Joe Hockey says we should be living within our means. But what exactly does he mean? (Image from abc.net.au)

Last night I watched a giggling Leigh Sales interview Joe Hockey who vacillated between the laughing matesy wink wink buddy of the MSM and the sombre Treasurer telling us we must “live within our means”.

So what exactly does “living within our means” mean?

It can’t mean always spending less than you earn because otherwise most individuals would not be able to buy a house or a car or go on overseas trips. Businesses would not be able to start up and grow. Governments would not be able to provide infrastructure. Developers wouldn’t exist and banks would go broke.

So I guess it means being able to service your debt.

In the last budget, net debt in 2013-14 was estimated at $178.104 billion, around 11.1 per cent of Gross National Product, and net interest payments for the year of $7.835 billion. By comparison, the combined net debt for the world’s seven biggest economies is 92.6 per cent of their combined GDP.

The Gross Domestic Product (GDP) in Australia was worth 1520.60 billion US dollars in 2012. Even allowing for the changes in exchange rate and the deteriorating position since the budget, our interest payments are about 0.5% of our GDP. If you were earning $100,000 a year I don’t think you would find paying less than $10 a week too onerous.

But are we saddling future generations with a debt they will never be able to repay?

Well for starters, the Australian government has NEVER had zero gross debt. We have very occasionally reached zero net debt, but considering the global financial crisis, and the very low interest rates on offer at the moment, going into such comparatively low levels of debt to stimulate the economy and to provide jobs, services and infrastructure seems a wise investment.

For many of us, it is a goal to be mortgage/debt free by the time we retire, though that is unachievable for a lot of people. This is not the case for governments. They will never retire. They will always have an income stream. There will be boom times when they can save and reduce debt, and tough times when they must borrow to spend. Suggesting that we can ever maintain zero debt is just not realistic nor is it necessary.

There are some structural issues in the budget that need addressing to prepare for our changing demographic but the cost-cutting measures so far announced or hinted at by the Coalition do little to address these problems into the future. Their miserly savings of a few million here and there have come at the cost of many very worthwhile ventures.

But the really galling part in this tightening of our belts is what the government is choosing to spend money on.

There have been many stories about politicians rorting their entitlements, hiring private jets, and generally wasting a lot of taxpayers money. Their travelling and office expenses are huge. We are providing Tony Abbott with several places of residence and also apparently forking out for new bigger jets and a fleet of security cars, costing us hundreds of millions.

We are having yet another enquiry into the Home Insulation Scheme. Whilst it was a tragedy that 4 young men lost their lives, there have already been eight investigations which have detailed how and why it happened with recommendations on how to avoid similar problems in the future. Royal Commissions aren’t cheap and it looks like we will also have one looking into unions even though there is already the framework to investigate corruption and prosecute individuals by Fairwork Australia.

Whilst cutting $13.4 million from Indigenous legal services, they provided $2.2 million legal aid for farmers to fight native title claims.

The Federal Government withdrew support for a $16 million grant to South Sydney Rabbitohs for a high performance centre whilst retaining a $10 million funding promise for Brookvale Oval – located in the heart of Prime Minister Tony Abbott’s Warringah electorate.

I shudder to think what Operation Sovereign Borders is costing us. With two frigates at $207,000 a day each and seven Armidale Class Patrol boats at $40,000 a day each, along with numerous Customs vessels patrolling the seas between Christmas Island and Indonesia, the bill must be huge. It has also left us without the promised patrol of Japanese whaling. Combine that with the $3 billion we spent last year locking asylum seekers up in offshore detention centres, and the extra $1.2 billion allocated by the Coalition in MYEFO, this is a very costly exercise in inhumanity.

Saving a few million dollars by disbanding all climate change advisory bodies and sacking scientists at the CSIRO will not make a dent in the $2.55 billion over the next four years, followed by $1.2 billion a year until 2020, budgeted to pay to polluters, and the $811 million we are spending on a Green Army.

It is also widely agreed that Direct Action as planned, with an unrealistic $8/tonne abatement price, will go nowhere near meeting our emission reduction and renewable energy targets. Under an emission trading scheme we would have the flexibility to source abatement overseas if the price is right so we would meet the target through national and/or international reductions. Direct Action has no such plan if targets aren’t met and it also has no plan for beyond 2020.

In the 7:30 report, Joe Hockey, when asked about assistance for struggling company SPC Ardmona, replied that the

“parent company of SPC Ardmona, Coca-Cola Amatil, which is an Australian company, in the first six months of this year had a profit of over $215 million …. I think you can understand why we are being very cautious, very careful about handing out taxpayers’ money to companies that are profitable.”

During the election campaign, Abbott flew to Tasmania and blithely handed a gift of $16 million to the Cadbury chocolate factory. Cadbury is owned by a multinational firm that had reported a 64 per cent rise in its profit to $74.9 million last year. It’s probably just a coincidence that they are major sponsors of Tony’s pollie pedal ride.

Speaking of pollie pedal sponsors, they include three pharmaceutical companies – alphapharm, Roche and Pfizer – as well as the world’s largest biotechnology company AMGEN. Bob Gosford wrote a very informative article in the Northern Myth about AMGEN. Tony’s close association with pharmaceutical firms and his haste to sign free trade agreements doesn’t auger well for our Pharmaceutical Benefits Scheme which will no doubt be immediately targeted for lawsuits for restricting profitability.

Joe Hockey also said last night, when asked about a possible $6 co-payment for bulk-billing doctors,

“Well, no, we’re not ruling things in or out. We are dealing with all of the suggestions that have been put forward on a methodical basis. I want to emphasise – I want to emphasise: this not a choice for government. It has to be done. We need to live within our means. We can’t keep hitting taxpayers, we can’t keep hitting families, we can’t keep hitting employers, employees with new taxes to pay for the largesse that Labor left. We can’t do that. We’ve got to live within our means.”

But apparently they can hit us all to fund their rolled gold Paid Parental Leave Scheme which is estimated to cost $5.5 billion a year and is hugely skewed to favour the wealthy.

Mr Hockey has also cost us several billion by abolishing certain taxes:

• $1.8 billion fringe benefits tax crackdown on cars
• $313 million in tax on super pension earnings above $100,000 for 16,000 wealthy people
• $266 million by removing the $2000 cap on tax deductions for work-related self-education expenses.
• Another three taxes, including one aimed at stopping multinationals shifting profits overseas, will be watered down, at a cost of $700 million.

Through direct subsidies and tax concessions, the mining industry receives over $4.5 billion a year from the government. The average rate of corporate tax is about 21 per cent, the mining industry only pays 14 per cent.

This year the government will provide $7 billion for the private health insurance industry. $5.6 billion will be in a direct subsidy to the industry. There will be another $1.4 billion in income tax foregone by the Commonwealth Government.

Excluding deposits, Australian taxpayers are handing over benefits worth $2.1bn to $7.2bn a year — up to $763 a taxpayer — to the big four banks, which is conservative because the Financial Claims Scheme insures deposits up to only $250,000.

Mind you, the banks don’t even pay for the explicit insurance, which the Reserve Bank governor said recently was probably worth “a few basis points” of insured deposits, or somewhere around $250 million a year.

There are many more examples showing the priorities this government has for its spending. MYEFO projects that we will not reach a surplus until 2023-24. From everything I can see, it is only the poor who are being asked to tighten their belts so the rich can grow richer in the misguided hope that this increased wealth will somehow trickle down. It seems to me that if you instead increased the wealth of our poorest people then that would create a tsunami of demand that would indeed “lift the tide” for all.