This budget seems to have not only transport costs and tax cuts, but will be the last nail in the coffin to scare the liberal party of rumors about the evils of debt and deficits.
A few weeks ago I suggested that due to an unexpected increase in income taxes and elections in the next 12 months, the budget would see the Treasurer “stingy pork.” Two days later, the leader of the National party, rather confirms this, referring to the Treasurer in an interview with the Daily Telegraph as “Scott Santa Claus Morrison”.
Morrison quickly tried to dampen those expectations, but the cat was well and truly out of the bag, and since then all budget drop was about new spending or tax cuts with little sense of the need of restraint.
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It’s actually brought some problems for the government, because they reject what they once told us was Holy beliefs.
Last year, Morrison was, for example, firmly believe that the ndis must be fully funded, and can only be done by improving health to levy a half percent. He did it, he told the nation, because “the time has come … we are giving Australians with disabilities and their families assurance that they deserve.”
But now? Guarantee? Pfft. So 2017, we have a strong economy, I don’t know!
Morrison told the today show Karl Stefanovic this week that, “I am very happy for the people with disabilities that we can guarantee them the funds from a stronger economy.”
You must be as stupid as punch to believe a strong economy is guaranteed.
The point of insurance is to increase the levy that the ndis is not a one-off project. It continues – when the economy is going well, and when it is not. Now Morrison would have us believe that the economy would always be good.
The only reason why the government has dumped a program to increase the levy, because in 2016 he introduced that stupid cap tax revenue at 23.9 per cent of GDP. So great a revenue stream through improved export prices and employment growth that it needs to break through this cover in the next few years – and then they need to reduce the tax take.
But why not just Bank that money and reduce the deficit and national debt?After all that, said Morrison, he’s going to do in last year’s budget. Now, instead, the additional income will be spent, or unavoidable, as in the case of medicare, the abolition of the tax increase.
That’s what happens when your budget policy feature more politics than Economics.
There is not one iota of evidence that the economy suffers if tax revenues exceed the 23,9% of GDP. When tax revenues rose he does it for pretty much everything – the economy is doing well for one reason. Therefore, in 2004-05 and 2005-06 at the height of the mining boom, tax revenue was equal to 24,3% of GDP.
And that’s why when you get a sudden influx of income, blowing on the tax cuts is the stupidest thing you can do because while you will be able to afford it, and all of a sudden feel good, when you are all suddenly bad.
And no one ever expects the economy bad.
In the last budget, Peter Costello in 2007, the Ministry of Finance predicted that “the global economy is expected to continue to expand at a rapid rate” and that “economic growth in the United States, expected to ease in 2007, before strengthening in 2008.” Instead, he went back into the deepest recession since the Second world war.
The position Morrison also highlights how hollow the talk about the liberal party of debt and deficit.
During the Rudd-Gillard years, the cries of the growth of public debt was endless. And the government net debt is now higher than ever and five years in government, the liberal party has to deliver a budget deficit less than it was in 2012-13.
Now this does not mean that the government should reduce the deficit and debt faster than they have – it only emphasizes how stupid it is to do debts and deficits of your key measures. In fact, both are important, but subject to the requirements of the economy.
When the economy is weak and taxes low, cutting spending to return to surplus is a fool’s errand that is only good if you believe that the country needs to experience a recession.
Cormann says corporate tax cuts ‘most important’ before the budget
Morrison, as Joe hockey (and Costello) he would have discovered that the path to budget surplus is paved with revenue growth, not spending cuts. But now that he has income that Wayne Swan could only dream of, desire for excess, or to reduce the debt has become less important.
In the 2014-15 budget, the government has planned a budget surplus“ at least 1% of GDP by 2023-24”. It was a little too typical for Morrison, which last year diluted the obligation to “ASAP.” Now, “as soon as possible,” Morrison told reporters this week“, due to the provision of taxes will not increase by more than 23.9% of the economy”.
It can be argued, given the current low level of inflation and income growth that the economy is not really strong enough for a faster return to surplus than previously planned.
But Morrison does not make it. For him the economy is strong and will never be so. He just uses a 23.9% line as an excuse to wiredu of tax cuts, because the elections are coming.
We are talking about politics, not Economics.
And this shows how insincere the liberal party’s decade-long sermon on the evils of the debt and the deficit. And that should never be forgotten.
- Greg Jericho Explorer Australia-the Guardian