Joe outlines Budget pain for all except the rich

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By Leith van Onselen

Joe Hockey has outlined the Government’s program of expenditure cuts in a bid to return the Federal Budget to surplus.

There will be tighter means testing of welfare benefits, along with co-payments for some government services (e.g. GP visits), all of which are designed to reduce real spending growth to 1.75% per annum, eradicate the budget deficit in five years, and deliver a surplus equivalent to 1% of GDP by 2023-24. It’s a monumental goal, which will be without precedent, according to Fairfax’s Peter Martin:

By way of comparison spending grew 7.6 per cent per year above inflation in the 1960s, 6.7 per cent above inflation in the 1970s, 3 per cent above in the 1980s, 4 per cent above in the 1990s and 4.4 per cent above in the 2000s.

The Australian’s David Uren provides further context of the mammoth Budget repair task ahead:

Delivering Joe Hockey’s surplus of 1 per cent of GDP will, on the Commission of Audit’s numbers, require a roll-back of the federal government’s weight in the economy of almost 10 per cent.

To put that into context, the required cut is equivalent to the combined total of all current federal spending on schools, universities, hospitals and childcare.

Treasurer Hockey has identified pensions, healthcare, welfare payments, education and defence spending as key targets for cuts, since they are the fastest growing areas of expenditure. According to The AFR, “total spending in these areas would grow from $409 billion a year now to $686 billion a year by 2023-24”.

The Aged Pension and associated seniors benefits are looking particularly vulnerable. The cost of the Pension alone is forecast to grow from $39.5 billion this year to $72.3 billion in a decade. And Hockey rightly believes that aged welfare can be better targeted to those in genuine need. According to Hockey:

The $40bn we spend on income support through the age pension is much more than we spend on defence, or hospitals or schools each year. It is our single biggest spending program,” he said, pointing out that between 2010 and 2050 the number of people age 65 to 84 is expected to quadruple.

And the vast majority of over-65s receive some form of government payment.

“Of Australians over the age of 65, four out of five receive a full or part pension. If we also take into account the concessionary health card, then only 14% of older Australians receive no government payments”…

The seniors health card is available to pensioner couples with an income $80,000 a year or singles with an income of $50,000 but has no assets test.

And without cutbacks to expenditure, the Budget deficit will balloon and working Australians will be required to pay much more tax, damaging the economy:

If no tax cuts were delivered, bracket creep would “have a serious impact on Australia’s economic growth prospects’’. Mr Hockey said without tax cuts, 3 million more workers would have taxable income exceeding $80,000 and be paying 45¢ in the dollar, up from 37¢ they now pay…

“In the absence of personal ­income tax cuts, over time ­Australians will face an increasing tax burden as inflation gradually pulls them into higher tax brackets. Those who may oppose the hard savings measures nec­essary to deliver genuine fiscal repair would do well to recognise the highly regressive nature of fiscal drag. The three million taxpayers affected will not be High Street executives on the top marginal rate, but hard working wage earners on Main Street.”

While I agree with Hockey that the ageing of Australia’s population and rising old-aged dependency requires some cutbacks in government programs and tighter means testing to ensure that welfare only flows to those in genuine need, I am amazed that the Coalition has totally ignored the elephant in the Budget room: Australia’s world-leading tax expenditures.

One of the key reasons behind Australia’s growing Budget black hole is that we lose a significant share of revenue through tax concessions. In fact, a report released early this year by the IMF revealed that Australia has the highest tax expenditures in the OECD when measured against GDP (see next chart).

ScreenHunter_1051 Jan. 30 17.39

With tax expenditures defined by the IMF as:

…government revenues foregone as a result of differential, or preferential, treatment of specific sectors, activities, regions, or agents. They can take many forms, including allowances (deductions from the base), exemptions (exclusions from the base), rate relief (lower rates), credits (reductions in liability) and tax deferrals (postponing payments).

