Budget 2014

[DeepState]

1. A nice overview, and I would agree entirely if for not that paragraph. Its nots all that disproportional as on 7:30 report "structural changes are being made to the low income earners, whereas high income earners are only hit by temporary levies. If you're a 250,000 earner, you're paying about an extra $1400. If you're 24 and unemployed, you're losing $2500 a year' .. where you probably don't have the assets to help you along compared to a 180K+ earner

2. As for welfare- an effective means of giving back to society

The money that goes into welfare is reinvested in the economy - don't know many job seekers who chuck it all into a term deposit so he have some cash if he ever manages to get a job

Welfare goes straight back into discretionary spending, consumer staples, utilities...drinks yes but it all goes back in.

If welfare didn't exist and you had all these poor homeless people wandering the streets you can be sure that not only would crime sky rocket, but costs for services such as policing, healthcare and clean up would go through the roof.

the economy could fall by orders of magnitude due to the fact you no longer have enough consumers in the market. Welfare is not degenerate. Welfare supports your most unfortunate countrymen. There are not enough jobs for everyone.

The deferment of dole programs for under 30s is a passionate topic and one I have a lot of sympathy for, but let's explore further.

1. The statements are true, but we need to look at not just changes (structural vs temporary) but levels as well. The wealthy already pay a disproportionate amount of their income into tax relative to an unemployed 24 year old or someone on lower income. Whilst the budget is in deficit, the wealthy are expected to pay more as they are in a better position to shoulder it than others who are already paying tax.

From a political strategy perspective, the under 24s already don't vote Libs as a bloc preferring "progressive parties" whose preferences can be subsequently negotiated, so it is easy to sacrifice. Law number one...stay in power. Law number two...refer to law number 1.

2. Welfare is tricky. The unemployed youth, who are sound of body and mind, have opportunities for employment and other opportunities are trying to be created. The overall unemployment rate of 5.5% is very close to what is essentially full employment. There are frictions for those who are, for reasons of health or circumstance, just can't work. Also, people are transitioning between jobs all the time. There will undoubtedly be those who are sound of mind and body and willing to work but can't find it. There are even programs to assist with relocation. But, yes, this is the part that sucks. There are always losers and this is hurting a vulnerable part of society. Meanwhile, another vulnerable part of society, those over 50 and needing a job are going to benefit from employment programs that pay allowances to employers to take them on.

In terms of the maximum bang for buck, distributing cash for early consumption is useful for a short term stimulus but has poor multiplier effects...you spend on a sandwich and it really doesn't cause he shop owner to do much other than to pass it on in further consumption. Spend it on infrastructure and the bang for dollar spent is much higher than a dollar spent on welfare. This type of investment unleashes a lot more GDP and, thus, creates jobs and better standard of living than welfare expenditure or helicopter money.

Australia has a pretty decent universal healthcare system compared to the US. Hopefully that provides a net for those who are suffering health issues.

If you look at France, a socialist democracy, it's going bankrupt and can't even meet its budget targets as laid out in Maastricht. The Labor party wants to distance itself from the Socialist label. I'm not saying that extreme laissare faire without community solidarity is correct, but these examples are there to highlight that high amounts of welfare don't work either and are not desired by the Opposition either.

Still, I'm sure that will be of no succour to those who are able and willing to work, but can't find any for some reason. I can't mount the slightest argument for cutting that support figure to zero for this age bracket for the length of time being considered.

 

[Calliope]

Most people, who do not belong to Special Interest Groups, judge a budget on how it affects them personally. I am quite happy that this budget does not affect my standard of living negatively, with the exception of the petrol excise. But here again it is only a small impost on me.

The petrol excise increases go to the maintenance and construction of roads, so it's only fair that the biggest users pay more.

 

[McLovin]

Still, I'm sure that will be of no succour to those who are able and willing to work, but can't find any for some reason. I can't mount the slightest argument for cutting that support figure to zero for this age bracket for the length of time being considered.

Me neither. It seems unnecessarily harsh, especially in the context of how easily the middle got off. The government has hurt those who fall into two camps (a) those on >$180k knowing that Labor is unlikely to try and target them with the broken promise meme (b) those who would never vote Lib.

