The Coalition and Financial Management … an Oxymoron
Poor Joe Hockey! One could be sucked in to feeling sorry for him … not! The Government’s election promise, the much touted public service staff cuts of 12,000, has vaporised. Joe can’t implement this promise because Labor beat him to the punch. The public service efficiency dividend, a mechanism governments of both persuasions have been using for the past 30 years, has already factored in cuts of 14,500. There is no more efficiency room left unless huge chunks of government delivered services are contracted out to private companies. What a blow! You would think Joe would be happy about that. Labor has inadvertently fulfilled one of the Coalition’s election promises. Is he happy? Not our Joe. He now has to look for other cost saving measures to avoid an increase in the budget deficit and further borrowings. You would have thought the Coalition, these economic gurus, would have known this long before they announced their pre-election promise. It’s not as if it was a secret. It was in the previous government’s budget papers. Someone in the Coalition was sleeping on the job.
So, where to now?
Sooner, rather than later, Joe and the Government are going to have to own the budget. They will have to accept responsibility for the state of our finances. By next May when the next budget is handed down it will belong to Joe and blaming Labor just won’t wash anymore. Then we shall see the cut of his jib. The May budget will certainly show yet another deficit of around $40 billion; one similar to what we have become use to under Labor. I suspect, also, it is going to contain some unpopular cuts involving broken election promises for which there will be a myriad of excuses. Why? Because Joe and the Coalition will be seen to be no better at raising revenue than Wayne Swan and Labor and that’s going to hurt him, personally. Joe spent a lot of time and energy telling us about fiscal mismanagement, budget emergencies and other bits and pieces. To be cast as just another Wayne Swan won’t go down well.
Economics is not an exact science. It relies on a whole host of uncertainties. There’s a lot of guesswork, estimating, crystal ball gazing and most important of all, events not yet known. Kevin Rudd learned that the hard way; his unexpected event was the GFC. Perhaps another GFC-like event is just around the corner, who knows. But whatever happens, it will belong to Joe Hockey. He won’t be able to blame any subsequent economic ills on Labor. It will be a good test of the false public perception that the Liberals are the better economic managers.
Who started that rumour anyway?
Matt Wade from the Sunday Age in his article, ‘Our National Journey to Prosperity‘ (24 Nov ‘13) highlights the beginning of Australia’s rise to world prominence in wealth, health and education which began when Bob Hawke became Prime Minister in 1983. Just prior to that, we were a basket case under the former Coalition Treasurer, John Howard. Paul Keating became the new Labor treasurer and over the next decade restructured our economy in five critical areas. It was the floating of the Australian dollar, which Reserve Bank governor Glen Stevens recently described as, ‘‘one of most profound economic policy decisions in Australia’s modern history’’, together with tariff reductions, de-regulation of the banking system, the trade union and labour market accords and the independence of the Reserve Bank that changed the Australian economic scene and our way of life, generally.
When talking about events, the next foreseeable one is the Indonesian Presidential elections in 2014. By the time that is decided, Tony Abbott will know just how good a friend President Susilo Bambang Yudhoyono was to us and how difficult it is going to be with the incoming president, whoever that might be. None of the candidates are particularly disposed toward us. This will create additional problems for Joe Hockey because he will have to re-visit all of our foreign aid commitments and find some grovel money albeit after just cutting the foreign aid budget to the bone. Tough times lay ahead for Joe and they have nothing to do with the six years Labor was in office. The repeal of the carbon tax might get through the senate next year although that is not a certainty. If it does, all revenue from that will cease as will the pittance coming from the mining tax. This is, of course, the government forsaking revenue to honour a promise they think helped win them office. But, most painful of all, as the Indonesian economy continues to gather strength and our near neighbour becomes the third Asian tiger, Australia will be denied access to valuable markets in favour of other friendlier nations. That is going to hurt us … big time.
So let me do a little crystal ball gazing of my own. Joe Hockey is the new John Howard (the 1982 version). Over the next six years the Coalition is going to systematically stuff up the Australian economy and re-define the parameters of fiscal ineptness pushing the national debt out beyond $500 billion. Why? Because they don’t have a vision for the future. They govern for today; they think tomorrow will take care of itself. Well, this time they won’t have a mining boom to mask their collective lack of ability which will translate economically into a probable recession and massive unemployment. Consequently, around 2019, if not before, Australia will be back where it was in 1982 and Labor will once again be invited back into office to clean up the mess.