The IMF estimates that tax expenditures reduce Australian government revenue by around 8% of GDP – theoretically enough to eliminate Australia’s Budget deficit. In fact, the huge loss of revenues to tax concessions explains why Australia simultaneously has some of the highest personal and company taxes in the world, yet is also one of the lowest taxing countries in the OECD – a contradiction in terms.

One of the biggest and most egregious tax expenditure of all are superannuation concessions, which already cost nearly as much as the Aged Pension ($44.8 billion compared to $44.9 billion in age pension), but are also growing more rapidly, meaning they will become a bigger Budget burden over time.

To add insult to injury, superannuation concessions are very poorly targeted, with higher income earners receiving the lion’s share of concessions when they contribute to super, whereas lower income earners actually incur a tax penalty (see below table).

ScreenHunter_151 Nov. 07 09.11

As noted by John Hewson yesterday:

As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.

So, by providing massive taxation concessions to those on the highest incomes, the Budget is losing billions of dollars of forgone revenue. The super system is also failing to relieve pressure on the Aged Pension, since those that are most likely to need it – lower and middle income earners – receive minimal (if any) concessions, which both hinders their ability to build-up a retirement nest egg and discourages them from making additional contributions.

Put simply, superannuation is an expensive rort that must be stopped, either by winding-back concessions to higher income earners, or as I have advocated previously, providing all tax payers with the same concession (e.g. 15%).

A related issue is that superannuation can be accessed well before the Aged Pension (i.e. tax free at 60) – a problem that will be exacerbated if the Pension access age is pushed-out to 70, but the superannuation access age remains the same.

Genuine entitlement reform is about shared sacrifice, but with those deriving the greatest benefits and most able to look after themselves bearing the largest cuts. Given that superannuation concessions are such a large drain on the Budget, and overwhelmingly favour the wealthy, it is lamentable that Government has refused to include them in its cutting program.

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Comments

    • That’s right. Get a fund going of us plebs to outlobby these treasonous grubs. Or revolution is inevitable.

    • That was an interesting discussion. While not a monarchist I’ve always admired the sense of duty and pride in the role that the Queen has shown. Yes, she was literally born to rule, but she tried to do it in the best way possible. That is quite different to a few others who believe that they were born to rule.

      • That’s right does anyone serious believe any of these career politicians have the long-term interest of the country at heart, or just their next political career move and their ambition.

        Gen Y clearly doesn’t and they’d be right.

      • migtronixMEMBER

        I couldn’t disagree more about Elizabeth R, she has 0 interest in England – they’re battenbergs for crying out loud – the Diana incident should have left no one in doubt, and the decades of horror in Northern Ireland is on her too

      • And Mig would you put our career party politicians as any more useful than a bunch of crony oligarch monarchs?

        My point is that a well run monarchy will take the power back from the party hacks lickety split at this rate.

      • AJ your ‘lickety split’ rhymes nicely with the current ‘Piketty hit’ and a return to the gilded age – perhaps your monarchical meme has legs 😉

      • migtronixMEMBER

        @aj are you asking me to beg the question whether a well run monarchy will perform better than a well run republic or a poorly managed republic?

        I think the current oligarchs are running things with the blessing of — or at least tacit acknowledgment — the Sovereign sitting in London.

      • I wouldn’t be so sure Mig. The unparalleled mythical Stephen Maturin gets it right after many years contemplating the carnage of Bonaparte:

        “Can you really maintain that the hereditary king cuts a very shining figure?”

        “I cannot. Nor is that to the point: the person, unless he be extraordinarily good or extraordinarily bad, is of no importance. It is the living, moving, procreating, sometimes speaking symbol that counts.”

        “But surely mere birth without any necessary merit is illogical?”

        “Certainly, and that is its great merit. Man is a deeply illogical being, and must be ruled illogically. Whatever that frigid prig Bentham may say, there are innumerable motives that have nothing to do with utility. In good utilitarian logic, a man does not sell all his goods to go crusading, nor does he build cathedrals; still less does he write verse. There are countless pieties without a name that find their focus in a crown. It is as well, I grant you, that the family should have worn it beyond the memory of man; for your recent creations do not answer – they are nothing in comparison of your priest-king, whose merit is irrelevant, whose place cannot be disputed, nor made the subject of a recurring vote.”

