The Kouk wants Joe Hockey to slash spending:
The previous government did this with each budget and economic update. In the last four years, the average growth in real government spending was 1.3 per cent, well below the long run average growth rate of 3 per cent. But even with this restraint, it failed on the political game as it failed to bring home a surplus in 2012-13 because of unexpectedly soft economic growth, a surprisingly low inflation rate and unanticipated resilience in the Australian dollar, which undermined the revenue side of the budget.
Errr, that’s one way to look at it. Another is that it cut too hard, too fast as the great terms of trade correction got under way and then persisted. Treasurer Swan was exceedingly slow recognise changing circumstances and instead of adapting lambasted the nation for being a doomster even as his own huge Budget misses undermined confidence.
Kouk makes more sense when he discusses preparing the population for tougher times ahead:
Spending was also hard to wind back given the sense of entitlement that is increasingly entrenched for many middle and high income earners. Joe Hockey has been a strong voice in breaking this wasteful, unfair and unnecessary spending and he now has his chance to put words into action. I hope he cuts some of these unfair payments and cuts hard.
But then he reckons:
If the economic outlook is favourable, as the 2014-15 budget is framed, the government should take an aggressive approach to decent and fair spending cuts. As things stand, the outlook for 2014 is favourable, so it appears there will be a heavy-handed approach to cuts in government spending in the budget in May.
Of course, there are risks ahead. The US may not sustain its recovery and as always there are concerns that China has a potentially toxic cocktail of bad debts, a property bubble and an investment overhang.
With respect, the outlook for 2014 is not favourable. It includes the greatest drawdown in Australian business investment in living memory, which does not rate a mention for some reason:
In this environment, if the government is going to cut entitlement spending (as it should) then it should replace that spending with productivity enhancing infrastructure investment to boost competitiveness for a net result that does not increase fiscal drag. Either that, or it should boost infrastructure spending even more.
Following the Kouk’s advice will, in all probability, lead to precisely the same outcome that afflicted Treasurer Swan.
