Hockey’s Budget

By Kerrod Gream

Is the Age of Entitlement really over? Does Hockey have what it takes to run Australia’s economy?

Joe Hockey’s second budget has again showed a failing on the part of the Liberal Treasurer to truly get Australia back on track and make serious reform to help bring the government back into surplus. While I do have to acknowledge that he was backed into a corner with this budget, it was largely his own doing with his failed first budget that left a deficit of $39.4 billion for 2014-15. This was largely because spending cuts were outweighed by new spending measures and because of this Hockey left the government with nowhere to go and no appetite for reform. These failings have seen the Abbott government adopt the mantra of “It’s too hard” and giving up on pushing for fixing the mess that our federal government finds itself in. They continue to talk about the feral crossbench, while failing to engage in proper negotiations with them. As the Howard government did when The Democrats held the balance of power. We’ve gone from promises for a surplus in the first year of government, to no surplus in the forward estimates; yet somehow this is considered getting the budget back on track.

So what are the main talking points of this budget? Is it radical reform to help move towards a surplus in the near future? Is it serious tax breaks to help encourage investment in Australia? Other than the tax cut to small business (which has problems in of itself) no. It’s increased spending measures, whether it’s $7 billion to childcare which is suffering from severe overregulation pushing up costs for families, over $300 million to have the government try and fix unemployment while increasing the minimum wage locking youth out of the jobs market, $300million to farmers while ignoring that farming subsidies elsewhere as effectively killed out the independent farms, is this really a Liberal budget when you’re talking of somehow a $35billion deficit as a good thing?

We’ve gone from an opposition that promised budget surpluses, and talked up the first budget as being better than Costello’s first budget, when in reality the path to surplus was no where in sight. Yes, Hockey makes the argument of falling government revenue but revenue has continually been rising since the Howard Era (excluding 2009-10). This means that Hockey’s only solution is to wring the taxpayers further, while ignoring the underlying structural problems that are in our budget from high governmental spending. This is not a Liberal attitude, but rather that commonly associated with the left, and the desire for larger and larger government.

This was exemplified in calls to tax corporations more, but not by dropping our tax rate and encouraging them to move their operations here, but to crack down on ‘tax dodging’ (or more commonly called tax minimisation). These actions will result in higher prices for consumers, and reluctance for companies to do business in Australia. Why is it that we have a Liberal Government calling for increasing the tax burden? When did we lose our spine?

But what about the tax cut for small business? While yes, it is a tax cut, it’s a poorly thought out cut. Using an example that John Humphries from the Australian Taxpayers’ Alliance has used to explain the tax cut. “A 1.5% cut to businesses that have a turnover below $2 million isn’t consistent with standard efficient tax practices. It’s a move that will create a two tiered system and favour businesses that have a high profit margin and low turnover, and harm businesses, like manufacturing, that have a higher turnover but a lower profit margin. For a forward thinking example, A business with a turnover of $10 million and a 1 per cent profit margin which has a profit of $100,000 will pay $30,000 in company tax, while a firm with a $1 million turnover and profit margin of 10 per cent, also with a profit of $100,000, will only pay $28,500 in company tax.” This creates a whole new mess within our already overcomplicated tax code. This is being done rather than focusing on creating a system based on net profit, as all tax is calculated at the moment, it’s creating a system with inherit inefficiencies and encouraging of businesses not to expand beyond the $2million turnover unless it results in significant benefits.

Joe Hockey has shown again with his second budget that he is really in no place to be managing the government’s finances, his unwillingness to actually decrease the government influence in the economy, and devaluing civil institutions in the process, is a clear indicator of the government’s tough position. Greater crossbench negotiation needs to happen, rather than attempting to ram legislation through the senate and assuming they’ll receive benefit of the doubt. Making excuses of falling government receipts (when in reality it’s falling expected receipts) shows Hockey is unable to take responsibility for his failings, and the only thing keeping him in a job is Abbott’s unwavering loyalty. To get the government finances back on track, either Hockey really needs to lift his game and call on other ministers to find serious savings in their portfolios, find savings himself, or step aside and let someone with the ability to do so to take over.

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