And those misguided voters who thought the Coalition were the better financial managers, will scratch their heads and seek psychiatric counseling. History doesn’t lie.
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15 comments
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PeterF -
rossleighbrisbane -
Billy moir -
mikestasse -
Kaye Lee -
Fed up -
Fed up -
Terry2 -
Fed up -
Fed up -
diannaart -
lawrencewinder -
Paul Raymond Scahill -
doctorrob54 -
Kaye Lee
Return to home page“The repeal of the carbon tax might get through the senate next year although that is not a certainty. If it does, all revenue from that will cease as will the pittance coming from the mining tax. ”
What a lot of Australians seem to miss is that there has been a good reason for the ‘pittance coming from the mining tax’ : simply, the miners have been given tax breaks covering all of the vast expense of setting up the mines. But now they are scaling down their construction, and focussing on production. They will now be moving into a positive profit stage without tax breaks, and this will take them into the circumstances where the MRRT will start to bight.
THIS is the reason that Abbott has been told to get rid of the tax, BEFORE it starts to act as it was designed to do. Perhaps someone should tell Joe.
I clearly remember the Fraser years for the Government’s inability to see some sort of cause and effect in their own actions and unemployment. They’d make cuts with the idea of balancing the budget, but then fail to take into account that their cuts would lead to more expenditure in the form of unemployment benefits and less revenue because – apart from the greater number of unemployed spending less – there was no flow-on of revenue to tax from the money they were spending. Therefore, you perpetuate the cycle be making even deeper cuts.
Rather like a family budget, where one person decides that they don’t want to spend money on petrol so they stop going to work. Yes, there will be savings but in the longer term, it was probably a bad move.
It worries me that the Abbott Government may go down the same path.
Great start, good middle and hopeful end. But history??? Written by belief??? Misguided voters driven by belief. Labor no effect on belief!! A testament to the fear power of ‘debt’ to baby boomers seduced by Menzies. Hope because the post war spike(local, european refugees and £10 pom’s) getting flatter by natural attrition, immigration and a spendthrift youth.
“Will the Coalition lead us into a recession, asks John Kelly?”
With CERTAINTY…… in fact, there can be no other outcome but a depression in a world that can no longer grow as we reach Limits to Growth…….
Joe Hockey said “And we have already pledged, Tony Abbott has pledged and we will deliver, cost benefit analyses of individual proposals that are going to ensure that we do not waste taxpayers’ money but also provide a platform for private investment.”
Could someone point me to the cost benefit analysis for Direct Action, or Paid Parental Leave, or Fraudband?
Can someone show me the benefit of cutting 4.6 billion from urban rail while spending 11.5 billion on roads to carry MORE cars?
Can someone point me to the costings for Operation Sovereign Borders and maintaining offshore detention?
Where will the 5.2 billion you budgeted on as savings from cuts to the public service come from now? (and I am kinda surprised that you didn’t read the budget and now claim the consequences of the efficiency dividend come as a total surprise….then again you rarely look as far as consequences do you).
We are forgoing revenue from the carbon tax, the mining tax, the fringe benefits tax on cars, the tax on wealthy superannuation accounts, and a 1.5% cut to company tax.
To help pay for this we are cutting the schoolkids bonus, the superannuation co-contribution for low income earners, foreign aid, research grants, funding for charities and community projects, legal aid for Indigenous people….I could go on but that is sufficient to show the trend.
Then we have the much heralded Commission of Audit which has been given the princely sum of ONE million dollars to review the full gamut of government spending and report back in a few months. The one million will barely pay the $1500 a day that the 5 person panel each receive and to think this can be completed in a few months is laughable. From the make-up of the panel I would suggest that they already have decided on their recommendations.
“The leader of the Commission of Audit will be Business Council of Australia head Tony Shepherd, assisted by the BCA’s chief economist. Other representatives include former Liberal Minister Amanda Vanstone and Peter Boxall a former bureaucrat and chief-of-staff to Peter Costello. It has subsequently been revealed that Mr Shepherd is chairman of Transfield Services, a company that has won hundreds of millions of dollars in outsourced government contracts.
The overall picture of this review is of a very small pool of people examining institutions that touch the lives of all Australians. There is no representation from workers, not-for-profits or other groups outside a narrow range of business interests. The BCA does not even represent small or medium-sized businesses, it is made up banks and mining companies.”
