Friday, 6 June 2014

Budget requires blind faith?

Greg Jericho in Coalition banks on blind faith in budget 'fix' wants more evidence than just an assumption that "fixing the budget" will help the economy.
A couple weeks ago the Secretary of the Treasury, Dr Martin Parkinson, delivered a speech in which he talked of our living standards and fiscal sustainability.

However, his focus on living standards was "weak productivity growth, a falling terms of trade, and an ageing population". When he attempted to link our standard of living with the budget he referred to the need to build up our reserves so that should another global recession hit, we could respond similar to how we did in 2008-09.

When he mentioned taxation he talked about the desirability of shifting the dependence from income tax to indirect taxes such as the GST more than about reducing our taxes overall.

In the past, the talk was of budget surpluses over the cycle - that when our economy was performing at trend or above, the government should shift to a surplus. Now the Government has moved to suggesting that shifting to a surplus will see the economy grow above trend.

At present Hockey and Abbott would prefer you just assume their "fixing the budget" will improve the economy without actually having to demonstrate how. Perhaps this is because it removes their need to talk about things like the GST and your blind faith will also make it easier for them to break their election promises.

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