What a tale the 2016/17 December MYEFO tells. And it’s not what the Treasurer is saying. Firstly, Scott Morrison is projecting a return to surplus in 2020/21 which is unchanged from the pre-election update.
What he isn’t saying though, is that the likelihood of this actually happening is next to zero. Thankfully, that’s not an issue because a surplus budget is the last thing the Australian economy needs right now, or indeed in four years’ time.
Next, the budget deficit is projected to fall by a paltry $600 million this year to $36.5 billion. That saving comes at the expense of pensioners, the disabled, the Green Army and the unemployed. But again, it probably won’t be realised.
That $600 million saving would otherwise have been spent by the recipients buying food, household items, travel, transport and other demand driven needs. That saving does even more harm to the economy.
Next, net debt is projected to peak at 19% of GDP by 2018/19. Who cares? Our debt is issued in Australian dollars and can always be repaid. We can continue to issue bonds till the cows come home and never run out of money.
We can, however, run out of resources. That’s where growth comes from. That’s what we should be looking at, not the debt. Our unemployed are an unutilised resource who create additional demand and a boost to our productive output. The fewer people working the less demand for goods and services.
Meanwhile real economic growth estimates have been revised down. There’s a contradiction here that seems lost on the Treasurer. Tax receipts are down $3.7 billion since the June pre-election budget. That’s because wages growth is virtually non-existent and with the increase in part-time work, people are working fewer hours.
The contradiction? The government has fought tooth and nail to prevent wage increases for the lowest paid and is now suffering the consequences of revenue write-downs in tax receipts from low wage growth. Talk about scoring an own goal.
What is of no concern is this constant talk about what the ratings agencies might do. Who cares? The ratings agencies are irrelevant to the success or otherwise of the Australian economy.
The interest rate for our bond issuance is determined by the government, not the ratings agencies. Regardless of any determination by the ratings agencies, our bonds will always attract both local and international support, whatever rate the government sets.
Not that we need to issue bonds in the first place, but that’s another story.
What this MYEFO tells us is that the government and Scott Morrison are incapable of managing our economy in a way that will bring an improvement to the living standards of most Australians.
They are collecting less and spending more but not where it actually leads to anything. Where is the investment in the future? How often have these pretenders been falsely warning us that today’s debt is a burden on future generations?
The reality is the reverse. Today’s lack of infrastructure spending is the burden we leave future generations. It is our grandchildren who will suffer the burden of ageing infrastructure, insufficient hospitals, poor public transport and communications.
With this kind of thinking, our economy is destined to decline further, with or without any international events impacting.