Download The 2014 Federal Budget

The 2014 Federal Budget
Implications for a better Australia
DAVID HAYWARD
2014 Federal Budget
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Introduction: worst budget ever
The plan
The budget
What went wrong?
Who really lost?
Where to from here?
David Hayward
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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)
Revenue increases = $8.7b
$6,000
$4,000
$2,000
$-$2,000
2015
2016
2017
2018
-$4,000
-$6,000
$22b
-$8,000
-$10,000
-$12,000
Spending cuts = $29.4b
-$14,000
-$16,000
Most of cuts not till the outyears
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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:
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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-budgetemergency-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/econo
mics/ratings-agencies-back-the-governmentsbudget-strategy/story-e6frg926-1226984874695)
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A problem of revenues not spending:
Revenues and expense as % of GDP
30%
25%
20%
15%
Receipts
Expenses
10%
5%
Source: Budget Paper No 1, 2014/15: Historical Tables
0%
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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/s3480
665.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..
60%
50%
40%
30%
20%
10%
0%
Cut spending
too much
Not cut
spending
enough
Cut spending
about right
Source: Essential Media: http://essentialvision.com.au/category/essentialreport/page/9
David Hayward
Don't know
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Fairness and the budget:
70%
60%
50%
40%
30%
Agree
20%
Disagree
10%
0%
Overall the
Bottom line Hurts the most Preferred
budget was fair ahead of
vulnerable better services
people
to cutting
deficit
Source: Essential Media: http://essentialvision.com.au/category/essentialreport/page/13
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Popularity of main measures:
70%
60%
50%
40%
30%
20%
10%
Support
0%
Oppose
Source: Essential Media:
http://essentialvision.com.au/category/e
ssentialreport/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.
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