Our budget black hole

Fixing the budget black hole.

Our budget black hole

Less than two weeks before the Abbott Government’s first budget we have seen some major policy changes counted in and out. At a meeting at the Sydney Institute on Monday night, Prime Minister Tony Abbott confirmed that the Age Pension would not be altered in his first term of government. But such changes would be inevitable in any second term. On Tuesday the rumours of a levy on high-income earners – a so-called ‘deficit tax’ – began to circulate. On Wednesday the previously ‘set in concrete’ rolled-gold Paid Parental Leave (PPL) had been trimmed to exclude those on salaries of over $100,000 per year. And it now seems likely that previous Howard Government tax cuts are also likely to be removed.

The many cuts under contemplation are a response by Treasurer Joe Hockey to what he declares to be a budget emergency, the result of overspending by the previous Labor government. The extent of the purported budget emergency is the subject of some debate. An ABC ‘Fact Check’ of the degree by which Australian debt is rising notes Mr. Hockey is correct on two measures – change in real expenditure and change in net debt – but he omitted to quote a third important measure – Australia’s overall net debt – which is the second lowest in the OECD.

With regard to the ‘burden’ placed on the budget by older Australians, an opinion piece by author John Legge in Wednesday’s Age newspaper questions the statistics quoted by Treasurer Hockey, declaring that Mr. Hockey has exaggerated the number of working age Australians compared to retirees, with his estimate ‘over six times the best available estimate’.

And perhaps ever more importantly, the most recent indicators for our nation’s economy suggest it is doing better than the pre-budget rhetoric might have us believe – as demonstrated in a recent article on the Crikey website.

So does a crisis really exist – or are we being sold one to make massive budget cuts slightly more justifiable?

ABC Fact Check 


The Age 


Opinion: Crisis? What crisis?

Does a crisis really exist – or are we being sold one to soften us up for massive budget cuts?

It is difficult to discern the true state of the nation’s finances with so many economists telling us different versions of what is happening and a plethora of government ministers warning us of the doom and gloom to come. When in doubt, it’s always useful to head to international benchmarks, so checking out Australia’s position in the OECD makes sense. And as the ABC Fact Check reveals, whilst our debt is growing quickly, overall we remain the country with the second lowest debt to GDP.

That said, it is obviously unwise for any individual, household, state or nation to continue to spend more than it earns, so reviewing income and expenditure makes a lot of sense.

And that is what the Commission of Audit is supposed to be doing. But note the suggestion we need to review income as well as expenditure. And that would mean considering ways of increasing revenue, including raising the level of the GST. To date this has been ruled out, despite the fact that most commentators have noted our GST is one of the lowest in the world.

So apart from looking at ways of increasing revenue, we should certainly be considering ways of trimming spending.

Note the careful use of the word ‘trimming’. Not massive cuts, but an intelligent appraisal of areas where costs can be decreased. And this does not mean saving money on the Age Pension. Why you would look at changing indexation measures on income which is lower than the poverty level beggars belief. And why you would deny Australians aged 67 and over a pension for another three years is also a false saving as it assumes all people in their 60s have the health and skills to remain in secure jobs. Many don’t, and secure jobs, or any jobs for older workers, remain scarce.

Our Treasurer seems almost surprised that so many of us are getting older. It’s a demographic fact that dates back to 1964 the year which marked the end of the baby boom. In reality, he is probably not surprised at all, but he does seem to have made a big deal out of the cost of our ageing population, which has been apparent to all and sundry for the past few decades. The sad fact is that, despite the inevitable rise in the cost of pensions as our population ages, with the exception of the introduction of the Superannuation Guarantee Charge (SGC) in 1992, no federal government has really done the hard work to prepare us for this significant shift. Training, jobs and workplace flexibility to encourage older Australians to work longer are still vague concepts. The increase to the SGC has stopped and started as Liberal and Labor governments come and go. And despite a real increase to the Age Pension in 2008, it remains too meagre to support anything approaching a modest lifestyle.

Australia does not have a budget black hole. It has a comparatively low level of debt. The hard questions for any treasurer are how to share what we have, most equitably. Beating up on older Australians is not the answer.

