Federal Budget mainly smoke and mirrors

Most of the gotta-get-a-life types who have examined the details of this year's Federal Budget were relieved.  There were few new spending and taxing measures.

The big ticket spending items were pretty much as expected.

Health and education each got an annual additional billion dollars or so.

Climate change programs got half a billion a year on top of the current $3 billion a year in subsidies and regulatory measures.

Few areas saw cuts in taxpayer-funded spending, which now totals $320 billion a year.  But Treasurer Wayne Swan claimed savings of some $7 billion compared to previous plans.

On closer examination, these savings are mainly illusory.  Many result from changed assumptions about spending and consumer reactions to existing programs.

The supposed savings also included $800 million a year from a higher alcopops tax.  If that much more money is raised, the tax increase will not have curbed the binge drinking it ostensibly addresses.

Actually, $800 million will not be raised in any case because people will switch from spirit-based to lower taxed, cheaper wine-based drink mixes.

Other savings include new oil taxes ($600 million) and an increased luxury car tax ($150 million).

These are part of a clutch of new imposts on business, described disarmingly as "fairness and integrity in the tax system".

Also falling in this category is a $600 million a year hike in the tax on tools and computer software.

There is also a new hit amounting to $200 million on firms that provide meals for their employees.  And there is a series of changes that will add $260 million in taxes on property sales, employee shares and on those winding down their businesses.

Many of these measures get little attention because they are taxes on business rather than on consumers.

Yet, impositions on business will always get passed on in higher prices.  Firms have to recoup higher costs and the consumer pays for this.

In addition to these "fairness and integrity" savings, the budget also claims some savings from "realising efficiencies".

Among these is the breathtaking claim of a near $1 billion gain from abandoning the deal to subsidise the Optus consortium's broadband network.  This is billed as "responsible economic management" but the budget contains no figure for the Government's own $4.7 billion broadband network.

Oddly, the Government also claims to be pocketing $269 million over the next few years by not proceeding with the sale of Medibank Private.  No countervailing loss from the forgone sales revenues appears.

One of the few budget savings that did look genuine was the "efficiency dividend" from reducing the number of public servants.

Even that turns out to be a pea-and-thimble trick.  Top Canberra public servant Terry Moran has revealed that "new government initiatives" will recoup the numbers.

So there we have it.  The first ALP Federal Government budget in 13 years does little harm and is mainly smoke and mirrors.

But the ALP may yet add lead weights to the economy's saddlebags in foreshadowed spending and taxing programs.  These range from measures to combat carbon emissions to "Think Big" new infrastructure funds.

ADVERTISEMENT