Budget Woes

The budget season has come and gone.  Treasurers have made budget speeches, and Oppositions have responded.  And yet the question remains – what’s changed?

Governments should provide their constituents with a vision of the future, the place they are going to take us to.  The budget is the tool in the tool box that helps get us there.  In the absence of any articulated vision of the future, by either side, in either parliament, what is it about the recent budget that shines a light into the souls of government and the alternative government, and gives us an indication as to where they want to take us. What signals can we glean from the latest budget round.

At the Commonwealth level, a new carbon tax is being imposed on “polluters” and being redistributed amongst the community.  The tax is being imposed to clean up our act and stop polluting the atmosphere with carbon dioxide.  Carbon dioxide is a byproduct of the burning of coal and petroleum products.  It is also a natural gas that is respired by all life forms, including you and me.

The call is for Australia to move away from coal as the major source of energy and to move to more expensive renewable energy sources, such as solar and wind power.  Yet we export increasing quantities of coal for others to burn.  End result, no change in the amount of gas in the air, cheaper power is provided to our trading partners, and as a consequence, manufacturing jobs are moved offshore.  Some signal.

At the State level, we have been advised the Tasmanian economy is in the slow lane, with little economic growth and with rising unemployment.  The budget papers recognise declining revenues from the GST, a tax that was meant to be a growth tax, and the Treasurer has decided to go into net debt as a consequence.

Like their Federal counterparts, who query the accuracy of the revenue estimates, the State Opposition has raised questions regarding the forward estimates for GST receipts, but this is not and should not be the main game.

Going into net debt last year was considered evil, now it is acceptable.  Interesting change of rhetoric.  Some taxes have been increased, but I suspect will do nothing to dampen or stimulate the economy.  The big ones though, land tax and payroll tax, have not been considered.  These are in the greatest need of reform if the economy is to stimulated and politicians cannot keep squibbing it.

At present land tax is not imposed on private dwellings, so the burden of this tax falls mainly on commercial property.  The signal is that commercial property is fair game for taxation purposes.  Payroll tax is imposed to a greater degree on large employers.  Signal.  We penalize large businesses.  And the rebate for apprentices has not been restored.  Signal, no encouragement is given to employ our youth or to advance our skill base.

On the expenditure side, the government has ring-fenced education and health from any further cuts.  These two departments make up over 50% of budget expenditures.  The government should be ensuring these departments practice proper cost control measures to ensure the taxpayer is getting the best bang for the buck.  Cost control does not necessarily mean cost cutting, but it does mean a more effective use of the money.  Such a concept seems to have been ignored.

There has been some movement to rein in the cost of living, and action has been taken to bring efficiencies into the power distribution system.  A good start, but more can be done to control expenditures.  At the same time, government should have in place a Plan B in case Aurora cannot be sold.  I suspect it would not be seen as a preferred asset by potential buyers.

The government’s continuing austerity measures are to be balanced, or so it is hoped, by an increase in investment activity by the private sector.  The Treasurer has gone to some pains in recent times to make the call for the sector to front up to the plate.  And this is a good call.  It is what we expect of the sector.

But there is a quid to the quo.  In order for industry to invest there needs to be a signal from the government that such investment would be encouraged.  There is so much that can be done in the area of microeconomic reform to provide that opportunity, but again it has not been addressed.

There are presently 34 separate planning schemes in the State.  The regulatory environment is harsh and inflexible.  Steering a way through them is extremely onerous, time consuming, and exhausting.  With an appeals process weighted against any investor.  And yet no mention of any reform in either the budget or the budget reply speeches.  Signal – investment is not wanted, and investors go elsewhere.

The continuing and ongoing demands by the conservation movement to move land out of productive purposes is alarming, and continues unabated.  Whether the topic is forestry, mining, aquaculture, agriculture, even tourism in our natural places, the argument against them is continual: more ground needs to be preserved from economic activity.

Would you invest in these industries, knowing that at any time you may be at the butt end of a claim to close you down?  Because that is what is happening right now.  With unemployment high and climbing, and with our rural communities bleeding, the demand from the preservationists is to lose more jobs.  Quite frankly, it is obscene.

The budget provides no clue whatsoever as to which direction the government wants to take us on these critical issues.

Some argue that the economy in transition.  It is a reasonable argument, and an obvious one, because economies are always in transition.  The issue is whether we should actively close down existing industry in the hope that something new will come along, or to maintain our existing base whilst encouraging new activity.  No signals in the budget for the latter proposition.

The current European maelstrom will lead to a flight of capital and people from the area, both looking for safe haven.  We could be a beneficiary, properly targeted.  But there seems to be little focus on such benefits.

Many say our future lies in Asia.  As Paul Keating once said, we need to be a part of Asia, not apart from it.  I agree with this view, but what are we doing as a state to ensure our future?  Whether it is Asian languages in our schools, an active student exchange program or trade offices in China and India, it would appear neither party has given any consideration as to how to engage with the region.  A trade mission once a year is a token gesture at best.  Without a concerted effort, the rest is platitude.

So the out-take from the present budget round is that our political leaders are more concerned with managing the present, and scoring cheap political points off each other, than providing us with a direction for the future, and the means to achieve it.  We deserve better.