        Which brings me to my next contemplation. Rule by meritocracy has become as despotic, cruel and unforgiving as rule with a hereditary base. And often the hereditary nature of the meritocratic rule is hidden, as it is with the Labor party where they share all the jobs in a nice nepotistic way and leave the meritocracy to the marketing and others.

      • @ aj

        I think you raise some excellent points here. It is easy to forget just how incestuous the party system has become. When you take into account rusted-on safe seats, manipulation of preferences, back room deals, and halo effects, we’re not really a world away from a hereditary-like form of rule.

        I’m reminded of some older folk during my younger years talking up the benefits of a benevolent dictatorship.

        Unfortunately the “benevolent” bit was the problem, and perhaps even more so in these days of shameless self-interest.

    • Strange Economics

      Also how about get rid of the private health insurance subsidy – all higher income people keep the health insurance anyway to avoid the additional 1% tax levy if uncovered. This is the health insurer seller grant (like the FHB grants is the first home owner seller grant).

      Why is all the pension reductions on the income of the pensioners, and none on preventing the rich getting it. 86% of Australia get some pension ! So the genuine lower income earners will get less, while the rich keep it.

      And remove (or limit to $1million) the family home from the means test. Easiest way is to drop the asset limit to 100k for home owners generally, but better to include the value of the house.

    • Whatever planet are you on, dude?

      We’re past ZIRP for quite some time now. I can tell you that as a saver – my bank account is raped each an every day to the advantage of banks and speculators!

      That being said – I’m still not taking the bait!

      • He means the RBA will have to do the heavy lifting that the government won’t, so lower rates will be baked into the equation if Hockey delivers an austerity budget.

      • Dude, I’m from planet Earth.

        Here on planet earth, ZIRP means Zero Interest Rate Policy (ZIRP). Further, it is generally accepted here Zero = 0. For mrs on this topic see link below.
        http://en.wikipedia.org/wiki/0_(number)

        Clearly where you are from Zero = 2.5%. I think that is very interesting.

        Tell me, what does 10 equal on your planet?

      • @b_b

        Ino is talking about real interest rates… The interest rate after deflating the nominal rate with inflation.

      • Yes – but it was clear I was talking about nominal interest rates.

        There was no need to act like that.

      • migtronixMEMBER

        I agree with b_b we can’t be past ZIRP as the P stands for policy not potential

    • migtronixMEMBER

      That’s what I was going to say, look what’s happened to rates as the % of GDP gov spending has dropped.

      • I agree that we are headed for ZIRP.
        It’s just a question of when.
        We are all about debt based economic growth. It’s good for the government and good for the banks. But if the government won’t take on more debt then the RBA will induce the private sector to do so by reducing rates.
        The main problem for the RBA would be inflation. And despite the major deflationary pressures in our system (cheap stuff from overseas, improving technology, unemployment), we still seem to be getting inflation. Could we achieve stagflation? What would the RBA do then?
        It should be a fine old mess within another few years!

      • Parrott,

        The government does not “take on debt”. The government spends first, creating new dollars which adds to private sector savings.

        Then, central Bank actions, co-ordinated with the AOFM use bonds to drain the new liquidity out of the banking system – so the RBA can maintain a stable interest rate.

      • I know people in the UK with a 1.25% mortgage.

        How low can we go?

        I guess we will find out, meanwhile there’s not a sniff of me locking in my variable rate anytime soon.

      • At ZIRP, I think the variable rate will get to 2.0% for the best credit with a SVR closer to 3.0%.

        I think deposit holders will PAY 0.1%-0.25% for accounting keeping services.

      • b_b, yeah Ino’s first line was rude.

        Everyone on this thread: ZIRP causes deflation.

        Even the gradual reduction to ZIRP caused deflation.

      • pfh,

        that paper gives an interesting history on monetary and debt issuance in australia.

