Budget Breakdown

12 May 2015

The Abbott Government’s second budget has been released , with Mr Abbott promising a ‘dull’ set of proposals compared to last year’s ‘repair job.’

Dr Bruce Littleboy, Senior Lecturer at The University of Queensland’s School of Economics, says the Abbott Government has stuck with a winning formula.

“The theory goes that you have a harsh budget in the first year of government and get the pain out of the way early,” Dr Littleboy said.

“In the second year, just be sensible. In the election year, move into popularity mode. I therefore predict common sense this time, or at least an air of it.

“In view of the Coalition suffering the political costs of attempting to be austere in their first budget and the Senate preventing them reaping the financial rewards, it is unlikely that the Coalition will try to tough it out again.”

Dr Littleboy says the government made the right choice by accepting the loss of revenue from the collapse of the mining boom.

“Several billions in tax revenue have vaporised owing to the collapse in mineral prices. The budget cannot offset the impact; it won’t and nobody should even try,” Dr Littleboy said.

“Treasurer Hockey has already indicated that the Federal budget will simply need to accept the loss of revenue associated with the collapse of the mining boom and loss of corporate taxation.

“This approach is wise; it would be foolish to try to claw back this revenue loss by raising taxes elsewhere.”

Changing commodity prices should be accepted as the norm, Dr Littleboy said.  

“Mining is acutely vulnerable to the inevitable fluctuations in the international economy,” he said.

“We should cease feigning surprise and bewilderment when commodity prices fluctuate.

“We do not know exactly when these events will occur but we can be confident that they will, and we cannot continue to pretend that they don’t in our fiscal budgets.”

Three billion dollar cuts to healthcare to be carried out over five years is part of this year’s budget. Dr Littleboy says the difficult part would be deciding which medications get subsidised .

“These savings are little more than loose change in comparison to the far more momentous and costly decisions that are made about how much to pay drug companies and about which drugs to subsidise,” Dr Littleboy said.  

“This is where the real savings are to be found.”

Dr Littleboy says the effectiveness of the budget could only be judged in a generation’s time.  

“Budgets are framed by politicians, largely for political reasons and under political constraints,” Dr Littleboy said.

“If we had made projections in 1990 about where Australia would be in 2015, how accurate would these have been, do you think?”

Dr Littleboy is urging politicians to accept the ill-fated economy until improvements become tangible.

“Hope is forever held that the economy will get back to normal in a couple of years, perhaps three years after there’s a crisis,” Dr Littleboy said.

“We have sung from this hymnbook since the onset of the global financial crisis.

“Perhaps Treasury will at last stop projecting some automatic and imminent restoration of normality.”