Australians must together fix the economy to avoid personal pain
A roundup of economic data makes it plain that if Australians don’t collectively hang together to fix unrealistic federal budgets, we’ll continue in consequence to hang separately in increasing insolvencies.
Eroding attempts to resuscitate our economy is a national debt of about a trillion dollars, and we’re paying the equivalent of two-thirds of the defence budget on interest payments alone.
For budgets to be in touch with reality and have any hope of returning to surpluses, the Parliamentary Budget Office (PBO) says Commonwealth governments must save the cost of more than 41,000 public service jobs over the next decade. (The PBO provides non-partisan financial analysis that helps parliamentarians oversee public funds.)
But not only do the Albanese government’s policies make mockery of the PBO’s advice, they also aim – especially by way of tax changes -- to make entrepreneurial people poorer without making lower income earners richer.
Surely the goal should be to boost prosperity of the poor without making it between extremely difficult and impossible for thousands of businesses to thrive and thus grow the economy.
The Australian Financial Security Authority (AFSA) reports a surge in personal insolvencies as cost-of-living pressures hit hard, and the Australian Chamber of Commerce and Industry reports 55% of 700 surveyed businesses claim consumer spending has dropped in recent months – despite 69% of these businesses absorbing rising costs and not increasing prices.
Earlier in the year 31% of businesses were delaying investment or expansion, but this had increased to 38% by the end of the past financial year, when 60% said they had been cutting back all non-essential spending.
Reality is the needed fix
A couple of months ago the PBO warned that the budget’s proposed return to surplus by 2034-35 was predicated “on a series of potentially unrealistic assumptions, including restraint in National Disability Insurance Scheme (NDIS) spending, no further income tax cuts, a shrinking of the public service and termination of all temporary government programs” – all of which is nothing short of “industrialised gaslighting”, according to veteran budget-watcher Chris Richardson.
Some four months after the current budget was delivered, unanswered questions about its validity are increasing from across the political spectrum, business and professional organisations. Even Labor members of parliament have been publicly questioning the wisdom of proposed tax changes – indicative of wide-ranging concern about far-reaching impact of the changes, due to apply from 20 September.
Polling conducted by independent advocacy group Ahead, shows more than half of so-called “working class Australians” believe the changes will directly or indirectly force them to “fall further behind”.
Only 11% of women aged 18 to 34 among 1,434 voters polled between July 11 and 23, felt they were “getting ahead”, and this dropped to 7% among older generations. About 20% of young men felt confident about their financial future, and across all male age groups about half said they were just “treading water”.
Perhaps most significantly about 60% of the people surveyed said Australia was “heading in the wrong direction” for anyone wanting to work hard, save money and build a better life – and this was a sentiment consistent among homeowners, people with or without a mortgage, and workers still living in their parents’ homes.
The wrong direction
The PBO’s medium-term fiscal outlook says it’s the budget’s “systematic optimism” that is pushing the economy in the wrong direction by relying on savings from unlegislated policies and assumptions that inflate forecast revenue while understating likely spending.
For example, consider this optimism’s effect on just one budgetary item, NDIS. The budget is predicated on $37.8b in savings from unlegislated changes to NDIS over the four-year forward estimates, projecting reforms will reduce the scheme’s annual growth rate for 10% to 2% in the near term, before settling at about 5% in the medium term.
But the PBO warns NDIS forecasts have consistently been exceeded in successive budgets, expanding at an average annual growth rate of 18.7% over the past five years.
The PBO further cautions that a return to surplus is also built on the unrealistic assumption that no further government would deliver income tax cuts, in which case workers can look forward to paying a tax rate that will be a record 28.6% of their income by 2036-37 – not forgetting that this and all other predictions are based on the budget’s seemingly rash “no policy change” assumptions.
The largest projected decline in spending across the budget is on the public service. The decline assumes all temporary government programs will be wound down and staff let go, but realistically future budgets will include new resourcing decisions resulting in expense forecasts and grants being topped up, but no significant decrease in public service jobs.
In any case Macks Advisory cannot see a Labor government moving towards the elimination of 41,000 public service jobs to justify its May budget predictions.
If all temporary government programs were ended, cost of the public service would drop from 4% of GDP in 2024-25 to a multi-decade low of less than 3.5% by 2029-30, but if Treasury assumed (in its advice to the government) that the public service would grow in line with population growth in the coming decade as it had over the past decade, then there would be 226,500 Commonwealth public servants in 2029-30 and 244,500 by 2036-37 – adding $14.2b to the cost of the service and further delaying the budget’s return to surplus.
Conclusion
Cost of living is not going to improve as national debt continues to rise and where there’s no political will in sight to produce realistic budgets. Voters, aware of this, are, in despair, forsaking major political parties that have no apparent hope of forming a government, no perceivable hope of producing a plan to give them what they want yet enhancing the economy.
Will what the polls are telling them be enough to compel major political parties to produce such a plan and a leader who can convince voters to support it – even though it’s likely to be a plan that won’t give them everything they want, yet will give their country what it needs?
So, if you agree with America’s third president, Thomas Jefferson that the government you elect is the government you deserve, then you’ll probably accept you are your best chance of fixing what needs to be fixed in Australia’s budgets when next you vote.