        It also covers some of the basics of CB intervention – i.e.: reserve (ESA) management.

        But to me, it does not try to explain how deficits are financed today. To do that, one must also take into account the private banks – who receive the funding from the treasury, so they have the funds to buy the bonds.

        The RBA, via its open market operations, buys and sells CGS under their repo facility to facilitate this flow so as to maintain its target interest rate policy.

        I have written a full paper on this for flying fox, but the mods would not let me post it.

      • b_b

        I am not sure what you are saying has changed.

        The current description of OMOs and ES accounts on the RBA website seem consistent with that paper

        http://www.rba.gov.au/mkt-operations/dom-mkt-oper.html

        The RBA OMOs are only designed to influence one thing – the overnight rate for the small loans required to clear the daily ES balances.

        They are not funding anything beyond that objective.

        The diagram showing the large spike around the GFC shows that generally the RBA is just tweaking and ES balances are usually very low.

        Keep in mind that as between the banks they net to zero.

      • pfh – you are so close you can almost taste it.

        So let me ask you this. When the AOFM announces it will auction $500M of Bonds next week, and the current ESA balances are such that the cash rate is 2.5% – what will the RBA’s OMO be during the week?

      • b_b

        I agree that the RBA has to manage the lumpy nature of an AOFM CSG issue to maintain the target rate but that is not the same as financing a deficit.

        The RBA does not supply the money to the banks to buy the CSG.

        It merely managing the impact of their puchase which in your example will be a $500m credit to the govt ES account and debits to bank ES accounts totalling $500m.

        On the assumption that the govt actually spends what it raises the stream of debits to the govt ES account will soon equal the initial $500M credit to the govt ES account.

  1. is anyone surprised?

    we elected world’s the most idealogical neoliberals into government and we are surprised when they cut everything from poor and give it to the rich?

    and I know Australians will not learn anything from this painful experience, because our propaganda machine is still promising everyone to become rich with no work – with just a little bit of “debt slavery” rent seeking investments

    I lived in few places around the world but I never saw greed spread so wide among ordinary population.

    • Until there’s a crash, if and when, they *are* getting rich. Labor had a chance to nip it in the bud and yet made it so much worse. So now why would anyone have the will to be reasonable? Bring on the PPL, cut from the inane and treasonous ABC, and whatever other bastardry I might like. I’m going to need as much money as possible to pay possibly “lefty” dickheads for their $1m property.

    • Let me fix that for you doctorX.

      …the world’s most ideological neoliberal luddites…

      And don’t forget the 457 and broader wave of immigration, because that’s the only way left to fake growth, kill unions and enrich their mates in one hit.

      This is worse than a disgrace. In France they’d be rioting in the streets.

      The vast majority will just take it lying down while watching Masterchef and masturbating over house porn…

  2. Just watched Joe on ABC TV.

    His main deduction is that all our bills are growing much faster than GDP… welcome to our world Joe.

    Many of us here believe that the CPI number used as the deflator to work out the GDP number is fake, and now this has come back to bite economists because they’ve all been planning with the wrong numbers for 30 years.

    Apparently people can fake their lives for only a few years before they are found out, but it takes the Australian Bureau of Statistics 30 years.

    • The Government bills are going faster than GDP because the non-government sector has a desire to net save AUD.

      Nothing Joe is proposing will discourage the desire to save – in fact as the economy slows, the desire to save will increase – increasing the budget deficit (via lower tax receipts and social security payments).

      Buy Bonds.

      • Government economists have been planning on GDP numbers of between 2% to 5% the past 30 years instead of the real GDP of 0% to 3% because the inflation number used as deflator is a fake.

        After 30 years of this, suddenly government realises it doesn’t add up, because they’ve been kidding themselves for all those years.

      • Buy CDS?

        Why? Do you expect the Australian Government to default on a currency that only it can issue?

      • Private sector CDS – fair enough.

        I couldn’t be bothered doing the credit work, and find a IB to give me the required volume and terms.

