Australians are being told to tighten their belts .... by a government that keeps letting its own out another notch.
asserted
that → tell → own
Mortgages cost more, so does shopping, all courtesy of rising interest rates and high inflation.
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courtesy → cost → rates
And when people ask why things remain so difficult, the excuses roll in thick and fast.
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excuses → ask → ?
There’s always a war, a president or an international crisis available for a minister to point at.
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minister → ’ → ?
And yes, that’s true now more than ever.
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that → ’ → ?
But here’s something you hear considerably less about: how much extra money has flowed into the federal government’s coffers while Australians have been struggling.
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Australians → ’ → coffers
And so much of that has flowed straight back out into the national economy via inflation and government spending, stoking interest rate rises.
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much → flow → rises
My co-author of our upcoming book The Long Decade, economist Professor Richard Holden, has crunched the government’s Budget numbers.
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author → crunch → numbers
Over Labor’s first four years in office, revenue gushed in at $400.8billion above what was forecast before the 2022 election.
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what → gush → election
Economist Richard Holden crunched the numbers
That's thanks to economic changes, rather than any new policy decisions.
That deserves considerably more attention than another Jim Chalmers press conference congratulating himself for handing down a couple of surpluses while overall government debt continues to balloon past one trillion dollars.
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debt → crunch → dollars
Some of the forces making life more expensive and difficult have also helped swell the Treasurer’s tax collections.
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life → make → collections
Inflation has a nasty habit of doing that.
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Inflation → have → that
A pay rise that barely helps people keep up with price increases can still push more of their earnings into a higher tax bracket.
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people → help → bracket
Their purchasing power goes nowhere, while the taxman takes a bigger slice of wages.
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taxman → purchase → wages
To be fair, rising prices also increase the government’s costs.
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prices → rise → costs
But Holden’s data accounts for that.
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data → account → that
After subtracting the additional expenditure associated with economic changes and existing programs, he calculates that the budget still benefits by $281.8billion.
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budget → subtract → 281.8billion
Yet small Federal Budget surpluses have been replaced by larger deficits.
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surpluses → replace → deficits
So spare us the suggestion that this government has been battling away without a financial windfall.
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government → spare → windfall
The real question is whether it has used that advantage well.
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it → use → advantage
Holden’s analysis finds that Labor’s policy decisions added a net $105.7 billion to spending over the past four years, compared with the pre-election baseline.
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decisions → find → baseline
And that’s after the savings ministers keep boasting about.
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ministers → ’ → savings
Holden’s analysis finds that Labor’s policy decisions added a net $105.7 billion to spending over the past four years
Anyone can announce a saving on one day and spend the proceeds the next.
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Anyone → find → proceeds
Calling the first announcement ‘budget discipline’ doesn’t make the second one disappear from the overall picture.
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one → call → picture
Nor does every extra dollar of spending necessarily represent waste.
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dollar → represent → waste
Governments need to fund services, and worthwhile investments can improve the economy.
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investments → need → economy
But worthwhile spending still needs to be paid for, and ideally it adds to productivity.
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it → need → productivity
But as the head of the RBA, Michele Bullock, has said, productivity is ‘going nowhere’.
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productivity → say → RBA
And when inflation is proving particularly stubborn, the timing and scale of government spending matters.
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timing → prove → spending
This is where the budget debate arrives at our front doors.
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debate → arrive → doors
The RBA has identified both overseas cost pressures and domestic capacity constraints as contributing to persistent inflation.
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RBA → identify → inflation
Weak productivity makes the problem harder, as does too much government spending.
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spending → make → ?
Nobody serious pretends private spending isn’t also a contributing factor, but that doesn’t absolve the role of government spending.
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that → pretend → spending
And the way many government support programs are designed these days pushes the support of the state into the private sector column.
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programs → design → column
For example, all the private sector contracting that government commissions.
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government → commission → that
This is something to be acutely aware of when Chalmers and others seek to pretend that if inflation isn’t the fault of overseas forces, you should blame the private sector, not the government.
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you → seek → sector
Greater spending restraint would help ease demand pressure, reducing the burden left to interest rate rises to ease demand instead.
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restraint → help → demand
Because Labor isn’t doing that, mortgage-holders are left to absorb the pain, as are Australians paying higher prices for necessary goods, while politicians explain away why their own spending commitments are so indispensable.
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commitments → do → goods
For families, when mortgage payments go up, something else has to go.
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something → go → families
A dinner out, a streaming subscription, or in more extreme cases fewer presents for Christmas and birthdays, or skipped meals to claw back the lost money interest eats up.
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interest → stream → Christmas
…and 7 more, not listed.
The Aporia