What do you think? Do we have a budget crisis? Or has this been fabricated by the Abbott-Hockey Government? Is it more a question of ideology and political point-scoring than economics?


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    David C
    1st May 2014
    Pensioners should be concerned about the lower rate of indexation which Tony Abbot is introducing in this governments next term of office (if they get another term). At least the labor government substantially increased pensions for us and have commited to maintaining the current rate of indexation. IT WAS FORCAST BEFORE THE ELECTION THAT ABBOT WOULD TARGET WEFARE.
    David C
    1st May 2014
    David C you right mate the Liberal party does not care about the retired battlers
    2nd May 2014
    We are talking about a leadership spill here .../?
    We are going to see the same thing happen to Tony Abbott as happened to Kevin Rudd -
    He is going to be shafted.
    It is being said that Julie Bishop is seen as too tired to fulfill her role as Australian Minister for Foreign Affairs.
    Also her being a woman is a definite handicap, as women are not taken seriously in the Asia - Pacific Region - Nor in the Middle Eastern & South African Countries - therefore business does not get done - they simply will not deal with females.
    2nd May 2014
    And the thing is that you can't force them.
    Some leaders find it an insult to have a woman as their equal.
    The result -
    Someone else gets the deal.
    1st May 2014
    Once again the Abbot government is not looking at revenue potential from tax. For example the ridiculous situation that super withdrawals are tax free when they become income at certain ages instead of attracting the total regressive tax margins. Thus the wealthy would pay more.Secondly a reduction in the tax revenue going to defence instead of the purchase of an incredible number of current antiquated fighter jets (Remember the old F111 debacle). Third the non tax on physical resources being exported out of the quarry. Fourth the tax lost on windfall profits in lotteries. Etc. Im sure the government could return to the days of collecting revenue also from our fire sold assets like banks, planes, toll roads, electricity,water etc etc. Talk about blunders as "business as usual" continues to cripple the economy by dreadful past and present policy decisions.
    1st May 2014
    Yes, we do have an ageing population - a comparatively healthy one because many of us value our health and take care of it, so we don't access health services, and if we do we are covered by our private health insurance paid for out of our meagre pension! The health budget, by necessity, is big. One of the ways to trim it is to put back funding into health education and promotion via community health centres - many of which have been closed in recent years. Prevention is and always will be cheaper than cure. People need to value and respect their health and enjoy maintaining it through healthy lifestyle choices.
    2nd May 2014
    Is that what you truly believe .../?
    Because you know for yourself & for sure .../?
    Or because you believe what you are told .../?
    We do not have an aging population & we are dropping like flies -
    Who is feeding you this rubbish.
    It is a CON on their part & it does not help the situation if you believe their propaganda.
    You then lay down on your back for their every whim & cry poor whining - like a submissive dog - mate.
    1st May 2014
    We definitely do NOT have a budget emergency. We have an AAA credit rating, debt is reasonable as independent commentators state. We are being very savagely misled by this despicable government, which wishes to look after "the big end of town" which finances it. It built its election campaign on the "lie" of Julia Gillard and yet there have been so many already exposed made by Abbott et al. I bet there are millions now regretting voting for the coalition last year. Letters in newspapers are showing this.
    2nd May 2014
    For what it is worth.
    I did a reading on Gillard & found a JINX.
    The bad luck has not yet run it's course.
    The best of the worst is yet to come.
    1st May 2014
    1st May 2014
    Thanks Rod63. Fear-mongering by a low-grade con artist, Joe Hockey.
    Tom Tank
    1st May 2014
    This is all about political ideology as we are considered worldwide to have one of the best economies in the World.
    The current Government, with the tacit support of so much of the media, have talked up a crisis to achieve their aims of reducing government involvement in so many aspects of our lives most of which are in OUR interests.
    Privatising Medibank for example will reduce the Private Health Funds to the same base level as the big banks. Without a Government owned enterprise keeping them in check they will head down the path of increased charges, not to mention increased salaries and bonuses for their executives. Why sell a successful business that provides real returns to Government coffers??
