Budget measures insufficient to avoid risk of permanent deficits

Tonight’s Federal Budget will be very disappointing, as the expected measures do not go anywhere near enough to reducing the risk that Australia will end up in a state of permanent deficit, as I’ve previously suggested it would if we do not make hard decisions (see Budget blowout highlights risk of permanent deficits without major spending cuts). Deloitte Access Economics forecasts suggest deficits in the order of $40-50 billion in the next couple of years (see ABC News report). While the end of the mining boom is no doubt responsible in part for recent revenue write-downs, it is undeniable that we have a huge structural deficit (see Guay Lim’s article in the Conversation), and tough, urgent measures are needed to remove it. Now is not the time to be spending an additional $3.5 billion on subsidising childcare, as reported by the Courier-Mail.

The best measure in the Budget appears to be the decision to tighten the assets test for the pension, saving $2.4 billion, but even that doesn’t go far enough. The assets test should, for reasons of both efficiency and equity, include the family home (see Adam Creighton’s excellent Australian article earlier in the year). The failure of our political class to deal with Australia’s long-term fiscal challenges is very disheartening.

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2 Responses to Budget measures insufficient to avoid risk of permanent deficits

  1. Katrina Drake says:

    One of the main problems with the Government’s budget – is that the Ministers and Public Service has no concept of managing a budget.

    Introduce a Dental Scheme for Chronic Disease – budget lows out by a factor of 10.
    Introduce VET-Fee-Help – budget overspent by a factor of 15.
    Subsidise recliner chairs – budget 25 times over-spent…..

    and it goes on and on …..

    Once the annual funds budgeted for a program are expended – the program should stop – that is how you maintain a budget. Government programs are open-ended and thus very vulnerable to creative organised rorting. Over-spend – get the chop !

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