the 2014 federal budget implications for a better australia david hayward
TRANSCRIPT
The 2014 Federal Budget
Implications for a better Australia
DAVID HAYWARD
David Hayward 2
2014 Federal Budget
• Introduction: worst budget ever• The plan• The budget• What went wrong? • Who really lost?• Where to from here?
David Hayward 3
Worst budget ever?
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The plan• Win on back of hugely unpopular ALP• With modest and middle of the road policies
– Except for refugees and the environment• Repeatedly denied a radical plan• “Committed Coalition expenditure including tax cuts, pension
increases and increases in expenditure on health and education total just over $33 billion... Today’s announcement also confirms that the Coalition will increase spending on hospitals, schools, defence and medical research – a far cry from the deceitful lies coming from the Prime Minister and the Labor Party that the Coalition would cut health and education”(Hon Joe Hockey and Hon Andrew Robb, Final Update on Election Policy Commitments, 5/9/2013) .
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The plan cont.• Only to win Government and do the opposite• After padding out budget deficit• And setting up an ideological Audit
Commission to recommend big cuts• Nothing surprising: a well worn electoral path
for right of centre governments whose policies are not popular
• Worked very well many times before– Especially with States; Jeff is still King
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The Budget: Revenue increases and spending cuts, 2014/15-2017/18 ($m)
2015 2016 2017 2018
-$20,000
-$15,000
-$10,000
-$5,000
$-
$5,000 Revenue increases = $8.7b
Most of cuts not till the outyears
Spending cuts = $29.4b
$22b
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The budget: a reminder II• Goal: turn $24b deficit into $1b surplus by 2017/18• Social policy especially hard hit:
– Social Services cut by $15b– Health cut by $6b (mainly to States & co-payment)– Education cut by $3.7b
• In sum: – massive consolidation– Mainly via spending cuts– Focused on social policy (ie those on low incomes)– Income tax hike on high income earners ends in 2017/18– Most regressive budget in living memory– Most pain not due to take effect for 2 years and onward
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What went wrong?• Manufactured claims of crisis clearly untrue:"Australia is not facing a budget or a public debt crisis right now," AMP Capital chief economist Shane Oliver said. "Our budget deficit and net public debt are low by OECD standards...”. Chris Caton, from BT Financial, said it was "simply absurd" to suggest Australia had too much government debt. Saul Eslake of Bank of America Merrill Lynch said (using terms like) budget crisis”…was to.. to abuse the English language”.• Read more: http://www.smh.com.au/business/no-budget-emergency-
say-economists-20140711-zt4kz.html#ixzz38rFDvnIR
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What went wrong cont.Moody’s senior vice-president Steven Hess said …“The Australian government has among the lowest levels of debt …of any advanced economy, and we do not consider that there is a risk to the AAA …” . Fitch Ratings ..Andrew Colquhoun said “Australia has strong public finances… which means there’s quite a bit of leeway in public finances from the perspective of the credit rating,” he said. (The Australian, 11/7/2014, accessed at http://www.theaustralian.com.au/business/economics/ratings-agencies-back-the-governments-budget-strategy/story-e6frg926-1226984874695)
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A problem of revenues not spending: Revenues and expense as % of GDP
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20140%
5%
10%
15%
20%
25%
30%
ReceiptsExpenses
Source: Budget Paper No 1, 2014/15: Historical Tables
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What went wrong cont.
• Budget was really about values“The 2014-15 Budget marks a major step by the Government to transform the role of government in people’s lives.” (Budget Paper Number 1: 1-1)• ie small government (remember culture of
entitlement speech in 2012) – (http://www.abc.net.au/lateline/content/2012/s3480665.htm)
• That sits uneasily with Australian public• Who remain broadly sympathetic to role of government
and endorse value of fairness
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Australian’s views of government spending
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Should Govt spend more or less on…
Source: ANU Poll on Government Expenditure, February, 2014.
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Should the government spend more or cut taxes?
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Too much cutting..
Cut spending t
oo much
Not cut s
pending enough
Cut spending a
bout righ
t
Don't know
0%
10%
20%
30%
40%
50%
60%
Source: Essential Media: http://essentialvision.com.au/category/essentialreport/page/9
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Fairness and the budget:
Overal
l the budge
t was
fair
Bottom line ah
ead of p
eople
Hurts th
e most
vulnerab
le
Preferred better s
ervice
s to cu
tting d
eficit0%
20%
40%
60%
AgreeDisagree
Source: Essential Media: http://essentialvision.com.au/category/essentialreport/page/13
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Popularity of main measures:
deregulat
e Uni fees
$7 medica
re co-pay
ment
Pension ag
e to ris
e to 70
6 month
wait
for d
ole
Tightening d
isabilit
y support
eligibilit
y
Cut 16,500 public
servi
ce jo
bs
Privati
se Roya
l Mint
0%10%20%30%40%50%60%70%
SupportOppose
Source: Essential Media: http://essentialvision.com.au/category/essentialreport/page/12
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Who really lost?• Government’s
popularity destroyed• Budget a complete flop– Still not clear what is to
be legislated
• Senate increased spending, not cut it
• Biggest losers are Neoliberals
• who have taken a beating
• arrogance has not helped
• Values are unpopular, despite 30 years of being on parade
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Who has won?
• Still unclear• But there is now a
political opening• Involving politics of
fairness• And budgets that
redistribute income progressively
• Top of the list of those still vulnerable:– The unemployed
(especially those under 30)
– The disabled– And single parents
• These are the most at risk people of our generation.