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Canberra Gaze « Previous | |Next »
May 12, 2006

As Alex Millmow points out in the Canberra Times the Costello Budget announced the impossible - tax cuts and spending increases. Milllnow says:

Economics was never supposed to be like this. Making do with less, not coping with superabundance was what it was all about. This is the fourth successive budget when the electorate has received some form of income tax cut or increase in welfare payments. Many now have the embedded belief that a budget surplus means tax cuts.The "gimme, gimme" budget has arrived. And there will be a repeat of the magic pudding next year, and, all going well, on an even bigger scale. The thought of using the surplus for the social good, for infrastructure, for training and education, will become more outlandish over time. Were the Government ever to renege on the transfer of the booty, the electorate would sulk.

Such a budget does not leave much room for the ALP to respond in the Budget reply. All eyes were on Labor, given its self-destructive tendencies. Would it build on its message about needing to lift the nation's productivity by offerring some policies as opposed to carping?

Unfortunately I missed Kim Beazley's address in reply on free-to-air televison last night. Reading it this afternoon his 'Pact with Middle Australia' he homed in on the nation's skills shortage, lack of places in parents' child-care and the failure to develop a high speed broadband network for businesses and households. Apparently it was a good performance with an emphasis on security: the government will protect you from changes in the workplace and in the market.

So Beazley differentiated himself on education and child care, but where was health? Is not a squeezed Middle Australia also concerned about health and wellness?

What was not addressed by both sides of politics was a strategy to rein in the current account deficit, which is running regularly at more than 6 per cent of gross domestic product and which has led to a national debt of about $500billion, still rising. Both sides of politics seem to think that we don't need to worry about these huge imbalances.

We should. As Millnow points out:

Recall how the British used up their North Sea oil bounty with nothing much to show for it in the end. Sure, Australia has oodles of resources, but our external account is forecast to be in deficit this year at 6.25per cent of GDP. This is when we have the best terms of trade in 30 years.Our actual trade deficit - exports minus imports - has been in deficit for 48 months straight.You'd think that with record export prices, this, at least, would be in the black. But no, the income effect arising from the terms-of-trade bonus encourages a spate of spending on imports.

Yet we have silence.

| Posted by Gary Sauer-Thompson at 2:53 PM | | Comments (0)