    A lot of damage can be done over the next couple of years which will be impossible to repair while Tony and his accomplices will ride off into the sunset with their exceptional taxpayer funded pensions. Which one will become a director of the Privatised Medibank one wonders?
    1st May 2014
    Why don't we Privatise the Federal Government ? I'm sure China would buy it !!
    2nd May 2014
    This is all about the Political Arena & Banking Sector shutting down the system so as to LOOT the NATION.
    A deliberate shutting down of the system & a systematic theft of all assets.
    They got away with it then why should they not get away with it now.
    2nd May 2014
    Yeah Tom. I seem to recall Medibank Private was adding $400mill pa to the coffers. That will just about pay off the expected sale price in only 7 years. Is this good business or ideology at any price? It's our assets they are flogging off.
    1st May 2014
    No. It is fabrication. if we are in such a crisis why are we spending billions on fighting wars in other countries in the interests of other countries. e.g.. USA.
    Why are we spending large sums of monies in other countries to assist the poor, while at the same time neglecting our own poor. the latest incident of Hockey's to charge a $6 fee to go to the GP will mean more people not seeking attention when they should. UI meet many such people as an advocate where I try to pursued them to go to aqa doctor or hospital. the answer is that their pensions, after paying for the fixed costs leaves little for food and clothing. Why is the government spending on its own people and not in other countries. I do not object to assisting others but our own should be protected first.
    Why is the government holding so much money in tax havens, e.g. Futures funds holds assets of approximately 97Billion dollars. If we are so short use that money to reduce debt.
    If we are so badly off why are the politicians not dropping their salaries and perks. What other public monies are held in tax havens or elsewhere that is hidden from the people.
    I worked in the public service and found that departments held moneys in investment accounts at least to try and get some interest to top up their budgets. Many investment were short term and a quick high return. We were never told what was lost on such markets. Local government corporate councils hold sums in investments and investment accounts. when you try to find out the amount you are told it is commercial and confidential. Why? It is the people's monies garnered from the taxes etc. to fund the public services, not for overseas investment. We the people, the lawful government have been sold out by our parliaments and political factions to overseas corporations and countries. No we are not broke. But we are naïve, believing the government is lawful and will govern to carry out the Will of its people. Until we start to speak out and and a return to lawful government our resources and assets will continue to be sold off to foreign powers. The services that parliament is supposed to be delivered for the good of all people will gradually be cut to fund other interests. Speak to your local politicians and tell them that it is your Will that they return to what their constituents elected them to do; that is to carry out the Will of the people, not political factions
    2nd May 2014
    Assisting the poor in other countries is bribe monies - that is if the money actually gets there. How do we know that these monies are really going to where they tell us they are - we don't. Does the aid money slide into the pockets of the Australian thieves instead - easy done.
    We only have the word of compulsive & persistent liars who would stop at nothing - after all.
    3rd May 2014
    If you pay Peanuts you get Monkeys !!..If you pay Mega Bucks you get a Better Class of Monkeys
    1st May 2014
    David C. The problem is that we are faced with two major parties, each little different in their objectives to choose from. We have an electoral system that is flawed and biased towards the two political parties. The only hope we have of a legitimate election is at present to encourage as many independents who will give preferences among themselves or better still no preferences.
    We need a system that is; one vote and first past the post. No political factions allowed to control the vote. No preferential voting. No postal voting; (leaves too many votes to be lost as we already know). No use of pencils as these can be altered
    If postal voting is to be used then let there be a contingency option where people who have not received voting papers can go to register their votes.
    2nd May 2014
    In fact we are faced with THE POLITICAL ARENA
    One for all & all for one & every man for his or herself.
    1st May 2014
    What unbelievable garbage.

