[infowarrior1]

This news broke about the increase of the budget deficit:

Quote:

The deficit forecast for the federal budget has blown out to $40.4 billion.

That compares with the $29.8 billion deficit predicted by Treasurer Joe Hockey in May.

The treasurer released his mid-year economic and fiscal outlook on Monday.

Deficits over the next three financial years are also expected to be larger than forecast in the May budget.

It means the deficit in 2017/18 is now expected to be $11.5 billion rather than the $2.8 billion previous estimated.

The report blames two factors for the $43.7 billion deterioration in the budget over the four-year estimates - the impact of the economy on tax receipts and payments, and the Senate's handling of May budget measures.

It says a 30 per cent collapse in the iron ore price and weaker-than-expected wage growth has resulted in tax receipts being revised down by $31.6 billion.

Delays in passing legislation and negotiations with the Senate have cost the budget more than $10.6 billion over the forward estimates, "keeping debt and interest payments higher for longer".

Despite the deterioration, the budget review says a wafer-thin surplus of 0.8 per cent of GDP is projected for 2019/20.

http://www.sbs.com.au/news/article/2014/...on-2014-15



If you were in Tony Abbott or Joe Hockey's place what would you have done differently to solve this crisis?

[Deluge]

Government spending as a % of GDP has been consistent since the 90's, the problem is government revenue has decreased due to the winding down of the mining boom. Despite all the deeply unpopular measures in the recent budget, the main way they were going to address this structural problem is bracket creep. i.e letting inflation push more taxpayers into higher tax brackets, which is an income tax increase in effect if not in name. And no serious economist would call Australia's budget situation a "crisis".

[Phoenix]

Yeah I would like to have seen the government have a Senate majority too, they'd probably have cut a lot faster and deeper.
As it stands though, the Left will scream murder when they cut something, but yell 'failure' when the government doesn't meet its budget surplus promise.

[infowarrior1]

(12-14-2014 11:21 PM)Phoenix Wrote:  

Yeah I would like to have seen the government have a Senate majority too, they'd probably have cut a lot faster and deeper.
As it stands though, the Left will scream murder when they cut something, but yell 'failure' when the government doesn't meet its budget surplus promise.

Yeah. And considering that the public goes along with that so easily



I am sure that when Bill Shorten gets elected the Australians will hate his guts very soon as well.

[Deluge]

John Howard made big cuts when he was first elected and went on to the win the next election despite also pushing to introduce a big new tax, the GST (albeit he lost the popular vote). The difference was people thought those cuts were fairly distributed amongst society, and he didn't try and attack single-payer healthcare or deregulate universities. Australian's are willing to bear pain if they feel it is necessary and fair, and they don't feel either about the current budget.

If Abbott and Hockey had never proposed university deregulation, the Medicare co-payment and making unemployed young people wait 6 months to collect benefits (none of which had a chance of passing the Senate anyway) and scrapped the tax-exempt status for high earner's Superannuation, negative gearing and the Paid Parental Leave Scheme he would be faring much better in the polls.

45% nationwide and 41% in Victoria almost 6 months after the budget is low enough at this point (15 months into a 3 year term) to make a one-term government a realistic possibility.

[Handsome Creepy Eel]

While I certainly prefer the current PM to Julia Gillard, it does have to be said that he's just blundering left and right. The relatively small budget deficit is the least of his problems.

[Phoenix]

Of course, the public's idea of fair is the same old: 'take from the rich, give me free loot'.

What else are they going to cut, that wouldn't also raise outrage from some group? If people vote-in a right-wing government, there should be a reasonable expectation of laws changing in the free-market direction. The Left lost that one, they can resume their sabotage next round.

If I were Abbott and Hockey, I would have gone for a double-dissolution early. Either you're capable of delivering your policy into legislation, or you're going to take the flack for floundering. It would be better they lost a double-dissolution election, and labor got another term and the blame for things going south, and then do a good job next term with a majority in both houses.

At least they got rid of the carbon tax though.

[infowarrior1]

(12-15-2014 04:10 AM)Phoenix Wrote:  

Of course, the public's idea of fair is the same old: 'take from the rich, give me free loot'.

What else are they going to cut, that wouldn't also raise outrage from some group? If people vote-in a right-wing government, there should be a reasonable expectation of laws changing in the free-market direction. The Left lost that one, they can resume their sabotage next round.

If I were Abbott and Hockey, I would have gone for a double-dissolution early. Either you're capable of delivering your policy into legislation, or you're going to take the flack for floundering. It would be better they lost a double-dissolution election, and labor got another term and the blame for things going south, and then do a good job next term with a majority in both houses.

At least they got rid of the carbon tax though.

That's why democracy fails on a large enough scale. It just really reduces itself to looting others.

