Wednesday, 30 April 2014

Welcome to the world of Hockeynomics - Part Two

This was Australian Treasurer Joe Hockey reported on ABC News, 24 April 2014:

The Treasurer Joe Hockey is talking tough on welfare measures in the lead up to the Federal Budget, saying means testing will become more important into the future, and Australians should keep working for as long as they can.
He's revealed some of the findings of the Commission of Audit, which shows that at $39.5 billion, Australia spends more on the age pension each year than it does on defence, hospitals, or schools.
"It is our single biggest spending program," Mr Hockey said.
"So the policies must be changed, either now or more dramatically in the future." [my red bolding]

According to Mr. Hockey in less than twelve months the Age Pension has gone from being the Federal Government’s third highest single recurrent expenditure item (approximately 10% of the Commonwealth Budget) to the highest at $39.5 billion.

Up an est. $2.5 billion since June 2013 and leaving Health expenditure at $62 billion and Goods and Services Tax transfers to the states at $48 billion miraculously way behind Age Pension costs using that mysterious method of accounting - hockeynomics.

Commonwealth government recurrent expenditure, 2012-13 
Grattan Institute analysis of Commonwealth budget papers
Grattan Institute 24 January 2014

In 2012-13 Defence as a recurrent expense was estimated to cost the federal government $30.8 billion and Education (minus the research component) was estimated at $27.16 billion, according to the Grattan Institute’s Budget Pressures on Australian Governments.

This is what Treasurer Hockey was waving in front of Spectator Magazine on 23 April 2014:

Again using hockeynomics, it appears that Defence as a recurrent expense has reduced in size by an est. $5.5 billion in less than ten months -  and this despite the Abbott Government spending many millions searching for the missing Malaysia Airlines plane since early March 2014 and increasing naval border surveillance since September 2013.

While Health expenditure is only shown as three discrete items in his Commission of Audit data and, is therefore reduced by $19.7 billion in under 10 months to make it appear as though the Age Pension is by far and away the largest contributor to the federal government's recurrent expenditure.

Education expenditure has $7.16 billion off its bottom line in less than 10 months in order for it to also fit into Hockey's universal-safety-nets-are-bad narrative.

If one looks at Mr. Hockey's chart; in 2013-14 Federal Government total payments (spending) are 25.93% of Australia’s Nominal Gross Domestic Product (GDP). By 2023-24 total payments are projected to be 26.50% of GDP. That expenditure growth is less than 0.57% over a decade, while the GDP is projected to grow 5.1% annually over that period.

Whereas, by comparison, in the United Kingdom (which also has a universal safety net policy covering health, education, employment, pensions and welfare payments) public sector spending was 42.2% of its GDP in 2013-14.

As for Australia's national public debt which is often quoted by the Abbott Government as a reason for taking the razor to government programs - the International Monetary Fund (IMF) in 2013 clearly stated that: Australian general government gross debt is expected to peak at around 32 percent of GDP in 2015 and is among the lowest in advanced nations.[International Monetary Fund. Asia and Pacific Department, Australia: Staff Report for 2013 Article IV Consultation-Staff Report]

While Mr. Hockey is trying to talk up his budget 'emergency' and demonise age pensioners (despite the fact that only seven per cent of Australia’s recent increase in health-care costs is due to aging, only 5% of people over 65 years require residential care as they age and more older people are already chosing to remain in the workforce longer), he remains almost mute on the subject of the new Abbott version of the Paid Parental Leave scheme.

This scheme will cost $14 billion in the first three years, or $4.66 billion a year. Costing taxpayers over $1 billion to meet the employer levy shortfall in its first year alone - in order to pay out up to $75,000 $50,000 (plus superannuation component) per non-means tested 6 month leave application granted.

The motivation behind this new scheme is not hard to find as it is based on feathering the nests of right-wing politicians' families and presumably the families of their political donors.

Here is Prime Minister Tony Abbott reported in The Sydney Morning Herald on 5 March 2014:

Mr Abbott said he opposed paid parental leave as a minister in the Howard government, but his views changed after considering what would be best for his daughters.


On 1 May 2014 at 2pm. the Abbott Government is finally releasing its first National Commission of Audit report. On May 13 full details of the Abbott Government's first federal budget are due to be released.

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