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The Forum > Article Comments > Things to think about as the federal budget approaches > Comments

Things to think about as the federal budget approaches : Comments

By Tristan Ewins, published 14/4/2014

This begs the question why higher aged care expenditure is not on the agenda - as opposed to pension austerity.

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HasBeen - it is considered 'common sense' that 'we are living beyond our means' and that we need to manage our Federal Budget as if it were a household budget.

But a number of points are worth observing.

Even in a household budget sometimes you need to make long-term investments - for instance in a car to get to work; in a house - because people cannot do without a roof over their heads.

Secondly, though: Our debt is low and serviceable by global standards. But it begs the question also why the Govt is selling off a profitable enterprise like Medibank Private - which bolsters both competition and the Budget bottom line. The problem is an Ideology of small government.

Thirdly I am not suggesting money grows on trees. I am making the point that in Australia we have small government by global standards - and that it is that very small government that isn't sustainable. Why? Because without increasing tax and making strategic savings where upper-middle class welfare is concerned - we cannot afford transport, communications, health, education etc. Unless we do something this will probably end in 'user pays' for roads, schools etc - which if inefficient AND inequitable.

I make the point that our GDP is worth about US $1.6 TRILLION. And I want people to get that figure in their head -$US 1.6 TRILLION.

Abbott, Hockey and co want to scare us with big numbers and confuse us about the level of debt and our capacity to service it. *I make the point* that we could make an array of savings re: upper middle class welfare and 'welfare for the rich' which could save tens of billions... WE DO NOT NEED pension austerity. We are well within our means if we restructure tax and spending progressively.

Abbott, Hockey etc do not believe in the social wage or the welfare state - for them it is 'every man (and woman) for themselves'. That's not the way you build a 'sustainable society'.
Posted by Tristan Ewins, Tuesday, 15 April 2014 11:17:50 AM
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Ludwig - re: immigration it cuts both ways.

Yes immigration means greater strain on infrastructure that needs to be paid for somehow.

But it also creates economies of scale. For instance - we can get away with a *proportionately* smaller Defence budget.

Though if we don't invest in infrastructure as we grow we'll end up in a right royal mess. And that's what governments in this country are allowing to happen.
Posted by Tristan Ewins, Tuesday, 15 April 2014 12:12:58 PM
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Tristan,

A bigger population also creates diseconomies of scale. As just one example, desalinated water is four to six times as expensive as dam water. The last lot of water restrictions cost us around a billion dollars, according to newspaper reports, and $150 million in Melbourne alone according to the Productivity Commission 2010/2011 annual report. This is due to such things as cracks in walls and foundations, and elderly people injuring themselves while carrying water to gardens. The cost of upgrading infrastructure for a denser population in an area that is already built up, tearing up the streets and the like, is also greater than for a green fields site.

The economist Leith van Onselen gives a graph showing total GDP and GDP per capita since 1996. GDP per capita has had very little growth over the past 8 years despite massive population growth.

http://www.macrobusiness.com.au/2014/03/gdp-is-rubbish/

van Onselen says:

"This infatuation [with overall rather than per capita GDP] has led to spurious policies like the pursuit of endless population growth on the basis that it stimulates headline GDP (more inputs equals more outputs), even though it provides next to no benefits to everyone's share of the economic pie as measured by GDP per capita and arguably reduces the living standards of the pre-existing population."

So far as your main argument is concerned, I am mostly in agreement with it. The 37% of superannuation tax concessions that are going to the top 5% are wasted money because these people would save anyway, since they want a better standard of living than they could afford on the pension. The politicians' problem is that they want to squeeze low and middle income earners until the pips squeak, while touching the genuinely rich with a feather. If they can't bring themselves to tax the money on the way out, as Wattle suggests, they should tax on the basis of how much has been accumulated in superannuation, with a reasonable benefit limit on the total amount, beyond which there will be no tax concessions.
Posted by Divergence, Tuesday, 15 April 2014 4:55:55 PM
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Yes Tristan, but to make those long term private investments, & pay back the borrowings, we have to cut back on luxuries. No flash car, no restaurants or holidays.

Those are the NBN, the NDIS, Gonski & the maternity leave, not only for private industry, but all government funded employees also, are the national luxuries we can not afford, & will have to cut back.

Ridiculously generous public sector pension schemes are another luxury which we not only can no longer afford, but are so discriminatory that equity demands they be massively reduced.

Shoving rather dumb people through totally useless university degrees is another luxury we have to stop. Many of these degrees are of no earthly use, other than as a ticket to a public service job. Another luxury we need to eliminate is the thousand of university people running & teaching these courses.

The only economy of scale immigration brings, is the payment of more welfare cheques by the same bureaucrats. With the growth of ethnic ghettoes in our larger cities, the scale of law enforcement cost requirements will make any economies elsewhere infinitesimal by comparison.

Then you suggest cuts to defense. Mate Julia cut defense by over a billion a year to spend on boat people, then wasted heaps of the remaining budget ferrying the bludgers about. We are already dangerously low on defense, much lower than ever. Much lower than similar countries. Defense is one thing that demands a 25% increase immediately, & another 25% over the next 5 years.

Yep, time to drop those "that would be nice" 7 start doing what must be done. Do you know anyone who could run a course on use of shovels in our universities. A degree in real work is the one we really lack.
Posted by Hasbeen, Tuesday, 15 April 2014 8:26:20 PM
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Has been - I don't support 'flat' or 'overall' cuts to Defence - but only a *proportionate* reduction as the country grows. And if we're going to cut defence it needs to be linked with multilateral disarmament in the region... Although I accept greater self-reliance in Defence could mean more foreign policy independence...
Posted by Tristan Ewins, Tuesday, 15 April 2014 9:12:21 PM
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Hasbeen: You call "NBN, the NDIS, Gonski" 'luxuries' 'we cannot afford'. But if you read the article you will see that we are a $US 1.6 TRILLION economy, and that we can save tens of billions from restructuring tax and withdrawing superannuation concessions. Wake up! Abbott and Hockey are pushing this 'beyond our means' argument because they have an IDEOLOGICAL commitment to reducing govt spending.

Also keep in mind that NBN and Gonski are crucial for our competitiveness. And you cannot put a price on the value of an educated citizenry - even where some courses don't have as much of a direct application in the labour market as some...

And even though we do have an ageing population - Even in 20 years time we will still need to make *choices* and decide about *priorities*. Personally I think a decent retirement, decent health care, decent aged care, educational opportunities for our kids - are worth the social investment... Sure it might mean some people might have to put off the new car for a year or two; or have an overseas holiday every *second* year... But it is well worth it.

And who can put a price on supporting the disabled - who suffer in ways you probably cannot imagine... And yet you are willing to dismiss care for those people as 'an unaffordable luxury'...
Posted by Tristan Ewins, Tuesday, 15 April 2014 9:24:39 PM
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