        Much easier to buy long duration Govies (I like the 4-27’s and 4-29’s). A 1-2% yield re rate = 14-24% total return. Not bad in this environment.

  3. I was actually impressed by Joe. He talked generational equity and outlined how the diminishing pool of workers can not be left with the burden. I read between the lines and now I do expect some major changes to the age pension.. The proof will be in the budget. I will wait and see before passing final judgement.

  4. notsofastMEMBER

    I hope the Senate blocks supply.

    Send it back to the people so they can have their say.

    • I like your thinking!

      Unfortunately the great majority of Australian’s are stupid enough to think we need to balance the budget measured in fiat.

      You know, “if I ran my business / household like that I would be broke blah blah …”

      • notsofastMEMBER

        I agree. Private debt is the problem in Australia, not Government Debt.

        But I also acknowledge with the ageing of the Australian population changes must be made to our retirement system and pension system to reduce costs. As it stands now it is unaffordable and unsustainable in the medium and longer term. For example I don’t have a problem with increasing the pension age to 70, in incremental increases from say 2023 to 2030.

        My angst against the budget is that we hear that the pain has to be shared, when in fact there is little sharing. Any reform of the Pension must also include reform of Superannuation concessions.

        It must be acknowledged that the very generous changes made to Superannuation concessions during the Howard and Costello years are unsustainable. If this is done and changes are made to significantly reduce this concession then the changes to the pension can be minimised.

      • i’m not sure what you mean by unsustainable.

        The Australian Government will never have a problem with “funding” so long as we use Aussie dollars.

        The bigger issue is availability of resources to take care of the ageing population.

        For example, creating a “sustainable health care system” does not require a tax. It requires a stready stream of doctors, nurses, equiptment and beds. Yet while talking about the strains on the system, the same government is willing to cut university funding.

        Bad economic policy / commentary will lead to a decline in living standards for all.

      • b_b I still don’t understand how the Govt can just print as much as they want to fund anything and everything without driving up inflation and tanking all the currency exchange rates. Can you explain this to me?

      • Jason,

        Every serious MMTer will tell you money is not wealth. It is a tool used to facilitate trade.

        MMTer’s believe the real constraint is the availability of resources (labour, materials, energy, food, etc) not the availability of money. So excessive government spending (even in surplus year) while the private sector is booming can inflationary (Howard-Costello 2005-2007). Most MMTers would have called for a bigger surplus in 2006-2007.

        But when there is excess capacity in the economy (usually defined by unemployment), there is scope to net spend (which is actually printing), lift output, and maintain price stability (MV = PQ)..

        No MMTer believes deficits are always good or surpluses are always bad. All MMTer’s know the real constrain is not money – but resources. Or what the wider public would define as inflation.

      • @ Mig,

        There are some pretty good MMT criticisms out there (MR / PragCap is probably the best). But the one you linked is one of the worst i have read.

        The guy does not even understand that when stocks are bought, they are sold at the same time (i.e.: the amount of stocks or bonds on issues does not change if Social security was privatised). Really basic stuff.

        If you want some good criticism of MMT try this.
        http://pragcap.com/mmt-critique

  5. Given that superannuation concessions are such a large drain on the Budget, and overwhelmingly favour the wealthy, it is lamentable that Government has refused to include them in its cutting program.

    Lamentable but entirely predictable. The public have been duped by the LNP, again. It’s back to the 1920’s and institutionalised hardship.

  6. Pity there is no reform in housing affordability or negative gearing. It will be a bad budget for poor and middle-income earners as expected.

    Rich will benefit more, coming out of this budget.

  7. The budget austerity agenda items named thus far do need be addressed as too do numerous other measures – super being but one.

    Has it been definitively absented from the coming budget? Perhaps it and other measures are slated for 2015?

    Nonetheless a blessing to have Hockey’s long term outlook guiding the budget process even if imperfect in scope. We’ve just had six years of ALP budgetary bastardisation and look where that got us !

    • ” We’ve just had six years of ALP budgetary bastardisation and look where that got us !”

