Sure, it's difficult balancing budgets when your main customer stops buying, but we should certainly come up with a much better plan. We didn't, and hence one suspects the recent Vic election results will also be seen nationally.
"Comment: Why Joe Hockey's budget flopped so badly" Sydney Morning Herald, By Ross Gittins, 4 hrs ago http://www.msn.com/en-au/news/australia/comment-why-joe-hockeys-budget-flopped-so-badly/ Who could have predicted what a hash a Coalition government would make of its first budget? If Joe Hockey wants to lift his game in 2015, as we must hope he will, there are lessons the government - and its bureaucratic advisers - need to learn. The first, and biggest, reason the government is having to modify or abandon so many of its measures is the budget's blatant unfairness. In 40 years of budget-watching I've seen plenty of unfair budgets, but never one as bad as this. Frankly, you need a mighty lot of unfairness before most people notice. But this one had it all. Make young people wait six months for the dole? Sure. Cut the indexation of the age pension? Sure. Charge people $7 to visit the doctor, and more if they get tests, regardless of how poor they are? Sure. Charge people up to $42.70 per prescription? Sure. Lumber uni students with hugely increased HECS debts that grow in real terms even when they're earning less than $50,000 a year? Sure. What distinguished this budget was that even people who weren't greatly affected by its imposts could see how unfair it was to others. Unfairly sacked Treasury secretary Dr Martin Parkinson is right to remind us we have to accept some hit to our pocket if the government's budget is to get out of structural deficit. But any politician or econocrat who expects to get such public acquiescence to tough measures that aren't seen to be reasonably fair needs to repeat Politics 101. This is particularly so when a government lacks the numbers in the Senate - as is almost always the case. Without a reasonable degree of support from the electorate, your chances are slim. Especially when you subjected your political opponents to unreasoning opposition when they were in office. A related lesson is that successful efforts to restore budgets to surplus invariably rely on a combination of spending cuts and tax increases. To cut spending programs while ignoring the "tax expenditures" enjoyed by business and high income-earners, as this government decided to do, is to guarantee your efforts will be blatantly unfair and recognised as such. Move in on "unsustainable" spending on age pensions while ignoring all the genuinely unsustainable tax breaks on superannuation? Sure. Our promise to the banks not to touch super trumps our promise to voters not to touch the pension. This makes sense? But a politically stupid degree of unfairness isn't the only reason this budget was such a poor one. Its other big failing was the poor quality of its measures. It sought to improve the budget position not by raising the efficiency and effectiveness of government spending, but simply by cost-shifting: to the sick, the unemployed, to the aged, to university students and, particularly, to the states. This takes brains? There are various ways to improve the cost-effectiveness of the pharmaceutical benefits scheme - though this would involve standing up to the foreign drug companies and to chemists - but why not just whack up the already high co-payment? There are ways to reform the medical benefits scheme - by standing up to specialists - but why not just introduce a new GP co-payment, even though we already have a much higher degree of out-of-pocket payments than most countries? The claim that introducing a GP co-payment constitutes micro-economic reform because it gets a "price signal" into Medicare lacks credibility. For a start, I don't believe that's the real motive. Who doubts that, once a co-payment is introduced, it won't be regularly increased whenever governments see the need for further cost-shifting? For another thing, the notion that introducing a price signal would deter wasteful use without any adverse "unintended consequences" is fundamentalist dogma, not modern health economics. Similarly, the notion that deregulating tuition fees would turn universities into an efficient, price-competitive market with no adverse consequences to speak of is first-years' oversimplification, not evidence-based economics worthy of PhD-qualified econocrats. I'm not convinced the range of savings options Treasury and Finance offered the government was of much higher quality than the options it picked. This budget was so bad because so little effort was put into making it any better. I'm starting to fear our governments and their econocrats have got themselves into a vicious circle: because the econocrats can't come up with anything better, they fall back on yet another round of that great Orwellian false economy, the "efficiency dividend". But the never-ending extraction of what have become inefficiency dividends is robbing the public service of the expertise it needs to come up with budget measures that would actually improve the public sector's efficiency. -- Cheers, Stephen _______________________________________________ Link mailing list [email protected] http://mailman.anu.edu.au/mailman/listinfo/link
