As expected, there was no good news when Treasurer Scott Morrison delivered his first Mid Year Economic and Fiscal Outlook (MYEFO), but just how bad are things?
Tax revenue shortfall and new spending measures bear the brunt of the blame for the budget deficit ballooning to $37.4 billion for this financial year. The estimate for the 2016–17 deficit has also jumped from $25.8 billion forecast in May to $33.7 billion.
The tax revenue has been revised down due to a cut in growth forecasts and falling iron ore, coal and gas prices, while spending on initiatives such as new medicines on the Pharmaceutical Benefits Scheme, managing asylum seeker boat arrivals and $1.1 billion pledged to new roads has increased the budget expenditure considerably.
The long-term forecast doesn’t look particularly good either, with the budget deficit projected to increase by $26.4 billion over the next four years and the total deficit to reach $647 billion by 2025–26.
The GDP annual growth forecast will fall from the 2.75 per cent cited in the May Budget to 2.5 per cent in 2015–16 and to 2.75 per cent in 2016–17, down 0.5 per cent from the forecasted 3.25 per cent.
The unemployment rate is tipped to improve from 6.5 per cent to 6 per cent and Mr Morrison was upbeat on this forecast, saying it may be “too conservative” given the recent fall in the jobless rate.
Several of the saving measures Mr Morrison noted yesterday have already been announced since the May Budget. The cuts which are aimed at getting the Budget back on track include:
- Crackdown on welfare compliance and fraud – $2 billion over four years
- Removing bulk billing incentive for pathology and MRI services -– $650 million over four years
- Cuts to health workforce programs – $595 million over four years
- Cuts to aged care funding – $472 million over three years
- Means testing of child care subsidy – $441 million over four years.
The arts have also suffered with $52.5 million cut from the Communications and Arts Portfolio. And former prime minister Tony Abbott’s Green Army program has also received a funding cut, with programs capped at 500 per year.
And while it’s not a large expenditure, opportunities for older workers took another bashing, with the abolishing of the mature aged employment program, saving $11m
Treasurer Scott Morrison said that in addressing the economic challenges of a growing budget deficit, it was important to take a “safe and careful route” that “does not put at risk our jobs and growth”.
Speaking from Perth, he said, “We have adopted a measured approach that avoids extreme responses that would place a handbrake on household consumption and business investment growth and unnecessarily threaten the fresh new momentum emerging in our transitioning economy”.
Greens treasury spokesman Adam Bandt’s response was to say that the report reinforced that unfair tax breaks for the rich should end, while ACTU president Ged Kearney accused the Government of cutting welfare rather than raising taxes on the wealthy, “overlooking the fiscal white elephant in the room”.
We knew the cuts were coming, we have been told often enough that funding of health, aged care and welfare can’t continue ‘to be a burden’ on the economy forever. But the one thing that is now crystal clear is that the responsibility of paying for health care is being well and truly shifted to the patient.
In the delivery of the Mid Year Economic and Fiscal Outlook (MYEFO), the Government has faced the stark reality that good economic policy and playing politics don’t mix. It’s all well and good to spout innovation programs, new roads and new PBS medicines as a gift to the people of Australia, but when the people of Australia ultimately end up footing the bill, where is the ‘gift’ in that?
For the last two years the Government has tried and failed to push the responsibility of health care onto the patient. GP co-payments and a reduction in the Medicare Benefits Schedule are just two of the unpopular and ultimately un-adopted measures the Government has tried.
So, in its latest move, it has instead of targeting the patient outright, gone for the providers of diagnostic services. The reduction of bulking billing incentives to pathology and diagnostic imaging service suppliers will ultimately lead to patients paying for such services, or simply going without what could be life saving tests.
Until now, patients have largely not had any out-of-pocket costs when referred by their GP for pathology, x-ray or MRI testing, but with the Medicare benefit payment to providers being cut, it’s the GP or the patient that will have to cover such costs. And I can’t see it being the GP.
“The axing of the bulk billing incentives for pathology and diagnostic imaging services will increase the health cost burden for Australian families, with the poorest and the sickest being hit the hardest,” said Australian Medical Association (AMA) President Professor Brian Owler.
“These measures are simply resurrecting a part of the Government’s original ill-fated co-payment proposal from the 2014 budget.”
Cuts to health, workforce and aged care funding will also see a reduction in care, with many services already stretched to breaking point.
Do you think the cuts announced in the MYEFO are necessary to stop the Budget deficit from increasing further? Or do you think other areas should have been targeted? Should governments be forced to reveal how new spending measures will be funded before making such promises?