Deakin University Warrnambool Accounting Professor GRAEME WINES says Wannon MP Dan Tehan's comments on the ABC's The Drum hit the mark.
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Dan Tehan is correct when he stated in his opinion piece last Friday that the government budget is showing strain and is breaking apart.
Especially with an ageing population, the budget deficit and government borrowings will continue to rise unsustainably if measures are not taken to increase government revenue and/or decrease government spending.
Mr Tehan contends that the problem has been caused by two main factors: the former Rudd government’s spending in the wake of the global financial crisis and the current generation that “will go down as the generation that trashed the country on the altar of our own selfishness.”
In addition, there is the general contention that “Labor squibbed the hard decisions.”
These statements require careful analysis.The Rudd government’s significant fiscal stimulus spending in response to the GFC included spending on, for example, school buildings and housing insulation.
It is certainly now generally recognised that the rush to roll out the spending resulted in substantial waste and overcharging and generally poor value for money. The current Royal Commission into the home insulation scheme is also examining some of the tragic consequences that arose.
On the other hand, it is also generally recognised that these stimulus measures put a floor under retail spending and under housing and construction activity when it was most needed.
The significant government borrowing for these programs reflected the substantial uncertainties arising from the GFC at the time and resulted in benefits in terms of averting potential recession.Even inefficient government spending can stimulate the economy.
While that will provide little comfort to taxpayers who are now responsible for repaying the debt, it will not be viewed quite so negatively by those who otherwise may have lost their jobs.
There is also a high social cost to unemployment that the stimulus spending no doubt alleviated.
The net result, though, has definitely been a debt bill that has not provided the level of benefits that should have been the case.
The second of the factors Mr Tehan cites as the cause of the current budgetary problems is the selfishness of the current generation and the inability of the previous Labor government to make the hard decisions required.
This effectively represents blaming the current generation for the ageing of the population that is an inevitable outcome of the population growth following the Second World War.
Past governments of both major parties can be blamed for not exhibiting the level of economic management required in coming to grips with the problems that should have been planned for many years ago.
In addition, is it fair to blame the general public when it is the political parties themselves continually offering tax cuts and handouts while at the same time portraying themselves to be responsible economic managers?
It is now evident that, when the mining boom was in full swing from the mid-1990s until the onset of the GFC in 2007 and 2008, the budget was already showing signs of being in structural deficit.
The healthy increases in government revenue arising from the booming economy at the time were only ever going to be temporary, at least at the high levels being experienced.
Yet the then Howard government was as good as any in offering income tax cuts and voter handouts.
Hence, it has been successive governments over many past years that have squibbed the hard decisions and not provided the responsible economic management required.
The results are now coming home to roost. The problems that have resulted in the need for difficult decisions now were becoming evident from at least the late 1990s, a decade and a half or so ago.
So difficult decisions do need to be made if the budget is to be put back on a sustainable footing.
The requirement for increased revenue will require decisions on, in particular, any increase in income tax and GST.
The requirement for reduced expenditures will require the weighing up and balancing of possible spending cuts in areas such as health, education, pensions, unemployment and other welfare benefits, defence and paid parental leave.
The decisions required will obviously not be easy and will require necessary trade-offs between different groups in society.
But what is inevitable from the past is that it will no doubt be politics that will drive the decisions that are necessary.