How committed is the Abbott government to ‘budget repair’, or to the challenges of a changing population?
The aftermath of last year’s budget was brutal. So much so, that most of the measures the government announced have not made it into law. While the backlash was understandable, given the government had put little effort into making the case for most of their reforms, their approach this year in many respects amounts to doing worse than nothing.
The deficit for 2015-16 is a lower than expected $35.1bn, but the claimed “credible trajectory to surplus” still depends on a return to trend levels of GDP growth – which is far from certain in the current climate.
Everyone’s talking about the $3.5bn over five years to childcare, in addition to the current $7bn annual spend. Some changes are a no-brainer, like rolling the multiple subsidies into one childcare subsidy.
While the Productivity Commission designed their relatively budget-neutral single subsidy to be more generous to lower– and middle-income earners by taking away from higher-income earners (for whom the economic case for subsidies is weaker), the government has left high-income earners virtually unscathed. Families earning above $185,000 are still entitled to claim 50% of their childcare fees (albeit benchmarked to $110 a day), up to a now-$10,000 cap.
The fate of this policy if no commensurate savings are passed by the Senate is a mystery. The best case scenario is that savings are found and there is no net impact on the budget deficit.
But not doing anything about the deficit means that the burden of fiscal consolidation continues to be carried by revenue-raising measures, most notably bracket creep on income taxes. The worst case scenario is that spending on a rapidly-growing government program increases significantly, because the government didn’t want to wear the cost of taking something away from high-income earners
There is, however, some silver lining to this. Tackling the number of people who receive a part pension, for a saving of $2.4bn over four years, goes a little way to end the perception of the pension as a universal payment where the only criterion is age, rather than means and circumstances – as is the case for all other social security payments.
Unfortunately, the massive inequity of the pension entitlement of someone with $400,000 in family home equity compared to someone with the same amount in the bank remains unaddressed. It cannot remain so for long if the government takes intergenerational equity seriously.
This budget shows how the government lacks commitment to the task of budget repair.
Home > Commentary > Opinion > Australian Budget 2015: the panel verdict
Australian Budget 2015: the panel verdict
How committed is the Abbott government to ‘budget repair’, or to the challenges of a changing population?
The aftermath of last year’s budget was brutal. So much so, that most of the measures the government announced have not made it into law. While the backlash was understandable, given the government had put little effort into making the case for most of their reforms, their approach this year in many respects amounts to doing worse than nothing.
The deficit for 2015-16 is a lower than expected $35.1bn, but the claimed “credible trajectory to surplus” still depends on a return to trend levels of GDP growth – which is far from certain in the current climate.
Everyone’s talking about the $3.5bn over five years to childcare, in addition to the current $7bn annual spend. Some changes are a no-brainer, like rolling the multiple subsidies into one childcare subsidy.
While the Productivity Commission designed their relatively budget-neutral single subsidy to be more generous to lower– and middle-income earners by taking away from higher-income earners (for whom the economic case for subsidies is weaker), the government has left high-income earners virtually unscathed. Families earning above $185,000 are still entitled to claim 50% of their childcare fees (albeit benchmarked to $110 a day), up to a now-$10,000 cap.
The fate of this policy if no commensurate savings are passed by the Senate is a mystery. The best case scenario is that savings are found and there is no net impact on the budget deficit.
But not doing anything about the deficit means that the burden of fiscal consolidation continues to be carried by revenue-raising measures, most notably bracket creep on income taxes. The worst case scenario is that spending on a rapidly-growing government program increases significantly, because the government didn’t want to wear the cost of taking something away from high-income earners
There is, however, some silver lining to this. Tackling the number of people who receive a part pension, for a saving of $2.4bn over four years, goes a little way to end the perception of the pension as a universal payment where the only criterion is age, rather than means and circumstances – as is the case for all other social security payments.
Unfortunately, the massive inequity of the pension entitlement of someone with $400,000 in family home equity compared to someone with the same amount in the bank remains unaddressed. It cannot remain so for long if the government takes intergenerational equity seriously.
This budget shows how the government lacks commitment to the task of budget repair.
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