[Deluge]

(12-15-2014 04:10 AM)Phoenix Wrote:  

Of course, the public's idea of fair is the same old: 'take from the rich, give me free loot'.

What else are they going to cut, that wouldn't also raise outrage from some group? If people vote-in a right-wing government, there should be a reasonable expectation of laws changing in the free-market direction. The Left lost that one, they can resume their sabotage next round.

If I were Abbott and Hockey, I would have gone for a double-dissolution early. Either you're capable of delivering your policy into legislation, or you're going to take the flack for floundering. It would be better they lost a double-dissolution election, and labor got another term and the blame for things going south, and then do a good job next term with a majority in both houses.

At least they got rid of the carbon tax though.

All the cuts were directed at the lower and working classes. There are huge amounts of revenue they could've earned by tackling upper-class welfare, let alone middle-class welfare, and the temporary debt-levy on high income earners was a joke. Superannuation tax-exemption, negative gearing, dividend imputation and the Paid Parental Leave Scheme are depriving the government of tens of billions of dollars of revenue, but the Coalition's donors won't let them touch the first three and Tony Abbott needs the PPL to use as an example to tell women/feminists that he's not sexist, even though no one else in his cabinet supports it and women/feminists have long since made up their mind about Abbott on "women issues".

At the end of the day though Australian's aren't really a small government people, they're willing to pay more for more government services. Good example from being Gillard and Shorten's National Disability Insurance Scheme, which was paid for by increasing the Medicare levy in people's income tax. This program funded by a direct tax increase, was so overwhelming popular (clear majority amongst all income brackets and voter blocs) that the Coalition immediately rolled over and gave their support for the scheme. Is it really looting if the people who pay most of the tax (50% of income tax is payed by the top 10% of earners) overwhelmingly support the sacred cows (health, education, industrial relations) of the welfare state? There's a reason why John Howard never dared to touch them, and when he finally did with WorkChoices 4 terms into office he got kicked out so brutally he even lost his own Coalition heartland seat for the first time in it's history.

[Saweeep]

This is pretty much a mirror situation of that we've had in the Uk for a while now.

I suspect that like us Aus doesn't have an income problem but an expenditure problem.

[Paracelsus]

It didn't have an income problem - until the mining industry began to go into the bust phase. Howard had unprecedented income tax receipts coming in off the back of the sudden boom in mining driven by China's thirst for resources. And like a lot of people, the country began to spend up to its means. Such cash as there was saved was basically blown by the Gillard/Rudd governments, not that some of Howard's middle-class welfare was helping the situation a lot.

[Deluge]

(12-15-2014 06:41 AM)CrashBangWallop Wrote:  

This is pretty much a mirror situation of that we've had in the Uk for a while now.

I suspect that like us Aus doesn't have an income problem but an expenditure problem.

No, I mentioned this before. Government spending as % of GDP has been the same here all century when we were running surpluses and actually had paid off ALL our outstanding government debt. That is practically unheard of for any country anywhere.

What happened from 2008 onwards was the GFC and the end of the mining boom, which both took big dents out of government revenue and had the combined effect of stagnant wage growth. Government revenue went from parity with spending as a % of GDP to 2-3% lower. Fiscal stimulus during the GFC created a deficit, we managed to escape as the only OECD country not to go into recession but not only could we not pay off the new debt but it kept getting bigger because revenue continued to fall.

That said the U.K and the U.S.A would still kill to have Australia's budget situation right now.

[Saweeep]

(12-15-2014 06:53 AM)Deluge Wrote:  

(12-15-2014 06:41 AM)CrashBangWallop Wrote:  

This is pretty much a mirror situation of that we've had in the Uk for a while now.

I suspect that like us Aus doesn't have an income problem but an expenditure problem.

No. I mentioned this before. Government spending as % of GDP has been the same here all century when we were running surpluses and actually had paid off ALL our outstanding government debt.

What happened from 2008 onwards was the GFC and the end of the mining boom, which both took big dents out of government revenue and had the combined effect of stagnant wage growth. Government revenue went from parity with spending as a % of GDP to 2-3% lower and now where in deficit. Fiscal stimulus during the GFC created a deficit, we managed to escape as the only OECD country not to go into recession but not only could we not pay off the new debt but it kept getting bigger because revenue continued to fall.

That said the U.K and the U.S.A would still kill to have Australia's budget situation right now.

I should have been clearer on what I was getting at.

What I meant was that in reality all of the Anglosphere country governments have an incredible amount of money to spend.

However a large majority of what they spend it on is nonsensical rubbish.

[T and A Man]

Well now something I know a lot about.

This situation was sewn back in the Howard government, particularly 2003-7. They mistook a temporary increase in tax receipts due to a Ming boom as a structural boon cuz 'our ideology' work.

