Judith Sloan tells Palmer to pull his head in, shows Labor up to be the liars that they are over the debt, and gives the Abbott government some good advice on bringing the budget back to surplus: #auspol #BSWNBPM #sameoldlabor #springst #PUP -FOR a person who supposedly has some business acumen, Clive Palmer talks a lot of tommyrot about the country’s budget position. I guess that’s what happens when someone decides to become a populist politician who will never have to manage the challenge of reining in government spending and raising sufficient revenue in an efficient and equitable manner. Palmer also fancies himself as something of a historian, telling us all the Menzies government was happy to operate with government debt of about 40 per cent of gross domestic product. This is a significant misrepresentation of the facts. Gross government debt had peaked in 1946 at 120 per cent of GDP. The debt to finance our war effort had been raised domestically mainly through the issuing of war savings certificates. After the war, successive governments worked consistently to pay down the debt through tight fiscal policy. A dose of inflation in the early 1970s finished the job with government debt reaching 8 per cent of GDP in 1974. The idea the Menzies government was perfectly happy to live with high levels of government debt could not be further from the truth; in every year of his term in office between 1949 and 1966, government debt was lower than the year before. The bottom line is Palmer should shut up when it comes to the history of government debt in this country. The release of the final budget position for 2013-14, Wayne Swan’s swansong, caused barely a ripple in the media or among the chattering classes. Whereas the deficit was initially projected to be $18 billion (mind you, once upon a time, Swan had sworn on a stack of Labor Party rule books that the budget would be comfortably in surplus by this time), the final figure was close to $50bn. To be sure, there can be some argy-bargy about whether Joe Hockey’s decision to recapitalise the Reserve Bank to the tune of $8.8bn should be included in the final figure when assessing just how hopeless was Labor’s record of fiscal management. But apart from the obvious need to rebuild the bank’s balance sheet after Swan’s sorties, taxpayers should be rewarded with extra dividends down the track as a result of the falling dollar. The Labor Party continues to run the line — a line that good ol’ Clive seems to lap up — that it was always a revenue issue, never a spending issue. The problem with this feint is twofold. First, the figures tell another story. When Labor came to office, government spending was running at 22.6 per cent of GDP. It jumped up to 25.7 per cent in 2008-09 and increased again in 2009-10 to 26.3 per cent. In its last full year in office, the figure was 26.4 per cent. At the beginning of Labor’s term, spending was running at $267bn; at the end, it was running at over $400bn. In anyone’s books, this is a spending problem. The second issue relates to the need to adjust spending according to revenue; to cut your cloth according to your means. Notwithstanding some heroic and stunningly unsuccessful attempts to raise more revenue (think mining tax, carbon tax with excessive compensation), the economic situation was never going to bear the revenue fruit of the early part of the 2000s. Just this week, we had more hysterical and inaccurate commentary along the “it’s revenue, not spending” line. Sponsored by the trade union United Voice (which obtained a number of special favours from the Labor government), the analysis purports to demonstrate Australian companies are failing to pay their full and fair rate of tax. Riddled with inaccuracies, misunderstandings and errors, the conclusion of the report is that Australian companies have paid $80bn less tax than the authors regard as right and proper. Not surprisingly, the facts that company tax as a percentage of GDP is now higher than it was 10 years ago or that this ratio for Australia is the second highest in the OECD are not mentioned in the report. Without any real knowledge or comprehension of the tax codes that apply to companies, the message (which was given prominent coverage by the ABC and Fairfax) is our budget woes can be solved by simply making companies pay more tax. It is an uninformed and unhelpful message the government can ignore. So where does the Treasurer go from here in the context of Palmer and the Labor Party living in some sort of fiscal fool’s paradise? Recall that in the May budget, a deficit of $30bn was projected for this year, falling to $17bn in 2015-16 and again in 2016-17 to $11bn. By the end of the forward estimates period in 2017-18, the budget deficit was forecast to be a mere $3bn. The reality is these figures are now a chimera, with some of the underpinning budget measures already knocked off by the Senate and others with an uncertain conclusion. Mind you, some of the measures were better thought out than others. Most of the changes to the social security arrangements make sense, save for the six-month wait for assistance for those under the age of 30. By failing to provide the regulatory flexibility that would allow young people to contract into the labour market, it is simply too harsh to expect them to fend for themselves for half a year. The $7 medical co-payment had too many moving parts and covered radiology and pathology services, in addition to visits to the general practitioner. A simpler move would be to remove the bulk-billing incentive that exists in the Medical Benefits Schedule, which would still save the government money while leaving GPs free to decide what to charge different patients. The government also should shelve its ill-considered plan for a gigantic, government-run medical research fund. When it comes to the reforms to higher education, again it is a case of too many moving parts. Changing the interest rate to be charged on HELP debt could be left to another day (but bear in mind the cost to taxpayers of this scheme is escalating), but there is sense in pushing on with fee deregulation and trimming tuition subsidies. The bottom line of all this, even on a best-case scenario for the government, is the budget deficit will exceed the projected $30bn this financial year by a wide margin. The projections for subsequent years also will not be met. The government needs to return to the drawing board to ensure the timing of fiscal consolidation can mirror that laid down in this year’s budget. Clearly, the paid parental leave scheme has to go (the funding is hiding in the contingency reserve). But there are other sensible changes that need to be considered to return the budget to surplus and pay down government debt — just as Robert Menzies did.- theaustralian.au/opinion/columnists/clive-palmer-needs-to-stop-talking-tommyrot-about-debt/story-fnbkvnk7-1227079493221
Posted on: Sat, 04 Oct 2014 00:19:09 +0000
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