Budget 2014

[Smurf1976]

I seriously doubt that we'll see major growth in private debt at least in terms of % of GDP.

The "spend like there's no tomorrow, "equity mate" will take care of the debt" thing was pretty much killed by the GFC so far as I can tell. Consumers just don't seem anywhere near as willing to borrow and spend as they were pre-2008.

That plus we don't really have anything obvious to spend the money on anyway, apart from (mostly overseas) travel. Homes have already been renovated on mass in recent times. There's no new expensive tech device that everyone wants - if someone hasn't bought a computer and flat screen TV by now then they're probably not going to buy one ever. Most homes now have air-conditioning. The solar boom is over too. Per capita car travel is trending down in practically all developed countries - car's aren't the thing they used to be either economically or socially (and to the extent that people do spend on vehicles, it's going to be 100% on imports soon anyway).

So if private debt is going to increase then it's either going into speculation or business investment I'd expect. But speculation is non-productive by its' very nature, and business will only borrow to invest if they can make a profit by doing so.

The whole easy money, borrow an spend, "equity mate" thing was a once in a lifetime experience that won't be repeated soon in my opinion. The world has changed and pinning hopes on a revival of a past trend is foolish at best.

 

[sptrawler]

It's interesting that Labor are against raising the pension age, yet they raised it from 65 to 67 in 2009.

 

[pixel]

It's interesting that Labor are against raising the pension age, yet they raised it from 65 to 67 in 2009.

Given the coalition's rejection of everything during Labor's tenure, it is utterly unsurprising that Labor refuses to rubber-stamp the current razor-gang.

 

[Judd]

It's interesting that Labor are against raising the pension age, yet they raised it from 65 to 67 in 2009.

Politics. Normal. Sadly.

 

[Calliope]

Given the coalition's rejection of everything during Labor's tenure, it is utterly unsurprising that Labor refuses to rubber-stamp the current razor-gang.

The Coalition made the mistake of trying to save money, and Bill Shorten and apparently the electorate don't like it. If they had followed Labor/Green policy to borrow and spend and not worry where the money was coming from, then they would be sitting pretty now.

Political expediency turns the Ant and the Cricket moral on it's head.

 

[Smurf1976]

The Coalition made the mistake of trying to save money, and Bill Shorten and apparently the electorate don't like it.

It's the manner of saving money, not the concept per se, that has upset many I think.

A temporary rise in tax for high income earners versus a permanent cut to welfare for those under 30 especially and a permanent increase in military spending.

It all sounds very ideologically driven, a typical right wing / conservative approach. If money was the real focus, then there are alternative ways of going about that I'd think.

 

[Calliope]

It all sounds very ideologically driven, a typical right wing / conservative approach.

Yes, it is simply a case of the greedy, right-wing, cigar-smoking rich grinding down the hard-working poor.

What baffles me is that Abbott and Hockey with all the resources of Treasury can't get it right when we have so many budgetry strategists on ASF who know all the answers.

 

[sptrawler]

It's the manner of saving money, not the concept per se, that has upset many I think.

A temporary rise in tax for high income earners versus a permanent cut to welfare for those under 30 especially and a permanent increase in military spending.

It all sounds very ideologically driven, a typical right wing / conservative approach. If money was the real focus, then there are alternative ways of going about that I'd think.

Apparently they are focusing on spending this budget, the white paper due to be commenced, looks at the tax side.
Apparently the quickest way to stop the blow out is to curtail outgoings, seems like it wasn't well recieved.lol

Maybe the tax increase on high income earners will be a permanent sugestion, who knows.
Oh well, let's career on regardless.

 

[DeepState]

The Budget explanation for all this fiscal responsibility is largely to prevent extensive build up of debt to ensure that we remain credible in the eyes of the international market. Gee, let's take a look:

What is Australia's net debt to GDP ratio and interest payments to GDP ratio likely to look like (Source: Statement 10, Budget Paper 1):



....around 11% of GDP with interest payments of 0.5% of GDP (which equates to about 2% of receipts on an underlying cash basis). Wow, massive problem with that right now. Not.


What does the rest of the Advanced World look like (Source: IMF):



The list rolls over a page and Australia is somewhere close to the bottom of it. And we are going to lose credibility in the world capital markets? Are you nuts?

Nominal GDP will likely grow at around 4-5.5% per annum. So long as the budget deficit is less than that figure, our net debt to GDP will decline. As far as I can tell, our butts actually aren't on fire and, if it were, other countries will be in worse shape and capital will flee from them to the butt that is burning at a lower temperature. I don't understand why we are taking such measures when there is actually no need. There could be a slightly negative budget balance and all would be fine. The GFC saw only a slight deterioration in the budget position, for example. That was huge.