And while I'm happy to see the medical research fund being established, why oh why does every government have to cut the budget for the CSIRO?

 

[Garpal Gumnut]

Not a good budget for students. Uncapped course costs and HECS indexation to increase by 2 or 3%.

Aus is already saddled with a hell of a lot private debt, what happens when university courses start costing 20 or 30k pa and the average student has a 120 - 150k HECS debt?

They either pay it back, or if they cannot, then they need to get a job in mining or infrastructure to pay it back.

This money students get through HECS is not a right, it is an obligation.

If they have too much debt, they need to work harder or sell assets.

gg

 

[McLovin]

Not a good budget for students. Uncapped course costs and HECS indexation to increase by 2 or 3%.

Aus is already saddled with a hell of a lot private debt, what happens when university courses start costing 20 or 30k pa and the average student has a 120 - 150k HECS debt?

More of them will move overseas after finishing university. I did. Didn't have to worry about my HECS debt until I moved back to Australia a few years ago, and by that stage I could pay it off as a lump sum. Of course, in the meantime, the government missed out on a lot of income tax revenue that went to HM Inland Revenue and the IRS.

The problem I see with this is that a lot of universities have dumbed down their courses to maximise profit, and in many industries like finance even the guy processing redemptions or a spreadsheet jockey needs to have a university degree (God knows why!). Not everyone who comes out of uni with a finance/law degree is going to end up being an IB.

 

[pixel]

They either pay it back, or if they cannot, then they need to get a job in mining or infrastructure to pay it back.

This money students get through HECS is not a right, it is an obligation.

If they have too much debt, they need to work harder or sell assets.

gg

One problem I see with the HECS concept is: Only those students who succeed after obtaining a degree will pay back the loan. (I'd rather call it a loan than an obligation.)
Students, who bide their time in one of the many "Arts" or "Social" studies and never turn it into something useful, will never pay it back, leaving the tax payer with a swag of write-offs.

Maybe there should be a risk assessment, as with any other loan, to determine size and duration depending on the chosen subject and likelihood of chances of success.

 

[piggybank]

Not everyone who comes out of uni with a finance/law degree is going to end up being an IB.

Hi McLovin,

Please forgive me for my ignorance (but where I came from I was known as the village idiot, well actually my Dad was and I inherited his title) but what does IB mean? My (village idiot) guess is Idle B--s--d

Cheers
PB

 

[McLovin]

Hi McLovin,

Please forgive me for my ignorance (but where I came from I was known as the village idiot, well actually my Dad was and I inherited his title) but what does IB mean? My (village idiot) guess is Idle B--s--d

Cheers
PB

Close. Investment banker.

 

[Ves]

One problem I see with the HECS concept is: Only those students who succeed after obtaining a degree will pay back the loan. (I'd rather call it a loan than an obligation.)
Students, who bide their time in one of the many "Arts" or "Social" studies and never turn it into something useful, will never pay it back, leaving the tax payer with a swag of write-offs.

Maybe there should be a risk assessment, as with any other loan, to determine size and duration depending on the chosen subject and likelihood of chances of success.

That's an interesting comment, especially regarding Arts and Social studies.

Whilst it is true that students in these courses are less likely to repay their debts according to published statistics, it is also important to note that they also make up far less a drag on the overall "bad debt burden" than their more popular counter-part courses. The major courses are a greater drag merely by weight of student numbers.

Source:

http://grattan.edu.au/static/files/assets/dc751829/809-doubtful-debt.pdf

 

[craft]

HECS Debt
Expensive Housing (debt financed)
Very little (and reducing) Tax breaks for supporting a Family.

Australia moves further down the road of intergenerational social Classes

Without parental support/inheritance getting an education, buying a house and raising a family in Australia will ensure you stay working class. There will of course be exceptions to this statement but not many, and they will probably have to be facilitated by moving oversees for periods and/or delaying/avoiding having a family.

Oh well – capital needs labour (not Labor)

 

[prawn_86]

More of them will move overseas after finishing university. I did. Didn't have to worry about my HECS debt until I moved back to Australia a few years ago, and by that stage I could pay it off as a lump sum. Of course, in the meantime, the government missed out on a lot of income tax revenue that went to HM Inland Revenue and the IRS.