      Yep, one of the world’s fastest growing economies based on lots of additional government debt.

      I think it will be easy for Hockey to either (a) move the budget to a surplus or (b) keep the economy growing at or above trend pace.

      I think it will be very difficult (if not impossible) to do both. If he can, I’ll be very surprised and very impressed.

      • One of world’s fast growing economies based on the biggest mining investment boom in our history and record terms of trade.

        I agree the shift to high debt was typical Labor finesse.

      • “I agree the shift to high debt was typical Labor finesse.”

        Yes, it was a switch away from typical Liberal private debt finesse.

  8. “superannuation is an expensive rort that must be stopped” – I know you are only referencing the tax concession, but as someone who had no say in voting on this superannuation system (being too young) I feel as if the whole thing is a rort and people should have the option to opt out of this corrupt system.

    If I could sign some sort of waiver to say I will never access the pension system (as if there will even be one when I am 65 – or freaking 80 before I get to retire if they keep increasing the retirement age) then be able to access my own money to put it to better use right now, I would happily do that.

    The problem is that policies seem to be created based on the lowest common denominator, which penalises people who actually know what they are doing.

    • migtronixMEMBER

      Worse than that imo, the fact you can’t opt out means over time more and more people join the LCD.

      Is there a way to have the super monies go into an escrow instead of into the fin world?

    • ILB

      There was never an election fought over superannuation.

      Hawke/Keating government brought it in to almost universal acceptance

      But nearly every year since, there has been a change to super such that it hardly resembles the original.

    • Joe made mention that 80% will require full or part pensions throught to 2050, despite our Super. I think he was saying Super changes are definitely on the table.

  9. agree that super is a rort, but its the only rort I have working for me at the moment – elsewhere i get crucified by the tax system so nice to get something back. Sadly i think the writing is on the wall for concessions, and i have no doubt it will be removed just as i pay the mortgage off and get myself into a position to make voluntary contributions (which will be about the time the last boomer has retired and no longer needs it).

    …. and of course, no one will touch negative gearing. there’s 5 billion a year easily recouped, should cover a few jets.

    • NG will go as the boomers retire on mass. They will no longer need it, like a free higer education. And once again, the younger generation will not get the same benefits the boomers did. Joe made mention of this fact that we can not expect the younger generations to make the biggest sacrifices to support the aged.

    • isn’t tax the actual rort ?

      I don’t think any of us actually have a say and we face the threat of imprisonment and having our property taken from us if we don’t want to pay.

  10. hzubrica73MEMBER

    There’s no way of stopping the age pension outlay from increasing, people will continue to age.

    But at least Hockey can reign it in a bit by at least removing the indexation to Male total average weekly earnings or hold increases to CPI.

    Wages growth has been much higher than CPI. There’s no reason to keep the maintain max couple rate benchmarked to 41.76% of MTAWE.

  11. Can you *please* add another row to that table showing that the tax concession for those earning over $300,000 (adjusted income) is actually only 15% (it’s actually 16.5% because of the medicare levy but whatevs). Please see the Div 293 tax introduced this year. The biggest tax concessions don’t go to the ‘highest earners’, they go to the second highest earners.

    • Hang on, people earning over 300k still get the benefit of the 180k – 300K bracket, no?

      In any case, someone taking home a third of a million or more a year does not need ANY tax concessions to save for retirement. They could beat my super total from a year of after tax saving at that level.

      • No they don’t get that benefit. The way it works is you pay 46.5% in your own name if you tax the money as income, whereas if you put the money into super you pay 15%… that’s why there is a tax saving of 30% for people between 180,000 and 300,000. Once you get over $300,000 they say ‘hang on that’s whack. You will get a Div 293 tax which taxes you at 15% extra on your contributions.

        So if someone with adjusted income of $290,000 puts $25,000 into super they pay $3750 in contributions tax and save $11,625 income tax = total tax saving $7875. If someone on $300,001 does the same thing they have exactly the same figures… but then get an extra 15% Div 293 tax on their contributions… so instead of their final tax saving being $7875 their tax saving is $4125.

