Today's budget was a modern rendition of a traditional tax-and-spend budget.
Spending is forecast to grow across the board with few signs of real restraint. Recurrent spending, excluding interest and super payments, is planned to grow by nearly 7.4 per cent -- which is high by any standard.
The traditional priority areas of government spending -- health, education, police, welfare and infrastructure -- get special treatment. Health spending is expected to grow by 3.0 per cent after adjusting for inflation. Given that the Commonwealth has cut health grants to the states in real terms, this amounts to a large increase in state spending. Outlays on education, police and welfare are also forecast to grow at rates far in excess of inflation and population growth.
Infrastructure -- as was the case prior to the early 1980s -- is the real focus of this budget, with infrastructure spending by budget sector agencies expected to grow by 24 per cent.
To finance this spending spree, the Government has once again raised taxes and charges. As a result of the higher stamp duties and vehicle licence fees announced in the budget, tax revenue is set to grow by nearly 7 per cent next year. The higher charges for water and public transport, announced before the budget, will also contribute to a 17.5 per cent increase in dividends paid by government business enterprises.
In other words, the Court Government has once again decided to spend and tax rather than reduce taxes. The Government does not have a revenue problem: State tax receipts have grown by over 55 per cent over the last seven years, even after adjusting for inflation and population growth. The Government has an expenditure problem.
The Budget does have a number of modern, redeeming features.
First, the Budget papers have, for the first time, been framed using modern accounting practices, including accrual accounting, statements of assets and liabilities, consolidated accounts and forward estimates. This means that for the first time the public and Parliament will have a good handle on the true costs of government decisions and a more accurate picture of the State's bottomline.
Second, the Budget flags the introduction of fiscal responsibility legislation which, if adhered to, will go a long way to keep this and future governments "on the straight and narrow".
Third, the Budget properly incorporates the benefits from privatisation, especially from the sale of the Dampier-to-Bunbury gas pipeline. This sale alone will benefit the Budget in the form of lower interest payments, lower super pay-outs and funding of capital works -- all to the tune of $700 million over the next four years.
Fourth, the Budget maintains the commitment to balanced budgets and reducing debt.
Is the budget responsible?
Clearly, some increase in infrastructure was required as was an increase in health spending. However, there was no indication that efficiencies are being pursued in low priority areas. Moreover, some of capital initiatives, such as the so-called Communications Pipeline, are of very dubious value.
The Budget is balanced -- although only just. Moreover, by some measures the budget will actual go into deficit for the next three years. State debt may decline but only with additional privatisation.
The main flaw of this Budget lies in its treatment of taxpayers. Taxpayers, not only do not share in benefits of growth and privatisation, but are hit harder with particularly destructive taxes.
ADVERTISEMENT
No comments:
Post a Comment