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April 30, 2013
Another day. Another article in the economic scare campaign around the federal budget deficit, which has Labor has disclosed is due to a $12 billion projected revenue shortfall. That campaign is along the lines of a decade of deficits spelling a bleak future for Australians.
Jakob Madsen invokes the spectre of Ireland and Greece as a possible future for Australia, if the current deficit spending is maintained.
David Rowe
Jakob Madsen says that it is important to steer the economy back to balanced budgets. His reason is that:
Unless this spending path is broken, Australia could risk an unpleasant speculative attack on its currency at some point in the future. And it risks having little to fall back on if economic conditions substantially worsen. Australia’s budget has been in deficit since the onset of the global financial crisis in 2008. No serious corrective course of action has been taken to reduce it – even though deficits are usually run in recessions, not during an unprecedented mining boom.
His argument is that it would have been much better if the government had saved up for a rainy day so that it would have the means available to stimulate the economy in times of economic weakness without being forced down the austerity path when it is the least desirable.
The mining boom is over, the economy is slowing down due to a high dollar and a recession in Europe and the US, Gillard Labor is tightening government spending whilst the shortfall in the budget is about 1% of GDP.
If the answer to budget deficits is to cut spending rather than raise tax collections--and that is the position of the austerity merchants--- why not eliminate some of the special concessions for Big Miners (eg., the diesel fuel excise rebate), Big Aluminum (cheap power subsidies), the fossil fuel industry, the handouts to irrigators and the public subsidies for private health insurance?
Secondly, it is the economy growing more strongly over time that is the best way to increase the long-term budget balance. This can be done by upskilling the workforce so that Australians became smarter at what they do and facilitating the shift to a digital economy.
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the federal Treasury has consistently over-estimated the recovery in tax revenues flowing into Commonwealth coffers since the expected recovery from the GFC began in 2010.