Hockey already owns the debt and budget, due to the actions he has taken in the last 69 days., He has added greatly to the debt in that time.
Kaye, that is the trouble, the figures do not add up.
The waste they predicted, will not be found, as they got it wrong.
The proof of the pudding is in the eating.
One has to have the necessary ingredients, and them mix it, before cooking.
For this government, the ingredients that they said where there for the picking, were long picked by Labor. The tree is bare.
No pudding to eat, I suspect.
One should never believe their own spin, or in this government case, lies.
The truth is, Labor ran a tight ship, with little unnecessary baggage abroad.
PeterF :
Precisely – the MRRT could start generating some respectable tax this year and it is one of the most progressive taxes to have been introduced as it was originally designed to replace the royalties paid by mining companies to the states which are regressive, applying to volumes and not take into account revenues or profits.
Hockey is going to need to generate revenue from new taxes, possibly, it has been suggested, the GST applying to fresh food which is regressive in that it disproportionately impacts families and those on low incomes.
And, he is going to have to find $5.5 billion to pay for Abbott’s Paid Parental Leave scheme which, whilst imposing a tax on major employers will be revenue neutral as Abbott has promised an equivalent company tax cut.
Good luck Joe but whatever you do don’t blame Labor.
Wonder if we can end up with stagnation again. The worse of all words.
Well we know, that Howard, is still in the background, pulling strings.
He was the creator of those horrific years. that left Labor the greatest economy deficit to deal with.
Yes, stagnation is not pretty.
Even the panel that Abbott has set up to look at the needs of our indigenous people has been loaded with powerful business leaders, that want free access to their lands.
That see their land rights, as hindering their access to rich mineral lands.
It is as if Abbott wants to take up where Howard was forced to abandon. The dismantling what Keating gave, the ability for the indigenous people to own and control their own lands.
This was the main aim of the Intervention under Bough and Howard.
@ Fed up
“It is as if Abbott wants to take up where Howard was forced to abandon. ”
Not “as if” definitely pick up where Howard left off and cement inequity permanently into Australia.
In addition to Kaye Lee’s list.
Why is it the most vulbernalbe of the community being expected to pick up the tab?
GST on fresh fruit and vegetables.
Either work till you drop or on the Newstart pittance (because employers are not interested in employing people over 50) till a person is 70. No problem with working on indefinitely if one is well and has a decent job where they are well treated. However, how long can care industry workers work for? Labourers? Hospitality staff? Cleaners? Tradies?
Cuts to super top-up to low-income people, contrasted with raising benefits to top 10 percent of workers.
http://www.smh.com.au/federal-politics/political-opinion/a-superannuation-blow-for-lowincome-earners-20131030-2wgzj.html
State funded child care scheme only beneficial to high income mothers.
I cannot believe anyone (apart from the wealthy 10%) voted for these self serving elitist bastards.
Perhaps when the going gets really tough “Rabbott” can trot his daughters out again!
It would appear as though there are plenty of thoughts and suggestions out there, however, it is only people like John Kelly and the like who have touched on credible suggestions. It is now upto our bastions of economics (long-visionary) to look over and seek long-term
answers, not more retorech. Hopefully, their guidance will steer us down the path to a secure future.
Isn’t it wonderful when opinions are irrelevant and the facts are the facts.Another good job Kaye.Thank you.
The idiocy of this government just keeps on coming.
“Scrapping the $10 billion Clean Energy Finance Corp will strip between $110 million and $171 million a year from the federal budget rather than save the government money, the fund will tell a Senate inquiry today.
The fund uses cheap government borrowing rates to lend money for clean energy and energy saving projects.
“The facts are that closing the CEFC will not save money, but come at [a] budgetary cost and end a vital public policy tool that will provide long-term benefits across the economy,” the CEFC said in its submission released before the inquiry.
The budget cost of scrapping the fund excludes the costs of redundancies for staff, with all jobs expected to go.
“The loss of this adaptive and committed group of skilled professionals from the public sector will be significant and regrettable,” the fund said.
The Coalition dubbed the CEFC a “giant green hedge fund” while in opposition and vowed to scrap it along with the carbon price once in office. It is understood that meetings between the fund’s management and Treasurer Joe Hockey failed to change his stance.
Fairfax Media sought comment from Mr Hockey’s office without success.”