Budget issues - Spending versus revenue
I DON'T think I'd have any disagreement in saying Australians crave balance and stability.
Got something to say? Share your story here
This is something that we haven't seen in a while both politically or economically.
Much has been written about the state of Australia's budget and the structural deficit which is causing our debt to grow.
Treasury quote both cyclical and structural issues which have caused this.
The questions bouncing around in my mind is what caused it and how do you fix the structural deficit?
Australia's government spending has increased over the last six years, but it came off a very low base and is still low in OECD terms.
In 2007 we were the third lowest in the OECD behind Korea and Switzerland which are both very small countries compared to us geographically.
Korea has twice the population while Switzerland has only one third of our population.
So spending is not our problem, revenue is.
The obvious answer is to fix the income, but I think we have to look back at the causes to appreciate the task of the future.
I have a few random thoughts about all this and I'm trying to tie them together in some logical fashion so that we can promote a decent discussion on the topic.
I am so over the political games that are being played, the lies and misinformation that are being promoted and the political spin that is forced upon us on a daily basis.
The points I want to bring up are Australia's tax intake, the cost of living and what I call corporate greed.
Revenue would be a logical starting point.
Australia's tax to GDP ratio averages a tick over 22.
It has been as high as 24.2 pre-GFC and as low as 20 in 2010-11.
In global terms, we are actually one of the lowest taxing countries in the OECD. In 2010 we were the fifth lowest overall and the third lowest in terms of personal income tax.
The fact that Australia gets 57% of its revenue from income tax means we are behind the eight ball before we even start. '
I believe we have to raise our income tax rates to the levels of the early 2000's before our yearly 'sandwich and a milkshake' tax cut were introduced.
In hindsight those 'sandwich and milkshake' tax cuts have given us one of the main features of our structural deficit. Both sides of politics played their part in this and it was plainly wrong.
The tax cuts were populist, unnecessary and have cost us dearly.
It is easy looking back, but I'm saying this money should have gone into a) infrastructure or b) the bank.
At the same time we were receiving these tax cuts, inflation and interest rates were on the rise.
The tax cuts were therefore 'swallowed up' and simply drove up the cost of living.
That money was wasted.
The relationship of tax, interest rates and cost of living got me thinking.
The RBA uses interest rates to take money out of the economy to cool growth and inflation.
Instead of this why can't the government use tax rates to the same effect.
If interest rates were constant and the tax intake was increased instead, the money is still taken out of the economy to 'cool' it, but then that money goes to the Commonwealth, not the banks.
To me, the Mining tax was a no-brainer.
The level of wages paid and profits made in the mining industry show the amount of revenue that we are letting slip.
When we allow foreign owned companies to take billions of dollars of profit offshore without taxing those profits appropriately we are simply punishing ourselves.
I'm aware that we can't tax business out of existence, but we can't just open the vault of our natural resources and say 'help yourselves fellas'.
There has to be a better balance for the Australian people who own these resources.
I liked the idea of the Carbon Tax but it was poorly sold from the start.
It should have been called what it is: a Pollution tax.
Whether you believe in climate change or not, there is no doubt that the world could do with less pollution.
Renewable energy targets and the carbon tax lessened our consumption of energy and promoted development of cleaner energy systems.
Tony Abbott has destroyed confidence in the renewable energy sector.
This, I believe, will be his lasting legacy and he will be damned by history for it.
I have no issue with the Government indexing the petrol excise, but I do have an issue with the GST being added to it. A tax on a tax is not fair.
The cost of energy brings my thoughts to privatisation.
I firmly believe that essential services such as power, water and communications should be government owned. Privatising power did nothing to reduce its cost. In fact, it has sent it the other way.
Ridiculously so. These services are non-negotiables.
Everybody needs them and at the moment we are being taken for a ride by the companies that own and supply them.
If the profits went to Government instead of companies the debt and deficits of Federal and State Governments would not be so high or not exist at all.
I don't subscribe to the theory that Government enterprises are 'inefficient'.
The Commonwealth bank just reported a profit of $8.68B. Wouldn't that help the budget bottom line.
This brings me to a real bug bear: Corporate greed.
The profits that some of these companies are making and the salaries they are paying their CEOs is obscene.
They make these profits by a) squeezing the producer and b) squeezing the wallet of the consumer. I'll admit I love a bargain and keep an eye on the weekly specials, but I refuse to buy $1 litre milk from the supermarkets. I don't know any dairy farmers, but when I see the stories about how the dairy industry is being squeezed, I do feel for them.
Examples like this would appear in all sectors and it is something I am very uncomfortable with.
I don't subscribe to the 'food chain' theory or the 'dog eat dog' world.
A fair day's work for a fair day's pay and some balance should win out everytime.
The current Government is proposing a budget which most respected columnists viewed as unfair and inequitable.
If you have a look at the figures beyond the slogans and spin, you will see that there is no budget emergency and no reason to harshly cut services and pensions while adding GP and prescription co-payments.
Small corrections now will produce the results for the future over time.
There is no need for a slash and burn budget now which targets the poor or disadvantaged while still looking after the rich with overly generous superannuation concessions.
Government ministers and other politicians get it pretty easy with their salary, entitlements and allowances.
If they want to inflict pain on the community, they must also have a good look at themselves.
A $270 per night travel allowance to stay in their wife's home is just wrong.
Australian Governments, both State and Federal, are balanced too heavily toward privatisation and big business greed.
We need to get back to a wages and cost of living accord that promotes some stability and consistency in our community. If companies want to be greedy with their profit making and rip us off, then tax them on it.
A least the money will come back to us that way.
The government don't need a new strategy to sell their budget.
They need a new budget. They need to get some balance and decency in their outlook.
If they don't, and it appears they won't, then they are gone come election time.
My advice for Mr Shorten in the meantime is this: Drop the spin doctors, start talking straight without the condescending overtone and develop and explain some clear consistent policy.
At the moment we're not hearing anything of any value.
Ref:
http://www.treasury.gov.au/PublicationsAndMedia/Publications/2013/Economic-Roundup-Issue-2/Economic-Roundup/Tax-to-GDP-ratio
http://www.treasury.gov.au/Policy-Topics/Taxation/Pocket-Guide-to-the-Australian-Tax-System/Pocket-Guide-to-the-Australian-Tax-System/Part-1
