Here are some words from another author that thinks Australia has a spending problem not an income problem.
I think we have both. Surely they realise that the drive to lower real wages for Australians will flow on as reduced income for businesses, (further exacerbated by the hemorrhaging of consumer spending overseas) and lower income for the Government.
The result could be a downward spiral at a time of low inflation, perhaps even deflation and rising unemployment putting more strain on the Budget.
Still the money has to be found for the ever increasing health budget. With health expenditure spread between States and the Commonwealth on would have thought there would be the possibility of streamlining services by eliminating a layer or two of bureaucracy.
This author puts a figure on what they think is required to balance the books by 2017. $1,700 a year per household by way of increased taxes and reduced benefits.
One problem of forecasting for the budget is identifying which changes will be structural and which will be cyclical. We only ever know that for sure through hindsight.
In my judgment the government should aim for structural measures totaling at least 1 per cent of GDP in 2016-17 (about $17bn) in addition to the measures included in the last budget and getting all the stalled measures through the Senate. This would provide for a small structural surplus (mid-point of the range) in 2016-17. If this effort turns out to be more than needed and the surplus is larger, they should make an earlier start to cutting income tax and handing back the proceeds of bracket creep than the current expectation (2020–21!)
Ideally the structural measures would be more ambitious than 1 per cent of GDP, making possible definite plans to reverse bracket creep in 2016-17.
The significance of 2016-17 is that it is the last budget year in the current government’s term. Three years should be sufficient for any government worth its salt to overcome what is essentially a modest structural deficit problem.
Just how they would lop $17bn a year off the deficit by 2016-17 is another matter. The Abbott government and its Labor predecessors have pretty well exhausted the old favourites: cutting defence and foreign aid, imposing amorphous ‘efficiency dividends’ on departments and streamlining the machinery of government.
What remains is politically much harder. It means taking money away from people (i.e. voters) through reduced social benefits or increased taxes. This would certainly test the Coalition’s appetite for electoral suicide, but at least it doesn’t have to mean reducing benefits in absolute terms. Just making them grow more slowly than currently planned counts as a ‘saving’.
By 2017 there will be about 10 million Australian households. Taking $17bn away from us means an average of $1,700 a year per household. How this sum is distributed and how it is divided between spending cuts and tax hikes will be hotly debated.
But any suggestion that low and middle-income households should be fully sheltered; or social security, health and education quarantined from cuts; or most of the burden carried by higher taxes, should be rejected. The federal budget is paying out more than $170bn a year in direct (monetary) and indirect (in-kind goods and services) benefits to households, a figure that has ballooned over the years. The problem is too much social spending, not too little taxation.