        I don’t think they should get any tax concessions either… I just like information to be correct.

  12. reusachtigeMEMBER

    LOL… that’s what poor people get for being poor. About time they got out there and got rich.

    • Hi reusachtige,

      Most rich people come from poor backgrounds : eg John Howard, Bob Hawke,Julia Gillard, Paul Keating etc

      You push yourself a lot harder if you have nothing to begin with…ask any student…

      Your photo gives the impression of a rich oldie… Probably no need to explain all this to you 😀

      • migtronixMEMBER

        Doubtful, most poor people come from poor backgrounds not rich so the soliloquy doesn’t hold:

        People from poor backgrounds are motivated,
        Motivated people are productive,
        Greater production means greater wealth

  13. Politics is the art of the possible. No Government is going to implement policy changes that get it thrown out of office.

    Changes that disadvantage pensioners (such as increasing the retirement age), changes to superannuation (reduced input tax concessions, higher preservation age etc) and changes to negative gearing will hit older generations much harder and they are the ones that currently have the voting power.

    Anyway, this could all be academic if Labor and the Greens block it in the Senate – “the federal Opposition warned it would block in the Senate any budget measures that constituted a broken promise.”

  14. Looks to me like the government has rather effectively managed to convince the public at large that the OAPs are our biggest problem, and in the meantime, the speculators continue to get their negative gearing and CGT concessions on their properties, and we will pay people to have babies to the tune of $5B+ a year. Good grief.

    What about making changes to Super, so the lowest income people get concessions? After all, they’re the ones most likely to require a pension after they retire as it stands, the higher income earners aren’t. Super’s become nothing but a f’ing joke anyway, existing to feed the bloated tick that is our “wealth management” industry.

  15. Disappointed that MB continues to perpetuate the myth of budget black holes and suggestion that all deficits are bad.

    If all of Hockey’s agenda goes through say hello economic downturn – if the economy was booming I would be saying fair enough

    Business isn’t providing any economic support, government is removing any economic support – there’s nothing countercyclical there – that’s another crash, a recession, at the very least an economic downturn.

    Then comes the attack on the job seekers but with no job creation then they get punished too.

    Then there is the rise of a few charities who can’t meet demand and hopefully well before then there is election which gets rid of this monstrosity.

    Hockey’s position is valid in a booming economy but not in the current circumstances despite a very modest uptick in the economy across the board.

    • +1

      It is hard to be too critical of Hockey. The public discussion (including MB) is all about “fixing the budget”, and “sustainable spending”.

      If Hockey came out with a plan to increase spending, cut taxes and (god forbid) a jobs growth target, he would get laughed out of the Chamber.

      A proper economic discussion has to happen outside of the mainstream first. Sadly it does not happen here.

    • So the gov’t running deficits is not really happening, and there is no budget black hole ?

      its no good just denying reality.

      Not all deficits are bad. The current one is dreadful. Most government spending is wasteful and not value-adding.

      Interest rates and monetary policy are super loose at the moment, and the government needs to tighten their spending to at least balance the budget. Nobody is expecting them to run surpluses in the next couple of years.

      • “Most Government spending is wasteful and not value adding.”

        Hmmm, not sure about most. But certainly some. Perhaps you can point out which is the most wasteful from the list below.

        – Pensions paid to the old and vulnerable
        – Defence
        – Education
        – Hospitals / Health
        – Social security
        – Interest on Government bonds and exchange settlement balances paid to the banks.

    • “Disappointed that MB continues to perpetuate the myth of budget black holes and suggestion that all deficits are bad.”

      With all due respect, I don’t think that is a fair representation of the position of MB. If the deficit is largely a product of poor policy settings (which it is) then I think some measured criticism is in order.

    • Well I don’t swallow the Keynesian BS.

      It has been proved through history that it never, ever works… and the Keynesian remedy this time around has also been a disaster.

      The government should only deficit-spend on huge infrastructure projects that will eventually have the capacity to pay the debt back with interest and then be rentier for some time after.

