in the government taking more tax revenue. Tax brackets are designed to be indexed to account for increases in inflation, however the indexes are usually set manually, and leaving them stationary while wages grow allows the government to increase the amount of revenue it takes from taxpayers without raising taxes. Warnings from accounting firms KPMG and PwC have fuelled speculation that the government is planning on letting bracket creep do some of the heavy lifting when it comes to recovering revenue.
PEFO	The Pre-Election Economic and Fiscal Outlook was released by the Federal Treasury shortly before the last election, and represents Treasury's and Finance's predictions on the current and future state of the economy. While budget bottom lines are often open to manipulation by governments, the PEFO is put together independently and the only outlook signed off by the heads of Treasury and Finance.
MYEFO	The Mid-Year Economic and Fiscal Outlook is an update to the budget that the government releases halfway through the financial year. The most recent MYEFO showed a major increase in the budget deficit from the PEFO, prompting speculation over whether the government was using a worst case scenario to strengthen the case for unpopular cuts and pave the way to a budget recovery.
Vertical fiscal imbalance	This refers to the fact that the Commonwealth raises the vast bulk of tax revenue, but the states have a large part of the spending responsibility. There is currently a large shortfall in the amount of tax the states receive compared to the cost of providing the services required of them, such as healthcare and education. This current imbalance is overcome by the Federal Government distributing money raised by the GST to the states, but this makes the states reliant on federal grants and subject to greater federal control.
Underlying cash balance	The benchmark measure of the government’s budget position: deficit equals less revenue than spending; surplus equals more revenue than spending; balance equals revenue matches spending.
Unemployment rate	Critical to the budget on both the revenue and spending fronts because a higher unemployment rate means less income tax revenue (and potentially less GST from consumption), while also meaning more money going out in unemployment benefits.
Consumer price index	Measures the inflation in the price of goods and services. Important to the budget because higher prices mean more GST revenue, although they also mean higher increases in government payments indexed to CPI and higher costs for government purchases.
CPI	Measures the inflation in the price of goods and services. Important to the budget because higher prices mean more GST revenue, although they also mean higher increases in government payments indexed to CPI and higher costs for government purchases.
Wage price index	Measures the change in wage levels paid to employees. Important to the budget because higher wage growth across the economy means faster growth in income tax revenue, which can be magnified by bracket creep – individual income taxes (which includes non-wage related capital gains tax) make up around 46 per cent of federal government revenue. Higher economy-wide wage growth may also mean larger rises in public service pay, but the income tax boost to the Government far outweighs this cost.
Corporate profits	Important to the budget because company tax makes up more than 18 per cent of federal government revenue. The faster corporate profit growth, the healthier are government revenues. A fall in company tax revenue, due to slower than expected profit growth and higher than expected deductions, accounted for a large proportion of the previous government’s revenue write-downs.
Consumption subject to GST	GST accounts for around 14 per cent of the Federal Government's revenue, although it is ultimately distributed to the States in grants. Not all goods are subject to GST, and the growth in consumption of exempt goods (such as fresh food, education and healthcare) has recently been much faster than the increase in purchases of goods subject to GST. Obviously, faster growth in the consumption of GST-levied goods means a greater increase in GST revenue for the government.
GP co-payment	The Government has introduced an upfront $7 co-payment for bulk-billed visits to the GP. After 10 visits, patients with concession cards and children under 16 will be exempt from the fee.
Fuel excise	This is a tax on petrol that currently sits at 39 cents per litre. The Government in the budget announced it would index the fuel excise twice a year to raise it in line with inflation, resulting in higher fuel prices.