The problem I see with this is that a lot of universities have dumbed down their courses to maximise profit, and in many industries like finance even the guy processing redemptions or a spreadsheet jockey needs to have a university degree (God knows why!). Not everyone who comes out of uni with a finance/law degree is going to end up being an IB.

I agree on both counts, moving o/s early on so as to not have to pay back HECS is a huge appeal for many students.

One problem I see with the HECS concept is: Only those students who succeed after obtaining a degree will pay back the loan. (I'd rather call it a loan than an obligation.)
Students, who bide their time in one of the many "Arts" or "Social" studies and never turn it into something useful, will never pay it back, leaving the tax payer with a swag of write-offs.

Maybe there should be a risk assessment, as with any other loan, to determine size and duration depending on the chosen subject and likelihood of chances of success.

I dont personally agree with this, because then it is still going down a segregation line. Nurses and teachers dont earn as much as a good finance grad, but i would argue, generally speaking, add more value to society

This money students get through HECS is not a right, it is an obligation.

Meanwhile many of the baby boomers got free university with nothing to repay at all...

 

[prawn_86]

If the tax rate is falling to 28.5% doesn't that also mean that franking credits will reduce?

 

[burglar]

... Meanwhile many of the baby boomers got free university with nothing to repay at all...

Yes!
You are right !!

Baby Boomers were ground in a different mill.

 

[Junior]

One problem I see with the HECS concept is: Only those students who succeed after obtaining a degree will pay back the loan. (I'd rather call it a loan than an obligation.)
Students, who bide their time in one of the many "Arts" or "Social" studies and never turn it into something useful, will never pay it back, leaving the tax payer with a swag of write-offs.

Maybe there should be a risk assessment, as with any other loan, to determine size and duration depending on the chosen subject and likelihood of chances of success.

Is HECS repaid following death, if you never have a high enough income to pay it out during your working life?

 

[craft]

Is HECS repaid following death, if you never have a high enough income to pay it out during your working life?

Not yet.

Dying is a pretty radical avoidance measure.

 

[Junior]

Not yet.

Dying is a pretty radical avoidance measure.

Haha, I'm not proposing it as an avoidance measure. Just curious from a federal budget perspective.

Surely the bad debt ratio would be very low if this were the case.

 

[prawn_86]

Haha, I'm not proposing it as an avoidance measure. Just curious from a federal budget perspective.

Surely the bad debt ratio would be very low if this were the case.

My understanding is that the biggest issue is that some people never end up earning enough, or end up doing multiple degrees.

I would be for a cap on total HECS per person along the lines of you are only allowed 2 undergrad and one postgrad degree or something like that, but have no idea if that would actually do anything to help the budget

 

[Ves]

Haha, I'm not proposing it as an avoidance measure. Just curious from a federal budget perspective.

Surely the bad debt ratio would be very low if this were the case.

See post #29. I linked a report from the Grattan Institute. Section 6 is on this topic (from page 38 onwards).

There is both a benefit from introducing such a measure to the budget, and also social costs of such a measure. The numbers are not straight forward (on a basic level you need to estimate how many people with HECS / HELP debts will die & the size of their debt & also their estate).

There is also a discussion on the prospective vs. retrospective nature of any measures to legislate the repayment upon death of student HECS / HELP debt. For instance, were those who already had a HECS or HELP debt misled into thinking that it would not need to be repaid if they died?

 

[sptrawler]

Yes!
You are right !!

Baby Boomers were ground in a different mill.

Yes you are right.
Back then only the top 5% or so went to uni. You had exams that filtered students at various levels.
Nursing, teaching and surfing weren't degrees, nurses were trained in hospitals and earned a wage.
Now everyone and their dog goes to uni for all sorts of useless degrees, someones got to pay for it.

As McLovin said the uni's are about making money now, not so much about the end product.

 

[McLovin]

If the tax rate is falling to 28.5% doesn't that also mean that franking credits will reduce?

Yer. The PPL levy paid by the top 3,000 companies will also not have franking credits attached because it's a "levy".