When Joe Hockey produced his first fiscal statement, the December 2013 MYEFO, he did everything he could to make the debt and deficit look as bad as possible, making spending and revenue decisions (including giving $8.8 billion to the RBA) which increased the 2013-14 deficit by $16.8 billion.
His projection for 2016-17, after three Coalition budgets, was a deficit of $17.7 billion, net debt of $280.5 billion (15.7 per cent of GDP) and a face value of Commonwealth Government Securities on issue (gross debt) of around $460 billion.
Moving forward to Scott Morrison’s May 2016 budget and we find an estimated deficit of $37.1 billion in 2016-17, net debt is expected to be $326.0 billion (18.9 per cent of GDP rising to 19.2% next year) and CGS on issue is expected to be $497 billion rising to $581 billion in 2019-20 and $640 billion by the end of the medium term (2026‑27).
Three years at the helm and, not only they have only made things worse, our standard of living has gone backwards.
Morrison tries to blame the Senate but that argument doesn’t add up.
In December last year, Finance Minister Mathias Cormann said nearly 90 per cent of all the budget measures had been passed.
Cuts to universities announced by the Abbott/Hockey partnership that did not get through the Senate are included in this budget. This is a $2 billion ‘saving’ starting with a $100 million cut in the next year, increasing to half a billion for each of the following two years, and nearly $800 million a year by 2020.
Another saving is deferral of the child care subsidies promised in the last budget, they’ve been pushed backward another year pending approval of cuts to family benefits.
It seems they are counting the savings of measures not passed by the Senate but not the cost of stalled promises.
The biggest spending cut in Morrison’s budget is actually a diversion of funds already in the Social Services portfolio to save money for the future of the National Disability Insurance Scheme. So the saving will eventually become expenditure, but beyond the forward estimates.
They also increased the public service efficiency dividend, which is leading to even more job losses.
These were the ten biggest savings in the budget in $m:
1 National Disability Insurance Scheme Savings Fund 2,186
2 Higher Education Reform – further consultation 1,982
3 Public Sector Transformation and the Efficiency Dividend 1,424
4 Jobs for Families Package – deferred implementation 1,103
5 Aged Care Provider Funding – further revision of the Aged Care Funding Instrument 1,152
6 Medicare Benefits Schedule – pause indexation 925
7 Asset Recycling Initiative – return of unallocated funds 854
8 Youth Employment Package – Work for the Dole – reform 494
9 Industry Skills Fund – efficiencies 223
10 Job Commitment Bonus – cessation 242
Every time you hear the phrase “we must live within our means”, or you are told something is “unsustainable”, remember that this government has committed to spending $400 billion over the next twenty years on war toys.
To increase Newstart by $50 a week would cost about $2 billion a year. Funding years 5 and 6 of the Gonski reforms would cost about $4.5 billion.
Just the weapons for the new submarines will cost us $5-6 billion. The only time an Australian submarine has fired in anger was four unsuccessful attacks on Turkish ships in 1915 before being damaged by a Turkish gunboat and scuttled by her crew. The weapons for the fighter jets will cost another $7 billion.
They are spending over $43 billion on “key enablers” for the military yet baulk at spending on key enablers for society.
It is often said that size doesn’t matter, it’s how you use it.
Governments should not be afraid to take on debt to invest in productivity enhancing ventures but if they continue to waste money on things that bring no return then it is inevitable that we will go backwards.
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