    We are OK because our friends will go bankrupt before us. What a great position to be in for a country at the end of a boom, which was totally debt free, with money in the bank, just 6 years ago.

    What's 10 BILLION a year in interest payments? That's nothing compared to Greece, Italy & Spain. Send out for some more booze, lets keep the party going until we have nothing left, the kids can pay for it after were gone.

    You know, sometimes I find some of my generation are disgusting bludgers, & their lefty supporters are definitely no better.
    1st May 2014
    Goodness me, Hasbeen!

    The voice of sanity among the shouts of whingers and hypocrites. What on earth are you doing on this site?
    1st May 2014
    lucher.. I think He's on this site Whinging about Labor ??
    1st May 2014
    Tell it like it is Hasbeen. Where has everyone else been for the last six years of profligate spending by the Labor government. Everyone seems to have been in a time warp if they didn't know the finances of this country are in such dire straits. Generations to come have been left to pick up the tab, with the Abbott government trying to make a start by taking some hard decisions to put us on the road to recovery. All the time being thwarted by Labor and the Greens blocking everything the government tries to do. What a novel idea it would be if they worked for the good of the Australian people instead of just being obstructionist for their own ends.

    1st May 2014
    Every new 'government' of either 'side' manages to find a massive 'black hole' in the budget that can only be filled by extreme measures. It all comes down to how you do the books, and in the case of Big Toe and the Krew. they designer add up the books to make it appear that we all need to tighten our belts. Both 'sides' have had years to take care of issues such as pension with a forward looking policy platform - both have failed dismally.

    Time for tough decisions? then cut politician's over-inflated wages, get rid of all your 'CEO' mates in non-jobs as a reward for service to the party, get rid of all these hanger-on 'corporations' created to handle government business like getting submarines, water supplies and so forth - work done by the public service and NOT requiring massive salaries for 'CEOs' and 'board members' out of the public purse.

    Daylight robbery is all those are - and ICAC is coming!
    1st May 2014
    The Grappler. You hit the nail on the head. Each parliament has to find a black hole in order to justify extorting more funds from a gullible taxpayer.
    Let them be accountable and transparent and show the public all investment accounts and moneys held in tax havens, the funding of "charitable" corporation where the government has handed its responsibilities to these corporations and then pay them more to deliver the services so badly.
    1st May 2014
    I cannot sense that there is a crisis when Joe Hockey donates 8.8Billion Dollars to the international Bankers against the recommendation of the Australian treasury Department.

    We must be VERY WELL OFF when we are supporting these "MONEY MOGULS" with additional cash that we have to borrow from them when their profits are already exorbitant!!!
    Flower Pot Man
    1st May 2014
    The Politicians did not listen to Kerry Packer when he told Browin Bishop that his lawyers would run rings around the tax laws if they were wishy washy. The recent $880 mil tax deduction to Murdoch for a paper shuffle in an off shore company should ring danger bells. We are give the big importers tax deductions for the inflated prices of cheaply made goods.
    The only way to overcome this is the radically change our way tax gathering.,i.e. bring a realistic Financial Institutions tax which every one pays., even the charities and churches
    1st May 2014
    Pensions are safe for now. wowee ,until the next election, when , hopefully Bud Abbott and Rocky Hockey will be unemployed.
    1st May 2014
    Maybe that is exactly what they are hoping for. To get kicked out and live happily ever after on their glorious, generous, specially indexed superannuation pensions for life. Think about it.....no more having to 'govern' and no more having to worry about balancing budgets etc.
    1st May 2014
    It's a normal for a Liberal government to strive for and achieve a surplus, and a Labor one to put us all in debt. I am now an pensioner and do have concerns for the future but I am a realist. All the lovely dollars Rudd gave us and lack of action by Gillard means the national bank book needs management which may include some pain for taxpayers. I don't believe for one minute a first term government will risk it's re-election by placing a burden on the population unnecessarily.
    1st May 2014
    There seems to be a lot of knee jerk reacting going on to something that hasn't even happened yet. This happens every time there is budget looming (State or Federal). First come the rumours, then the 'leaks', then the media ramp up the pain factor with carefully collected edited sound bites, then the hysterical reaction from the general population kicks in. Social media sites go ballistic on the bash-the-pollie freight train. Finally budget night rolls round and what do you know? The actual content is bad but not as bad as imagined, there is a collective sigh of relief and we all go on with life until the next budget cycle. That's life. Let's wait and see what is actually in the budget before indulging in such vitriol.

    As for comments about no budget crisis just because we have the second lowest debt... we still HAVE a debt!

    "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery." Charles Dickens, David Copperfield, 1849.

    We cannot continue to live beyond our means (even just a little bit), just because the people next door have a bigger debt than ours.

