http://www.afr.com/opinion/columnists/s ... 417-1mkgllAs the general public would do six hours later when the budget was released, well-paid editors and journalists would go straight to the tax tables to see the size of the personal bounty being handed out that particular year.
One of the more memorable was the 2006 budget, released about two years before the US economy went belly up. It contained $43 billion in new spending, mostly structural. Every crevice of the tax and transfer system had cash stuffed in it. There were $36.7 billion in personal income tax cuts, boosted family tax payments, a softening of the pension assets taper rate, and super payouts for people over 60 were made tax free.
Looking back at the newspapers from the next day and it's all rather surreal. A bit like watching an old footy game with cigarette advertising on the fence.
Few people at the time sounded the alarm. Economists Saul Eslake, Chris Richardson and Stephen Anthony were among the notable exceptions. Even Treasury was talking as if the boom would never stop.
Once the GFC hit the boom time revenues dried up but the pork, middleclass welfare and tax cuts continued.
Worse tho was the real estate boom, the borrow on the equity in the home to spend on holidays etc, house increases in value so lets borrow more and buy a speedboat etc, left the household sector highly indebted, mortgages at or above the equity of the home, credit card bills as long as your arm. How can a recovery come from such a highly indebted sector? It is demand that fuels business investment and job creation.
The Gillard/Swan govt was wrong to go for a surplus tho I can understand the political need that drove it and they did abandon the search for a surplus as unemployment started edging up.
The Abbott/Hokey 2014 Budget was totally the wrong prescription and we see seasonal unemployment at 6.2% in the last two quarters, well above the levels of the Gillard/Swan govt. I think we can take this figure to be more like 6.5%—the latest figure was supposed to show 38,000 mostly full time jobs had been created to which I say “Bullshit!” Mining, renewable energy all closing down, motor car manufacture closing in 2 years, nothing there to create 38K jobs.
The correct setting now is small deficits to return money to the household sector. I mean, compared to the deficits after the Great Depression and WWII the deficits, even the inflated ones under Abbott/Hokey are tiny as a % of GDP. Those huge deficits were paid back with nary a surplus Budget, only Whitlam , who paid of the last of this debt, had surplus Budgets.
You pay off deficits with growth in the economy, not with surplus Budgets! So you can see the Abbott/Hokey Budgets are anti–growth because they attempt to get money out the household sector into the government sector, further depressing buying power.
Is it impossible to get to a surplus any time soon? Not at all. You need to consider discretionary income, the income left after paying rent or mortgage, power/gas/water/council rates, cost of getting kids educated etc—the essentials. Pensioners, the chronically sick, the unemployed and underemployed, university students have little to no discretionary income. If the 2014 Budget had gone through we would be in a deep recession right now, as the little or none discretionary income disappeared due to the mooted changes to pensions, university fees, the six months without support etc.
Who has discretionary income? The well off and very rich, huge international companies. Guess what? The very rich get stupidly huge tax concessions on superannuation, on incomes from super, by negative gearing, CGT concession and so on and so on. The multinationals as we know now pay tiny amounts of tax within Australia. Thanks Peter Costello, not!
These multinationals will not stop doing business in Australia if they have to pay their fair share of tax. Apple and Google make like $8Bn revenue every year in Australiia, why would they leave Australia just because they now pay a reasonable amount of company tax? The well off, the rich and the super rich have plenty of discretionary income, they can lose the huge tax advantages they enjoy and still maintain pretty much their current spending.
$50Bn additional revenue can be gained by tackling these tax rorts and it won’t affect private spending much at all.
At the moment we are slowly sliding into a recession because most of the household sector is saving not spending:
http://www.theage.com.au/victoria/more- ... mnku9.htmlRecent figures from the Australian Bureau of Statistics show the shift from state schools to non-government schools has halted for the first time in almost four decades.
Glenn Savage, a researcher and lecturer in education policy at Melbourne University, said Australian schooling was increasingly marketised and competitive.
"Parents are very savvy in choosing schools these days and adopt a range of strategies to secure the best deal," Dr Savage said.
Private schools offering discounts, more families sending kids to public schools, who’d have thought that would happen when you squeeze the private sector?
One day the housing bubble in Sydney and Melbourne will burst and the shit will really hit the fan.
That is what Treasurer Costello and PM Howard “the Profligate Twins” did to us!