September 8, 2014
The Abbott Govt celebrates the removal of carbon pricing and the mining tax and stopping the asylum seeker boats from reaching Australian shores. That represents a roll back of Labor's policies and the rhetoric is that ridding the country of a minerals tax will boost income and create jobs even though the investment boom is over, the price of minerals is falling, and the mining tax raised very little money.
The next stage of Chinese development will likely see its citizens spending more on consumer goods, and this in turn means a reduced, demand for the raw minerals from Australia. What then of its medium and long term reforms as distinct from the short-sighted politics and protecting the interests of the miners and fossil fuel companies?
The removal of the increase in compulsory superannuation from 9% to 12% indicates that it has none. Superannuation is one key way to further the "end of the age of entitlement" agenda as it shifts people from the old age pension to superannuation. It's self reliance par excellence. All it has done is to cut the rate of increase in the old age pension. This is hardly forward looking from a government anxious to tout its neo-liberal credentials.
The Coalition's rhetoric is that the best way to eliminate the budget deficit is to slash spending, cut superannuation entitlements and ensure 80 per cent of the proceeds from Australia's diminishing resources flow offshore. Eliminate the budget deficit in this way----by promoting inequality and placing the greatest burden on those least able to bear it----will ensure national development and growing prosperity. The Coalition's rhetoric is premised on a morality tale:--a period of opulence must be atoned for by a period of austerity.
The economic argument from economists with respect to 'budget repair' is that if a reduction in spending growth is not achieved over the medium term, an even greater share of the burden of fiscal consolidation would need to fall on the revenue side of the budget, meaning taxation increases. The Commonwealth budget doesn’t add up. Revenues don’t cover outgoings. The numbers won’t improve much with time. It’s very unlikely that driving economic growth will solve the budget’s problems, given that small countries like Australia are simply too dependent on what goes on abroad.
Yet the Coalition's new spending which is increasing the budget deficit, suggests that it will not prove capable of managing the twilight of the mining boom by investing to develop human capital by educating the Australian population. Their emphasis appears to to be the low road of a low wage economy.