    There is 'good' debt and 'bad' debt. The good debt is when you borrow to build an asset (e.g. your mortgage - at the end you will have a house/flat). The bad debt is when you use 'borrowed' money to pay for something that does not result in an asset (e.g. paying bills by credit card then not paying off the entire credit card bill). Australia has bad debt. We are not borrowing to build assets, we are borrowing to pay bills. That is a problem.
    1st May 2014
    the comment that there is a lot of media hype about how bad the budget will and that when it does come in it isn't so bad. the point is that the "government" has got what it wants. Remember ambit claims. You asked for more than you want and are prepared to take less. If you don't do that the opposition will still try and negotiate lower.
    I agree we need to manage our income and outgoes but the real question has not been answered; are we really in so much trouble? and if so why are we giving billions to overseas banks. Seems contradictory to me. Gold and silver are money the rest is credit according to the Rothschild philosophy. You borrow and the banks contribute nothing as they sell it on to another bigger bank who in turns sell it on. The original debt has been paid out several times to the bank and you will continue to pay as well. the bank makes double.
    1st May 2014
    Then Jack falls down and breaks His Crown and spills bloody water everywhere !!
    2nd May 2014
    The House of Rothschild manage Prince Williams money - Prince William is dead broke.
    Did anyone notice - for the most part the clothes that Kate Middleton wears & indeed wore during her visit in Australia were horrible.
    Kate Middleton is modeling cloths for money.
    They are using Baby George in the same way - to sell brands -
    Her husband is broke.
    I read the UK News.
    Crazy Horse
    1st May 2014
    There is no budget emergency. Just the largest lie ever perpetuated by any political party ever. The only purpose of the LIE is to try to justify the extreme right wing ideologically driven changes that will be unveiled on May 13th.

    Australia is still rated AAA credit rating by all three of the worlds leading credit agencies. They would not maintain this rating if the economy really was in crisis.
    2nd May 2014
    I agree with you
    Australia is being deliberately mismanaged.
    But don't forget that the ratings agencies are owned & funded by the BANKS...
    They are trying to have their cake & eat it also.

    1st May 2014
    Big panic over nothing much...... no changes have been adopted...but it makes for great entertainment when I see folks panicking.....hee, hee.....great...you should be concerned for today and not what may or may not happen in 2 years.....
    1st May 2014
    Liberal governments over time save and spend money wisely,in most cases.
    Labour governments over time spend and waste money,in most cases.
    Yes,we are the envy of the world with our great AAArating,and it needs to be kept like that.
    2nd May 2014
    According to the I.M.F.
    Little Johny Jack Boot Howard was a BIG SPENDER -
    The King of the Loose Purse Strings they called him.
    1st May 2014
    What do you think about this article posted on The Australian Independent Media Network?

    1st May 2014
    Good One,

    Sound very much like thievery & Croneism to me.
    I don't see why pensioners are threathened to pay for the absolute waste that is highlighted in that link.
    SACK THE BASTARDS!!!!!!!!!!!!!!!!!!!!!!!!
    1st May 2014
    That's excellent.
    1st May 2014
    why doesn't the politicians look at reducing the wonderful benefits that they receive on retirement leave the pensioners alone address your lucrative after retirement benefits how much would they save
    3rd May 2014
    Make them wait till their Greedy Sweaty Palms are 70 before they can touch it !!
    1st May 2014
    Hasbeen, you took the words right out of my mouth!
    3rd May 2014
    He took the Meatloaf out of mine !!
    1st May 2014
    No increase in pension age until 2053.
    Plenty of time for the 'We want everything Now Generation' to organise their finances and super.
    What was all the fuss about?
    1st May 2014
    Thanks for that Info ! I wont have to worry !! I'll be 107 then !!!.
    Bless Your Ear Trumpet jd.......
    1st May 2014

    You are clearly wrong when you say that women earning more than $100.000 pa will excluded from the PPL.
    Fact is, they will still be eligible for the benefit but it will be capped as if they were on the hundred grand.
    Your misrepresentation of this is disappointing.
    2nd May 2014