I'm not saying that no tightening was required, I'm just wondering why there is urgency to return to surplus when it doesn't seem called for. All these nations face some form of demographic aging which will place pressure on health and pension expenses too. In Australia's case, if the participation rate of those aged 15-70 remains the same as it does today (it won't because pension ages are being pushed back so these figures are worse than reality/projections) the dependency ratio deteriorate by 5% of what it was between 2013 and 2030 and a further 3% between 2030 and 2050. Does that strike you as some sort of monster demographic disaster on our doorstep particularly given pension expenditure is increasingly becoming self-funded?

 

[Smurf1976]

Conservative governments - low welfare, low corporate taxation, big military etc.

Socialist governments - higher welfare, higher taxation, less focus on military etc.

What the Coalition has done looks awfully like just an implementation of ideology using the budget situation as a convenient excuse. Cutting welfare etc whilst raising military spending to 2% of GDP - exactly the sort of thing they'd like to do even if we had a surplus.

How about closing some of the tax loopholes as an alternative?

 

[sptrawler]

How about closing some of the tax loopholes as an alternative?

Isn't that what the 'white paper' on taxation is meant to identify?

I think from my basic understanding of the fiscal model, minor changes to handouts, has a minimal effect on the equilibrium of the system. It is a known cost and a known saving.

Changes to the 'tax take', has a much larger ripple effect.
For example, the low interest rate climate currently in place, is stimulating employment in the building sector which is counteracting the contraction in mining related employment.
Hit neg gearing and the effect may be immediate and excessive.

I'm sure everyone would love some big tax hits, however the economy is in a fairly precarious state. That is spending is low, businesses are hitting the wall, our manufacturing isn't competitive, our wages are high relative to competition, our welfare system is generous.

It is great, but it is going backwards.
I know they use computer modelling and small changes to inputs give radical changes to outcomes.
A bit like controlling on the bypass, as opposed to opening the main v/v

 

[Calliope]

Conservative governments - low welfare, low corporate taxation, big military etc.

Socialist governments - higher welfare, higher taxation, less focus on military etc.

What the Coalition has done looks awfully like just an implementation of ideology using the budget situation as a convenient excuse. Cutting welfare etc whilst raising military spending to 2% of GDP - exactly the sort of thing they'd like to do even if we had a surplus.

How about closing some of the tax loopholes as an alternative?

I guess David Marr is your mentor. You certainly think alike.

On Q&A;

Sharman Stone : …Australia has some of the lowest productivity per worker in the developed world and it has been going down over the last 10 years. We have about the highest, I have to say, minimum wage as well in the developed world –

David Marr : [interjecting] Yes, let’s get that down.

Sharman Stone : Let’s get that down in that it looks – it reflects on our productivity levels where we have very high and –

David Marr : [Interjecting] Don’t you think it’s a great idea?

Sharman Stone : Well, just look, just – just give me time, David. Just hang on.

David Marr : [interjecting] – to make sure – to make sure that the people on the maximum don’t get taxed…. Make sure the people on the maximum, which is everybody here, don’t get taxed…

Sharman Stone: No, just let me make a point.

David Marr : [interjecting] – but get that minimum wage down.

Sharman Stone: Just let me make a point, please, David.

David Marr : [interjecting] Let’s get them poorer. Well, we’ve got to.

Alannah MacTiernan: [interjecting] Get them down to $2 a day.


Sharman Stone : If you can both stop yelling at me for a minute, and let me explain.

David Marr : [interjecting] I am helping you.

Sharman Stone : If we have a very high minimum wage and we have very low productivity, when we have a highly regulated work force, so there’s very little flexibility –

David Marr : [interjecting] And a AAA rating (Speaks indistinctly)…

Tony Jones : Hang on, David. Hang on, David.

 

[DeepState]

Conservative governments - low welfare, low corporate taxation, big military etc.

Socialist governments - higher welfare, higher taxation, less focus on military etc.

What the Coalition has done looks awfully like just an implementation of ideology using the budget situation as a convenient excuse. Cutting welfare etc whilst raising military spending to 2% of GDP - exactly the sort of thing they'd like to do even if we had a surplus.

How about closing some of the tax loopholes as an alternative?

Hi Smurf

You've made mention of the military expenditure twice in this thread. Just want to point out a couple of things.

This from Statement 6 of Budget Paper 1:



There is a budgeted plan to increase military expenditure by 2% per annum for the year to 2013/14. It is presently closer to 1.1% of GDP. As nominal GDP will be materially higher than 2%, the proportion of military expenditure to GDP will actually decline. Over the period through to the end of the projection, it will rise by a further 5.4% per annum. This is close to the rate of nominal GDP growth and hence military expenditure will be pretty much static as a percentage of GDP.

The US has criticized Australia for its very low military budget and, thus, limited role that it can play in the Pacific Sphere. For a country with our land mass and coastline, albeit being an island affords some protection, this level of expenditure is very low by world standards.

