Assume a recovery. Assume fiscal sustainability. Assume that you can fool enough people to get yourself re-elected, probably at an early election!
If these are the worst global economic circumstances in 75 years, how is it that our recession will be less severe than the recession of the early 90s?
How is it possible to spend some $120b in new initiatives since the last election; to have to accept a collapse in Budget revenues of some $210b due to the global financial crisis; to spend more on short-term, one-off, cash handouts than on new infrastructure measures; and still be able to re-balance the Budget in just five years? Only if you assume it, by assuming unattainable growth rates!
How is it that we can hope to recover so quickly when the other major developed countries certainly don’t believe that they will, and that at least one million Australians will find themselves unemployed?
About the only certainty that I get from this Budget is that our economic circumstances will not unfold as forecast. The Budget deficit will blow out even more and growth will be much weaker. This should mark the end of any residual forecasting credibility of either the Treasury or the RBA.
Where are all those tough decisions that are to ensure a re balancing of the Budget and the repayment of debt? How is it that “we all have to bear part of the tough adjustments in these tough economic times”, yet the “pain” seems confined to those who earn more than $150,000 per year, but even then more than offset by the tax cuts?
However, if you are a single parent or unemployed, you will certainly be relatively worse off. Or, if you are about to retire, you may be forced to work longer, even longer than you had thought you would have to because the value of your super collapsed due to this global financial crisis. If this Budget is about jobs, and if we are to believe that there would have been 210,000 more unemployed if the Government hadn’t acted in this way, then how much is each job saved costing? At least $250,000 each job!
The only way I can make any sense of all this is to believe that the Government simply wants to be seen to be doing something to deal with recession, but not really caring how things will unfold, pushing the necessary tough decisions out beyond the next election, as it did with the Emissions Trading System.
Expect an early election, before the weaknesses of our economy and this Budget response become evident.