Australia's "Budget Crisis" - Politics Forum.org | PoFo

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#14494498
So in the last couple of days I've noticed the conservative side of politics and the media begin to re-focus on the economic state of the country and the financial position of the government. There is some legitimate reasons for this, not least of which is the failure of the Coalition to pass certain pieces of legislation designed to, among other things, ease the current budget deficit (now standing at $35 billion, around 2% of GDP).

The primary reason, I'm sure, is divert attention away from these failures and the general unpopularity of the Abbott government federally and the election results in Victoria.

Is there, though, a serious case to make for the Australian government having a "budget crisis"? Many people deny this being accurate, people including Bill Shorten who has described it as a "myth" and "a manufactured crisis".

The numbers look terrible or fine, depending on the context in which you view them. Comparable with other developed nations we're in great shape, out debt-to-GDP ratio is only 20%, a magical sort of a figure to politicians in Europe and the US.

However, that debt as a figure is still $370 billion dollars, not exactly loose change. When you add state and local govt. debt it becomes something like $600+billion. There's a gaping deficit and seemingly no end in sight, with commodity prices being way down (iron ore is half the price it was this time last year and is a massive source of govt. revenue), China slowing somewhat risking demand for our exports, and lack of political chutzpah to address the issue properly.

I do get frustrated when I hear people dismiss the topic offhand due to comparable nations being worse off, why would that matter? I worry we're choosing to bury our head in the sand and call it an unfixable problem, and leave our kids to foot an un-payable bill.

Do we really have a serious issue or is it just smoke and mirrors?
#14494502
To reduce your debt you must reduce your demand for everything you consume by 2 %. This means you have to walk out 2 minutes and 24 seconds before the end of a 2 hour movie, eat 98 % of your meals, and wash only 98 % of your body surface. And so on.
#14494760
It's not a crisis the way Abbot and Hockey have been going on. But sooner of later you have to bring the budget back.

Fundamentally there has been a long term decline in the payment of taxes. Many very profitable companies are using various shell games and pre texts to not pay any Australian tax at all. This has lead to a deficit in the budget.
#14494836
I don't think Abbott's 'budget savings' will fix the debt, or provide a strong economy. Privatising universities, cutting research ect... will remove the debt, but in 20 years Australia's service industry will be bereft. What do we do then? Begin to manufacture things again?

Or do we just do 'more for less'? i.e. work harder and longer for less pay?
#14494846
pugsville wrote:It's not a crisis the way Abbot and Hockey have been going on. But sooner of later you have to bring the budget back.

Fundamentally there has been a long term decline in the payment of taxes. Many very profitable companies are using various shell games and pre texts to not pay any Australian tax at all. This has lead to a deficit in the budget.


Australia has a clear declining-revenue problem. So what does the Abbott government do? Cuts off even more sources of revenue - not to mention hacking and slashing the one industry that should be a cash cow for us - renewable energy. They then attempt a 'quick fix' by hitting the vulnerable and the young - which will only give us more long term economic pain.

This government are economic vandals.
#14494872
I think that with all the fuss Joe Hockey made with raising the Debt Ceiling last year he knew it had to be done - he knew that the budget was going to be in deficit for a number of years despite his insistence that he would be able to bring the budget back into surplus. The main reason why we have such a large debt is that the Rudd Government overestimated the impact the GFC would have on the economy and increased expenditure when it shouldn't. I expect another GFC - like event to happen within the next few years and if that is the case tax revenues will go down even further, not to mention the even further increases in government expenditure due to such an event.

While I agree that there needs to be more investment into renewable research I can't see it being the cash cow that supporters expect it to be. I think we're too far behind in product development compared to other countries. Only if we develop something radical will it be a cash cow.
#14495022
There is no spending crisis, but there is a revenue crisis. While Labor's Kaynesianisn saved Australia from the worst economic crisis since the Great Depression the recovery hasn't been full-scale. The Fed. Government's tax revenues are still being affected.

Obviously re-taxing the mining sector, closing tax loopholes and making corporations & the wealthy pay their fair share of tax, for he first time in a long time, will help enormously to bring the federal budget back to surplus.

