Manna or myopia? The 2006 Australian budget

The headline writers greet this year’s budget with acclaim and enthusiasm as will, it is supposed, we all given generous tax cuts. “Manna from heaven” proclaims The Australian on the morning after. “Spend, Spend, Spend” shouts the Sydney Morning Herald.

Leaving aside the more interesting issues of when heaven was moved to Canberra (and who is now playing God), we come to some more mundane economic issues.

The Federal Treasurer was certainly upbeat. As reported on the 7.30 Report website:

Australia has weathered some economic storms over the decade, storms every bit as deadly as the cyclones that lash the north of our continent in the early part of this year. We have weathered the Asian financial crisis, the global downturn, a one in 100-year drought … SARS … terrorist attacks …

Strong government has seen us through.

But with disciplined and prudent management, our economic has come through these storms intact. In fact, growing. In fact, growing in the longest continuous stretch our nation has ever experienced.

But we have prevailed.

There were moments where we were vulnerable. But through these storms we never lost sight of our goals to get Australians jobs, to keep inflation low, to keep interest rates affordable, to balance our Budget and to repay Labor's debt.

The worst, it seems is behind us. Now we can spend our surplus, or at least some of it over this year and the next few. The Federal Government debt repayment appears one of the government’s proudest achievements. It has been a key mission goal.

But how has the goal been achieved? In part, by selling assets and under funding key societal activities. Other goals have similarly been achieved through under funding or under investing, as is particularly evident in education and health. Education ($16.6 billion) does not get a mention in the broadcast budget speech, though childcare and training do. Health ($39.8 billion) gets a little more mention with some research funding and mental health services noticeably up. Social security ($91.8 billion) receives only a single mention. Little comment and few initiatives are offered where $148 billion or 64 per cent of the budget is spent.

Instead the emphasis is on how little government will take. Tax will not be as high as it might have been, on income and superannuation. “You will have more to take home” is the central message. You may now even be able to stay in your home on retirement if it is a suitable rural property.

Treasury and its treasurer are relying on a money illusion it seems. People receiving more cash in their pocket will feel good. Outgoings on things like fuel, food, housing and personal services will need to be more than compensated for.