Basically the increased revenue has subsided, but the annual outlays remain.

Why the proposed cuts are so resisted is because they are aimed at working and underclasses, the same class that didn't make hay during the boom.

One thing we do lead the world in is foregone tax receipts due to concessions. This is namely negative gearing and superannuation concessions.

We still have an unaddressed housing bubble which we have leveraged about 100% of GDP in foreign debt, guaranteed implicitly by government, and has done nothing but bud up the price of our existing housing stock.

So insidious and corrupt this feature is of our economy that we have loosened our foreign buyer laws, then dont even enforce these new, lax laws anyway.

We also spend around 5% GDP on welfare for our elderly, to the point a retired couple can have a $5mil as their home, $1mil in the bank, and still get a small welfare payment and a healthcare card.

Rich people, elderly home owners made out like bandits, and when times get tough, they're not even asked to pay a cent in down times,

That's why people are pissed, it was a most clear manifestation of class war, and nit the one that gets bandied about that often

[Saweeep]

By the way the UK deficit is about £170B this year....

[Deluge]

^^Thanks for reminding me. I forgot to mention that you could own a sprawling mansion in Point Piper or Toorak and not have it counted as an asset when working out your retirement benefits as long as it's your "primary residence". It's a complete joke. Liberal party donors would never approve of scrapping that though, or tax-exempt Superannuation or negative gearing.

The later is literally wealthy baby boomers carving out Sydney and Melbourne property markets for themselves and pushing young people out of the housing market, who could never afford to pay $800,000 for a house (the median house price in Greater Sydney). I actually think foreign housing investment here is great because it drives up house prices in wealthy suburbs which punishes wealthy baby boomers for their inter-generational theft and increases the supply of inner city apartments to be rented for young people priced out of buying homes. Labor could get away with it scrapping them though, hopefully Bill Shorten being a lifelong union man has some down to earth common sense about him, I guess we'll see.

[Saweeep]

(12-15-2014 07:15 AM)Deluge Wrote:  

^^Thanks for reminding me. I forgot to mention that you could own a sprawling mansion in Point Piper or Toorak and not have it counted as an asset when working out your retirement benefits as long as it's your "primary residence". It's a complete joke. Of course Liberal donors would never approve of scrapping that, or tax-exempt Superannuation or negative gearing.

The later is literally wealthy baby boomers carving out Sydney and Melbourne and pushing young people out of the housing market, who could never afford to pay $800,000 for a house (the median house price in Greater Sydney). Labor could get away with it scrapping them though, hopefully Bill Shorten being a lifelong union man has some down to earth common sense about him, I guess we'll see.

We have the same boomer problems.

The problem is that they make up a huge percentage of our voter base and it's only going to get worse with an ageing population.

Young people can't afford houses pretty much anywhere in the UK at all.

[Phoenix]

(12-15-2014 06:36 AM)Deluge Wrote:  

At the end of the day though Australian's aren't really a small government people, they're willing to pay more for more government services.

Do you know any countries that are? The size of government and it's tendency to fence loot in exchange for power has little to do with the nation of people involved, but in its constitution.

I agree that they should cut into upper/middle class welfare too, but when you're already taking more from those groups, you're not favouring them over other groups, you're just disfavouring them less than you were.

[Deluge]

(12-15-2014 07:17 AM)CrashBangWallop Wrote:  

(12-15-2014 07:15 AM)Deluge Wrote:  

^^Thanks for reminding me. I forgot to mention that you could own a sprawling mansion in Point Piper or Toorak and not have it counted as an asset when working out your retirement benefits as long as it's your "primary residence". It's a complete joke. Of course Liberal donors would never approve of scrapping that, or tax-exempt Superannuation or negative gearing.

The later is literally wealthy baby boomers carving out Sydney and Melbourne and pushing young people out of the housing market, who could never afford to pay $800,000 for a house (the median house price in Greater Sydney). Labor could get away with it scrapping them though, hopefully Bill Shorten being a lifelong union man has some down to earth common sense about him, I guess we'll see.

We have the same boomer problems.

The problem is that they make up a huge percentage of our voter base and it's only going to get worse with an ageing population.

Young people can't afford houses pretty much anywhere in the UK at all.

Now imagine if the U.K allowed you to buy a house as an investment property, rent it out for less than the cost of the mortgage payments, and offset that loss against your tax bill? It literally creates a financial incentive for boomers to make loss making investments, and leads to a situation where the majority of new mortgage debt taken on in Australia is for investment properties rather than people buying their own homes. Pure insanity.

http://en.wikipedia.org/wiki/Negative_ge...stralia%29

(12-15-2014 07:20 AM)Phoenix Wrote:  

(12-15-2014 06:36 AM)Deluge Wrote:  

At the end of the day though Australian's aren't really a small government people, they're willing to pay more for more government services.