    Remember :- The International Monetary Fund in their analysis of the Australian economy found beyond any doubt - that the JOHN HOWARD led GOVERNMENT was the biggest spender of all time.
    2nd May 2014
    The UK had Thatcherism, Australia has Abbotism !!!!!!
    This PUPPET has got to go. Banks, Mining Moguls, Murdock they are all pulling the strings !!
    3rd May 2014
    Did you mean Bottulism ??
    2nd May 2014
    Looks like we will all have to have a few cigarettes less,a beer less and one bet less per week.Perhaps one extra home cooked meal a week and some home grown vegetables may also help.
    2nd May 2014
    More fear and loathing here in the Lucky Country about what "Gunner" Abbott and his side-kick Joe Hockey are "gunner" do to us all. The fear mongers among us should be preparing for the worst by getting on boats the avoid the double impending calamities of global warming and Tony Abbott's May 13 budget by paddling themselves off to Macquarie Island or Antarctica and thus escape the terrible effects of both.
    By the way, I see no one mention that Australia needs the return of Labor's troika of economic genius, namely Rudd, Gillard and Swan to the seat of power.
    2nd May 2014
    It is confusing when govt announce proposed changes to cut services, yet there was also an announcement that finance forecast is positive. It is public knowledge that Liberal party policies favour business and the affluent.

    2nd May 2014
    Oh hum...the panic merchants are at it again.............. NOTHING IS GOING TO HAPPEN TO YOUR PENSION FOLKS...nothing...now get a life and mature a bit, grow up.
    3rd May 2014
    I've grown up to think that Governments are the New Mafia !!
    3rd May 2014
    I grew up thinking.. 'I'm a baby boomer, I'm a baby boomer, I'll be looked after, yeah, yeah, yeah'.............and I am.....what a life !
    4th May 2014
    Tony.."AYJoe!" Do you think we can Implement a Tax Collection Tax +GST with a Global Warming Element attached to it ??"
    3rd May 2014
    If you google "March in March". This organization held marches all over the country in March against the Abbott gov. But the media would not cover it. There are more marches this month in some states and more in August. Some interesting reading on their page also. I detest Abbott & Hockey. If the age of entitlement is over, then start trimming the pollies life long retirement perks !!!!! and get rid of the bloody stupid wasteful Paid Parental Leave.
    3rd May 2014
    The Paid Parental Leave is Quiet Legitimate ! If its the Bosses Child !!!
    4th May 2014
    I agree with you. No politician is above the law or should be treated any differently from any other member of the Commonwealth of Australian. The politicians both Federal and State have legislated protection for themselves from prosecution. This legislation is a breach of the Constitution and therefore invalid.
    Not Senile Yet!
    20th May 2014
    The only budget Blackhole that I know of is the one where retired Politicians are scamming the Public with excessive payout in Super that they can access anytime they want and in a Lump Sum!
    Gee...wish I could do that!
    Not to mention...free flights & accommodation to overseas destinations so they can study how others stuff up their economies and how to get away with it......al at our expense!
    Let not suggest that the ex-PM's don't deserve all their lurks eh what!
    Man if every retired person got their lurks who would care about what's going on with budgets etc.
    Stop voting for the Pricks....I mean it!
    Vote Independent next Election.
    Then they might have to negotiate with someone who actually has a conscience to pass stupid Regressive taxation laws aimed at the Less privileged in our Society.
    Neither of them will get a Grey Seniors Vote....you watch!
    Howard forgot that everyone has Family.....and it was their Family members who turfed him on his ear over the unfairness of Work Choices!
    Abbot & Costello underestimate the Grey Army and the Family vote that will drop kick him out of office!
    20th May 2014
    i agree with not senile yet mr hockey said all australians must feel the pain but he doesnt practice what he preaches make politicians wait till they are 70 and stop the perks then i agree we all suffer equally
    27th Jul 2014
    Lisa Owen began by asking him how much trouble the Australian economy was in given his drastic measures in the recent Budget.

    Joe Hockey: The Australian economy is not in trouble. We’ve had 23 years of consecutive economic growth.

    Read more: http://www.3news.co.nz/Interview-Joe-Hockey/tabid/1348/articleID/354234/Default.aspx#ixzz38dLvSp61

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