My first thoughts on the budget – published at The Conversation:
There is a lot to like in this budget. A lot of the heavy lifting in returning the budget to surplus comes from reductions in spending. The changes to universities are significant and will lead to greater competition in the sector and drive change within individual Universities. At the same time there is a lot to dislike in the budget.
Comparing the Budget fiscal balance to the MYEFO fiscal balance (Table 6 page 3-27 in Budget Paper 1) we see that the improvement is mostly driven by parameter variations – in other words by changing assumptions and circumstance. It looks like a lot of spending has been cut but little of it comes from changes in actual policy.
Then there is the Medical Research Future Fund. This verges on the incoherent. The government will invest all the money from the GP co-payment, increased medicine payments, and savings from medical expenditure into the fund which will then finance research. In other words, the GP co-payment and increased medicine prices will not be used to reduce debt or deficit. So why have it all? Clearly there is no urgent need to introduce these higher prices and co-payments; they are driven purely by ideology. The Medical Research Future Fund exists to detract attention from that decision. Why deprive people of actual medical attention in order to finance research when there is no guarantee of any actual benefit?
Then there is the broken tax promise. Tony Abbott consistently and persistently promised no new taxes. This promise has been shattered by an increase in the top marginal tax rate above $180,000 and the reintroduction of petrol indexation. In time petrol indexation will generate a lot of income, but not in the next financial year. Similarly the increased tax rate (only for three years, we’re told) won’t raise much revenue either. So why break a promise for little revenue gain? This is a form above substance measure to share the pain. Most notably, however, while high-income earners are being asked (Hockey really means “compelled”) to pay higher taxes for three years, politicians’ salaries are only being frozen for one year.
Finally, of course, the budget and the forward projections all remain in deficit. Joe Hockey has not produced a surplus and over the foreseeable future isn’t forecasting a surplus either.
I should add the cuts to foreign aid are good but not deep enough.