  16. If this budget goes through Tony Abott will be Liar, Liar, Liar.

    He will have lied on education, he will have lied on pensions and he will have lied on health.

    Mr Abbott said on the night before the 2013 election: “No cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS.”

    http://www.smh.com.au/federal-politics/political-news/abbott-to-break-abc-no-cuts-promise-20140412-zqty9.html#ixzz2z0ZGotaf

    *************

    “As far as school funding is concerned, Kevin Rudd and I are on a unity ticket,” Mr Abbott announced this morning.

    “There is no difference between Kevin Rudd and myself when it comes to school funding.”

    http://www.abc.net.au/news/2013-08-02/coalition-to-support-gonski-school-funding/4861102

    • migtronixMEMBER

      Nooooo! Say it ain’t so.

      And I would have had such a high regard for his integrity… travel expense rorts notwithstanding

    • “He will have lied on education, he will have lied on pensions and he will have lied on health.”

      He’s also lied on not committing to infrastructure spending of over $100 million without a public CBA. See Melbourne’s East-West Link for just one example.

    • Liar liar pants on fire. Move along chaps, that’s owned by Gilllard – no matter what level of juvenile politics the current mob play to.

      Go read Hawke and Keating.

      • I read the article in the Oz, for what its worth. Nothing in the Oz is written without a big helping of right-wing spin.

        Hawke and Keating seemed kinder to Gillard than Rudd, and concluded:

        Both said that despite the many problems, there were policies that Labor could be proud of after six years in government. While Mr Rudd and Ms Gillard “deserved to lose”, Mr Hawke said, they “achieved a lot of good Labor things”.

        The headline (“Bob Hawke and Paul Keating’s brutal verdict on the Rudd-Gillard years”) is classic spin from the Oz. Hawke and Keating are saying the party needs to be brutally honest about why they lost and reform party membership, union influence etc.

        Bramston has tried to string a quote together here to justify the headline. Its total bullshit of course, but you can’t expect better from the Oz.

        Assessing the Rudd-Gillard legacy, Mr Hawke said the party needed to be “brutal” in its assessment and acknowledge that they “didn’t deserve to win” the September election. “They just distracted themselves with internecine strife.”

        This equates to “Bob Hawke and Paul Keating have given a blistering assessment of Labor in power under Kevin Rudd and Julia Gillard” in Oz-speak.

        What an embarrassment of a newspaper.

      • Mining BoganMEMBER

        Yep. Can’t even have fish and chips wrapped in it these days. Always seems to have this nasty, bitter aftertaste.

    • Explorer et al

      When you are finally an OAP yourself, you’ll probably have a chuckle about the naivety of these statements.

  17. If the paid parental leave scheme for those who need it least didn’t convince people there was no budget emergency, surely the purchase of the F35’s will.

    The whole public debt emergency is confected.

    The real debt problem in Australia is non-productive and consumption financing private debt.

    • Exactly Explorer,

      It is an emergency because Hockey has decreed it as such and it helps facilitate his agenda of screwing the relatively poor but richly undeserving folk at the bottom of the ladder to ensure that they never soil the boots of those occupying the upper rungs.

  18. Really but, if you couldn’t see this coming then you must be living in a magical mystical fairyland.

      • Even someone listening to the mysterious disconnected world of the MSM, would surely have noticed that politicians invariably promise to be nasty before the budget and invariably give massive handouts to boomers.

      • migtronixMEMBER

        Would they though?

        Why is the biggest loser a show about obesity and not politics?

  19. Super will be an interesting one. You can’t cut the tax concessions too hard because the funds management industry is worth billions and they will gut you in the media. You can’t raise the preservation age because, let’s be honest, no-one wants to work past 60 if they can help it.

    So what can you do at the margins?

    Cut super co-payments for low wage earners
    Limit lump sum withdrawals from super accounts with low balances (quarantining the impact to low wage earners)
    Token means testing of concessions for high income earners (say over $250K p/y)