2014 Federal Budget: Budget Economics – Not Tough Enough!
The 1990s recession that brought on the budget deficits provided a basis for the Budget to ‘whir’ back into surplus as the Budget recovered with the economy and unemployment payments fell away and consumption and personal taxes rose.
It is extraordinary to think that despite the GFC of 2008 to 2010, Australia has enjoyed amazing economic sunshine of no recessions for 20+ years but now can’t produce a Budget Surplus to lean against the cumulative hundreds of billions of debt accumulating since the 2009 tax year.
With around $60bn of deficits now estimated for 2014 to 2018, there is merit to the argument that the Commonwealth Budgets are not paying for themselves, and either spending should be cut more or revenue increased more than it has already.
The current Budget situation is not the fault of the current Government. Frankly, with hindsight, the seemingly strong surpluses of the Howard-Costello years were actually not strong enough and did not provide sufficiently for a resources downturn (luckily it was not a bust!), so the Liberals are not entirely faultless. But the Rudd-Gillard-Swan ‘gang of three’ consistently failed to meet expectations and made promises and funding commitments without providing the revenue to support cost requirements.
True enough, Australia has a relatively low debt compared to other countries, but comparing to other countries is not a level playing field. With our vast and valuable natural resources the current Budget and debt situation is a comprehensive failure of budgetary policy.
And we just don’t know what is around the corer – if we can’t produce a Budget surplus in the good years, it is frightening to think what Budget deficits will arise if we have another ‘x factor’, be it another terror or security failure, global financial crises, Asian credit squeeze, tech bust, dramatic turn in the Chinese economy, etc.
Our debt may not be so benign then. And tax rises or $7 dollar doctor visits may not be the worry then, with the Australian dollar being impaled, inflation souring, unemployment bolting and property prices plunging.
That is why the 2014 Federal Budget, like the ones of recent years at least, was not tough enough.