October 22, 2012
The consensus is that today's Mid Year Economic and Fiscal Outlook (MYEFO) is driven by political imperatives rather than economic ones. The surplus itself is a political figure as it is really to show that the Labor government can manage the economy.
Today's MYEFO statement seeks to replace $4 billion in lost tax revenue this financial year, and $21 billion over four years through savings and increases in charges. Swan has made good on his 2012-13 promise to return the budget to surplus, even if it does involve accounting illusions of shuffling money in the way that company tax is collected.
Gillard Labor continues to slowly dismantle the Howard-era policy of middle class welfare and subsidies for private health insurance. Rightly, as I cannot see the importance of the baby bonus--it strikes me as bad public policy. No doubt the conservative's rhetoric will be along the lines of " cooking the books" to achieve an "imaginary surplus", but the Coalition do have a track record of opposing the means testing of the Private Health Rebate and reducing the amount of taxpayer subsidies going to big business.
Today’s rather predictable MYEFO confirms that government spending, in real terms, will fall by a record 4.4 per cent in 2012-13 with government spending being 23.8 per cent of GDP. So we have fiscal discipline and loosening monetary policy from the Reserve Bank of Australia in a slowing economy that is due to the low growth of the global economy. The fall-off in revenues is largely due to the fall in our terms of trade — that is, the global prices of our exports have come off the boil. The Australian dollar continues to remain high.
In this context Labor's commitment to the knowledge nation takes another battering with cutting skills training and investment in research spending and higher education. Half a billion dollars will be cut over four years from a program that helps pay overhead costs for Australia’s researchers. How does that kind of cost cutting help to develop the future of Australia beyond digging up, and exporting minerals?