Cheers

 

[sptrawler]

Not wanting to make an issue of military spending, but some of the posters that condem the spending on military equipment, were the same posters that mentioned the closing of manufacturing and smelting would reduce our military capacity.

Not saying it is right or wrong, but to argue one way then the other, is confusing.

Australia is surrounded by culturally and religiously different countries, we have a very small population in a very large country.
To not have state of the art and up to date military capacity and strong alliances, would be idiotic.IMO

 

[Smurf1976]

There is a budgeted plan to increase military expenditure by 2% per annum for the year to 2013/14. It is presently closer to 1.1% of GDP. As nominal GDP will be materially higher than 2%, the proportion of military expenditure to GDP will actually decline. Over the period through to the end of the projection, it will rise by a further 5.4% per annum. This is close to the rate of nominal GDP growth and hence military expenditure will be pretty much static as a percentage of GDP.

So unless I misheard what the Treasurer himself said then he's told a big fat lie. I thought he said they were increasing military spending to 2% of GDP? Or did I mishear that during the budget?

 

[DeepState]

So unless I misheard what the Treasurer himself said then he's told a big fat lie. I thought he said they were increasing military spending to 2% of GDP? Or did I mishear that during the budget?

Hi Smurf

No. I told a big fat lie. But I did it without intention. Upon review of his speech, the Treasurer actually did say that they want to increase defence to 2% of GDP within a decade. I was looking at the actions within the projection period and noticed the 2% growth there and, mistakenly, thought is was you that mixed things up. Actually, it was me.

Sorry about that Chief.

Max

 

[Smurf1976]

Not wanting to make an issue of military spending, but some of the posters that condem the spending on military equipment, were the same posters that mentioned the closing of manufacturing and smelting would reduce our military capacity.

Not saying it is right or wrong, but to argue one way then the other, is confusing.

We're effectively doing both. Increasing spending whilst still allowing industry to decline.

So we end up with a military that's a bit more effective under "normal" circumstances but which fails in the event of a major war. A bit like having a fire fighting pump that doesn't work if it gets too hot or having a heater that doesn't work if it snows. Works until you need it most, then it stops working when your enemy fails to send more parts or ammunition to use against them.

It's like the US military discovering a couple of years ago that their high tech weapons couldn't be manufactured without materials from China. Better hope that China's on the same side in the next war then.

My real point though is about ideology and I'm not saying it's wrong or right, just observing. Conservative governments like the military etc and dislike welfare. Reverse that for those to the political Left. We have a conservative government and, despite the apparent financial difficulties, they've found a way to increase military spending whilst cutting back on welfare. A course of action that fits well with their ideology, the budget situation just being somewhat convenient in that regard.

Overall I do think the Coalition is doing a better job than Labor did, no real argument there I think. But they do seem to be showing a definite ideological, rather than purely financial or practical, bias in the manner of allocating funds and this won't be to their long term advantage.

Wrap too many ideological things up in what is properly a financial issue and you start alienating voters on two fronts both financial and ideological. Then we end up with a Labor government to mess the finances up again.

 

[qldfrog]

and I would add:
spending for military expense per se: we need to be able to defend ourself, but I see the big tickets which came lately as useless for that:
submarines (to do what? unless you have nuclear heads in on board missiles, a submarine is a useless toy with very limited fire power and a very high cost )
figher jets: we just bought fighers which if leaving brisbane would not be able to go to cape york and back , or just..
what for???
switch this into drones for surveillance , awacs systems for long range alert and get hundreds of ground to air top of the range missile if we feel threatened..
ahhh but that can not be usefull in irak /afghanistan..

yet a few tweak there would have EASILY saved a few billions AND have actually increased our defence capacity...
so my anger to this budget, that plus the on going NDIS/parental leave and super rort for currentretiree

 

[Smurf1976]

figher jets: we just bought fighers which if leaving brisbane would not be able to go to cape york and back , or just..

And if they do get back to Brisbane, well then we need an ongoing supply of fuel to fill them up with for the next mission and of course parts to maintain them with.

If we're concerned about defence then simply having a lot of expensive equipment isn't enough. We also need the ability to make fuel to run it, parts to maintain it and so on. We're spending big on equipment whilst allowing everything from the manufacture of mechanical parts (and the metal to make them with) to fuel refining go offshore. All good under normal circumstances but has big flaws in the event of a real, major war breaking out.

It's like installing the greatest security system at home to keep burglars out. Then a thief works out that it can be disabled simply by turning the power off....

 

[sptrawler]

It would also seem sensible to refuel and deploy them out of Darwin, Townsville and Curtin, in the event of a threat, not Brisbane.

Flying from Brisbane to Cape York, then back to Brisbane, would appear poor military tactics, but does support your theory.