Mr Hockey delivers the Mid-Year Economic and Fiscal Outlook
Yesterday Treasurer Joe Hockey delivered the MYEFO – the Mid-Year Economic and Fiscal Outlook. The numbers are complex, but the top level projections are as follows:
- Over the next four years there will be a $123 billion increase in the budget deficit.
- Contributing factors are a $37 billion reduction in tax receipts, nearly $9 billion grant to the Reserve Bank, $8 billion in infrastructure funding, Loss of $7 billion due to a carbon tax repeal.
In effect, the government is getting less money in taxes due to a softening of the economy. The situation is worsened by the Abbott government’s decision to make a capital grant to the Reserve Bank of $9 billion, despite Treasury’s advice not to do so.
Mr Hockey stated that:
“Doing nothing is not an option and that all options are on the table”. He also suggested that Australians will need to rethink their expectations on what the Federal Government should provide, but the Abbott Government would ‘turn the ship around’. However, when pressed for detail by Leigh Sales on ABC’s 7.30 Show, he said “…I don’t want to get into any individual policy announcements”.
Commentary from AMP’s Shane Oliver was that “it's likely some politics are at play in the downgraded forecasts … if anything, the economy has improved slightly since August's pre-election fiscal outlook.
"Not much has really changed since August in terms of the economic outlook, but we have seen, quote, 'a significant downgrade to the growth assumptions which affects federal government revenue'," he said.
"So it may well be the case that by the time we get to the May budget that those numbers have become a bit more optimistic again and therefore the budget projections probably won't be quite as bleak."
Read the ABC’s coverage.
So the MYEFO statement has been delivered and the budget black hole is bigger and scarier than anyone thought, and the past three months of Abbott Government rule haven’t had anything to do with this naughty Labor legacy.
Well, that’s the gist of what Treasurer Joe Hockey said yesterday. I pinched myself, as it was only a few short months ago, that this same politician told us that an Abbott Government, if elected, would return the country to surplus, and faster than Labor could. Now we are all supposed to forget those ‘non-core’ promises and believe that Mr Hockey has received a massive shock and is heroically trying to dig us out of this Labor-created mess.
In essence we are being softened for massive cuts in the May Budget. And whilst a Labor Government would probably have raised taxes to balance the books, the Coalition is considering cuts to a wide range of social services and community programs, including the National Disability Insurance Scheme, Indigenous Legal Aid, medical research, cancer care and conservation projects. The gold-plated Paid Parental Leave Scheme, apparently, will be protected as it was already ‘funded’ – whatever that means.
I don’t believe in fairies at the bottom of the garden, bogeymen under the bed, or sudden fiscal Hockey Horror Shows. The budget projections were made available to the incoming Abbott Government before it assumed power. The Australian economy has slowed dramatically in the 100 days it has ruled. It has taken the time and money to print a book to tell us what a ‘gold star’ job it is doing. It’s a pity it didn’t step up and take ownership of its responsibilities – including the economy – from day one. Losing Holden – and the related job cuts - is just one example of this poor performance. No matter what this Treasurer says, he can’t keep blaming Labor – he actually has to ‘own’ the job which he craved for so long.
Merry Christmas, Mr Hockey – the buck stops with you.
What do you think? Is the MYEFO as big a shock as Mr Hockey tells us? Or is he blowing it out of proportion to soften the public for dramatic cuts in the May 2014 budget?