It’s has taken me a while to put some thoughts down about the 2104 Australian Federal Budget simply because I am suffering from budget fatigue. Maybe the rot set in when Kevin Rudd & Wayne Swan were prancing around during the GFC talking about a national economic emergency. Or perhaps it was just years of Swan delivering budgets which had little connection with reality, with himself and Ken Henry both off in some parallel universe. In any case, when Tony Abbott and Smokin’ Joe Hockey rolled out the budget emergency theme the fatigue really set in.
As readers will know, I was no fan of the Rudd/Gillard/Rudd years and was very critical of every budget Wayne Swan handed down. So I was hoping to be impressed with the new team and see a fresh new approach to the budget process. Unfortunately that’s not what we got.
To be clear, the budget needs fixing and the blame for the mess the nation’s finances are in, is mostly due to the economic incompetence of the previous government as I wrote in various articles such Rudd Economics 101: When in doubt spend like crazy(2009) or in Swan’s lazy 2011 budget and Australian economic madness
Of course some people compare Australian government debt to other nations and argue the nation’s finances are in good shape however they forget to mention household debt levels or that Japan for example has around US$3.2 trillion yen in foreign assets. These wise heads also fail to mention that Australia has managed to go from a budget surplus to a large budget deficit during a commodities boom that bought in billions of dollars in extra revenue.
Call me old fashioned, but I’d say if you cannot balance the books when business is booming then you have a real problem.
In any case I have been warning for some years that the boom days would come to an end and that measures should be taken to re-balance the economy. These measures were not taken so the economy will essentially be re-balanced by force not by planning, as we can see happening already across the manufacturing sector.
My main criticisms of the 2014 Federal Budget are that the “emergency” has been over-hyped, there is little in the way of tax reform and that many measures seem to have been put together in a rush with not a lot of consultation. Yes government spending needs to be reduced and debt paid down but calling the current situation an “emergency” is hype with a capital H.
Looking at a few specific budget areas here are my quick comments:
- Reduction in business tax rate – good move.
- Medical Research Future Fund – excellent initiative and something I have been talking about for some years.
- Retirement age to increase to 70 – not good bordering on mean. Sure people are living longer but not everyone is and some people will just get a few years on the pension before they venture off this planet if they retire at 70. Politicians and desk drivers also seem to forget that some jobs involve more than just pushing a pen. Is the government expecting builders for example to keep working on site until they are 70?
- Doctor co-payment – seems to have been a lot of focus on just $7 and I just say $7 in the context of what people spend these days on mobile phones, i-Pads and coffee. There is a safety net for concession card holders (i.e. they pay for a maximum of 10 visits per year) so I would suggest that the outcry over this is unjustified.
- High income earners levy – to be fair high income earners already pay a higher rate of tax so this measure seems a little politically motivated to me. (i.e. to deflect some criticism that the Liberals only look after the high end of town) If politician’s perks, pensions and waste in the public sector was cut this measure would not be needed.
- Infrastructure Funding – sounds promising with $11.6 billion being set aside for this but I get nervous about government infrastructure projects as they are often politically motivated and poorly executed.
- Cuts to CSIRO/ANSTO – the media coverage of this has been woeful and it usually fails to mention that a review into how the CSIRO conducted research/operations was done during the term of the previous government and numerous changes were recommended. Some of these changes are now being implemented and include cuts to administrative and managerial staff which is hardly going to affect future scientific discoveries.
There were also reductions and changes made to family and unemployment allowances etc. which are probably needed but I would prefer to have seen these implemented after a wider review and simplification of the tax system. Or perhaps Joe can’t find the Ken Henry Taxation Review which seems to have been filed away in the too hard basket. (Hint – I believe the review is filed next to the report from Rudd’s Australia 2020 Summit)
Of course there is no such thing as a budget everyone will be happy with, but Smokin’ Joe didn’t t help the budget selling process by comparing the price of doctor pre-payment to a glass of beer and being somewhat dismissive of concerns both real and imaginary.
The mass media doesn’t help the process either, and in an age where online click-bait articles rule there is more focus on bringing in readers rather than putting together information articles that calmly explain the finer point of the budget.
Of more concern to me is the truly toxic nature of Australian politics and the absence of much talent in the 4th Estate as well. It appears there is little consensus building at work across the political spectrum and groups of people who think yelling, pushing and intimidation are valid forms of political expression should think about how they would feel if similar tactics were used against them. Unfortunately much of this toxicity is stirred by by the media with the national broadcaster, the ABC, being just as unbalanced as most other media outlets.
So Joe, if you are looking for a few hundred million dollars to save, try leaving the pensioners alone and privatise state media assets instead.
Until then, let’s hope that the next budget includes some real tax reform and that people on all sides of politics chill out a little.
This article was written by Greg Atkinson who is the Managing Director of Ohori Capital. Greg is from originally from Sydney but now works and resides in Japan. He can be followed on twitter via GregAtkinson_jp