Do you know any countries that are? The size of government and it's tendency to fence loot in exchange for power has little to do with the nation of people involved, but in its constitution.

I agree that they should cut into upper/middle class welfare too, but when you're already taking more from those groups, you're not favouring them over other groups, you're just disfavouring them less than you were.

Would Americans support increased income taxes to pay for single-payer healthcare? No way. Australia is less socialistic than the U.K maybe (I know public housing there is much more common for instance) but it still takes a European view on these matters. We're certainly nowhere near as Libertarian as America is, the Liberal Party (our main Centre-Right party) is to the left of America's Democrats...

[Saweeep]

(12-15-2014 07:21 AM)Deluge Wrote:  

(12-15-2014 07:17 AM)CrashBangWallop Wrote:  

(12-15-2014 07:15 AM)Deluge Wrote:  

^^Thanks for reminding me. I forgot to mention that you could own a sprawling mansion in Point Piper or Toorak and not have it counted as an asset when working out your retirement benefits as long as it's your "primary residence". It's a complete joke. Of course Liberal donors would never approve of scrapping that, or tax-exempt Superannuation or negative gearing.

The later is literally wealthy baby boomers carving out Sydney and Melbourne and pushing young people out of the housing market, who could never afford to pay $800,000 for a house (the median house price in Greater Sydney). Labor could get away with it scrapping them though, hopefully Bill Shorten being a lifelong union man has some down to earth common sense about him, I guess we'll see.

We have the same boomer problems.

The problem is that they make up a huge percentage of our voter base and it's only going to get worse with an ageing population.

Young people can't afford houses pretty much anywhere in the UK at all.

Now imagine if the U.K allowed you to buy a house as an investment property, rent it out for less than the cost of the mortgage payments, and offset that loss against your tax bill? It literally creates a financial incentive for boomers to make loss making investments, and leads to a situation where majority of new mortgage debt taken on in Australia is for investment properties rather than people buying their own homes. Pure insanity.

http://en.wikipedia.org/wiki/Negative_ge...stralia%29

Ok that's completely insane. Lost for words!

[T and A Man]

Its not the mortgage, just the interest component. You can offset the cost of capital against other forms of income. You can do it against shares too. Any income producing asset really.

We also have government constricting supply, negative gearing amplifies it due to speculative mania

[Saweeep]

(12-15-2014 07:36 AM)T and A Man Wrote:  

Its not the mortgage, just the interest component. You can offset the cost of capital against other forms of income. You can do it against shares too. Any income producing asset really.

We also have government constricting supply, negative gearing amplifies it due to speculative mania

Ah ok. That makes more sense and I think is the same here.

We used to have mortgage interest relief, in general, here up until a few decades ago.

During the GFC did you guys have any correction of your housing bubble at all?

We did briefly but it was propped up by the government and is once again beginning to get out of control.

[T and A Man]

No correction, the Rudd government pushed every button they could to preserve it, drop cash rate 3.0%, tripled grants to first home buyer up to $21,000, loosened foreign buyer laws, underwrote banks foreign debt, relaxed rules for superannuation (401k) funds to buy property

[Deluge]

(12-15-2014 07:39 AM)CrashBangWallop Wrote:  

(12-15-2014 07:36 AM)T and A Man Wrote:  

Its not the mortgage, just the interest component. You can offset the cost of capital against other forms of income. You can do it against shares too. Any income producing asset really.

We also have government constricting supply, negative gearing amplifies it due to speculative mania

Ah ok. That makes more sense and I think is the same here.

We used to have mortgage interest relief, in general, here up until a few decades ago.

During the GFC did you guys have any correction of your housing bubble at all?

We did briefly but it was propped up by the government and is once again beginning to get out of control.

No, Australia escaped the GFC more or less unscathed compared to most countries. Housing prices dipped slightly but rebounded quickly after. To be fair it's hard to call it a bubble when the problem is a population concentrated almost entirely in big cities and a dearth of housing supply, as opposed to speculative mania. Mania's and bubble's are short-lived, Australia's housing's been very expensive for decades. Even if Australia scrapped negative gearing and went into a depression tomorrow housing here would still probably be overvalued property by international standards. It's a structural problem.

[Saweeep]

(12-15-2014 07:45 AM)T and A Man Wrote:  

No correction, the Rudd government pushed every button they could to preserve it, drop cash rate 3.0%, tripled grants to first home buyer up to $21,000, loosened foreign buyer laws, underwrote banks foreign debt, relaxed rules for superannuation (401k) funds to buy property

Our unpublicised but real solution was a steady devaluation of the currency (25% or so). Unfortunately wages have not increased at all really since the GFC making the problem even worse in many respects.