EDIT for expansion;

http://www.abc.net.au/news/2014-05-06/has-the-government-doubled-the-budget-deficit/5423392

Joe Hockey cooked the books too;

Has the deficit doubled?

The August PEFO said the underlying cash balance in 2013-14 would be a deficit of $30.1 billion. The following year's balance would be a $24 billion deficit, and in 2015-16 a $4.7 billion deficit, before returning to a surplus of $4.2 billion in 2016-17.

These forecasts total a deficit of $54.6 billion over the four-year forward estimates.

The December MYEFO estimated the underlying cash balance for 2013-14 would be a deficit of $47 billion. The projections for the following three years were deficits of $33.9 billion, $24.1 billion and $17.7 billion.

These total $123 billion over the four years of the forward estimates.

The difference between the two projections is $68 billion. The combined projected deficit in the coalition's MYEFO is more than double the corresponding number in the PEFO. Mr Bowen is correct on this figure.
#14495222
GandalfTheGrey wrote:Australia has a clear declining-revenue problem.


This seems to be the consensus from both sides - one of the few points of agreement. The narrowing of the tax base started with the Howard government (maybe earlier) and continued under Rudd/Gillard, with the global recession and slowdown of the mining boom helping the shrinkage along. The added tax loopholes and middle class exemptions weren't a noticeable issue when the money was still rolling in elsewhere, but the problem with buying the electorate off with that stuff is that when you need to bring it all back in it is almost impossible to do so.

So what does the Abbott government do? Cuts off even more sources of revenue - not to mention hacking and slashing the one industry that should be a cash cow for us - renewable energy.


This is not something I have ever given any thought to, but it sounds like a strange thing to say. Could you provide evidence to support that claim, or at least a rationale behind why you think that about renewables?


redcarpet wrote:While Labor's Kaynesianisn saved Australia from the worst economic crisis since the Great Depression the recovery hasn't been full-scale.


Do you really think this, really? It seems to me like it was a massively overblown reaction which has further sunk our finances. Perhaps we didn't realise how insulated we would be from the global recession, but with hindsight you have to wonder how much it was the Keynesian spending compared to the continued demand for our exports from china and so on.

If nothing else, it was a very inefficient use of resources. School halls that weren't needed etc. I remember when I got my $900 I went and put it straight in the bank - way to stimulate spending Kev!
#14495365
I should have been clearer, what I meant to ask was:


This is not something I have ever given any thought to, but it sounds like a strange thing to say. Could you provide evidence to support that claim, or at least a rationale behind why you think that renewable energy is a cash cow.

I wouldn't have doubted Abbott not being a supporter of renewables, don't worry, i'm not that crazy
#14495920
redcarpet wrote:There is no spending crisis, but there is a revenue crisis.



If the government reduced its spending wouldn't the revenue crisis be diminished or eliminated altogether? While I realise that a large proportion of government spending is justified that are areas where it is unnecessary. As an example, I was recently talking to someone who works for the RAAF who mentioned that when present at the Avalon Air Show he and his colleagues have to stay at hotels in Melbourne rather than Geelong, which is much closer. The reason? The RAAF managed to put a condition in their work contracts stating that when working from home they must be placed in hotels rated no fewer than four stars!

I believe that you could cut 10% out of the budget with little or not effect on the economy as a whole, both short and long term.
#14497173
Ornate Placebo wrote:Could you provide evidence to support that claim, or at least a rationale behind why you think that renewable energy is a cash cow.


Apologies - and its a good question.

Currently we are at the tail end of the greatest mining boom this country has ever seen. Our chief trading partner for this mining boom is China, who has a massive demand for our minerals - coal, iron etc. However as we know they are now going green - in a big way. So there is now a market for exporting green energy - and by that I mean technologies that harness green energy. Australia is a technological savvy first world nation who is best placed to create the world's best green energy technology. If we invest in this properly it will become a cash cow - by exporting these technologies to developing nations who are trying to increase their green energy industry - namely China.
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