Turnbull Government barely keeping its fiscal head above water?

The 2015‑16 Final Budget Outcome document was released on Friday 30 September 2016 by Australian Treasurer Scott Morrison and the Minister for Finance Mathias Cormann. It can be downloaded here.

This is Stephen Koukoulas writing on the subject in The Guardian on 3 October 2016:

The treasurer, Scott Morrison, and the finance minister, Mathias Cormann, "took out the garbage" last Friday afternoon, dumping the final budget outcome for 2015-16 on the Treasury website under the cover of the football grand finals, a long weekend and the start of school holidays around much of the country.

Morrison and Cormann came close to breaching the Charter of Budget Honesty, which requires the release of each budget outcome for the prior financial year by 30 September each year. They made it with a few hours to spare.

They also released it without a press conference or detailed media release, making sure there was miniscule coverage of something that would normally be a key area of economic and fiscal management. This is especially the case with "budget repair", the "return to surplus", "paying off debt" and dealing with the "budget emergency" being the basis that saw the Coalition elected to power in both September 2013 and July 2016.

Looking at the budget outcome document, it is clear why it was released in the shadows of the Friday night without any fanfare.

The 2015-16 budget deficit was $39.6bn or 2.4% of gross domestic product. When the former treasurer Joe Hockey delivered the first budget of the Coalition government in May 2014, the budget deficit for 2015-16 was forecast to be $17.1bn.

Much of the blowout was due to decisions of the Coalition government. Foregoing revenue from the carbon price, gifting $8.8bn to the RBA and ramping up spending on border protection without any offsets were vital.

The Coalition, contrary to all perceptions, has been spending at an alarming rate. In 2012-13, the last full year of the previous Labor government, the ratio of government spending to GDP was 24.1%. In 2014-15, this had risen to 25.6% and, in 2015-16, it rose to 25.7% of GDP. The 1.6% of GDP blowout in spending between 2012-13 and 2015-16 is about $26bn and accounts for more than the blowout in the deficit from the time of the 2014 budget.

The deficit blowout fed into the level of government debt as it had to ramp up its borrowing to cover the ever growing shortfall.

Net government debt rose to $296.4bn at June 2016, up from $153bn in June 2013 just before the Coalition took power. As a share of GDP, net government debt has risen from 10% to 18%, just off the all-time high in the wake of the second world war. When the 2016 Myefo is released before year end, net government debt will be at a 60-year high and rising.

Gross government debt, according to the final budget outcome documents, rose to $420.4bn, or 25.5% of GDP, in June 2016. This is at the highest since 1971-72 when the Vietnam war effort was being funded.

Government debt is growing at a pace that will no doubt be the focus of the credit ratings agencies. Unless there is some miracle in terms of a growth spurt that fuels an unexpected windfall revenue gain to the government, further large budget deficits are likely in the near term, as are further increases in government debt……

Australian Federal Election 2016: Labor candidate for Page Janelle Saffin announces a Shorten Government will repair Coalition budget cuts to community legal centres

Labor Media Release, Friday 10 June 2016:

SAFFIN ANNOUNCES $300,000 FOR NORTHERN RIVERS COMMUNITY LEGAL CENTRE

Janelle Page, Federal Labor Candidate for Page, today said a Shorten Labor Government would provide $300,000 over three years to ensure the Northern Rivers Community Legal Centre has the funds to continue helping people in need.

The Federal Budget confirmed that the Liberal-National Government would cut funding for Community Legal Centres by 30 per cent, however Labor will inject a total of $43 million into the sector over three years from 1 July 2017.

Ms Saffin said Labor understood how important the Northern Rivers Community Legal Centre was to people in the seat of Page.

“Access to legal assistance when you need help is as important as access to Medicare when you’re sick. That’s why Community Legal Centres are such an important local service.

“The Northern Rivers Community Legal Centre helps local people deal with a wide range of legal issues – from tenants’ rights, to domestic violence and family law disputes.

“Labor will ensure that CLCs can continue their vital work helping people to navigate their way through our complex legal system.”

Ms Saffin said the Liberal-Nationals attack on Community Legal Centres was another example of how local MP Kevin Hogan had failed to needs of regional communities.

“Mr Hogan has been missing in action. He’s been too busy defending the city-centric Liberal-Nationals to defend local community legal services.

“Labor will ensure the Northern Rivers Community Legal Centre can keep its doors open and go on providing vital services to the people of the North Coast and Northern Rivers.”

Ms. Saffin told The Daily Examiner on the same day:

"Access to legal assistance when you need help is as important as access to Medicare when you're sick. That's why Community Legal Centres are such an important local service," Ms Saffin said.

"The Northern Rivers Community Legal Centre helps local people deal with a wide range of legal issues, from tenants' rights, to domestic violence and family law disputes.

"Labor will ensure that CLCs can continue their vital work helping people to navigate their way through our complex legal system."

Ken Beilby, the Principal Solicitor for the Northern Rivers Community Legal Centre in Lismore said the funding will mean they do not have to shut offices in the Richmond Valley in Casino and the Tweed Valley office in Murwillumbah.

"It's going to help us maintain front line services to disadvantaged clients in our region," Mr Beilby said.

"One of the main priorities of our centre is women experiencing domestic violence and providing early intervention.

"Our ability to continue assisting vulnerable clients will be greatly diminished without those funding cuts being restored."

The day after the 2015-16 Budget was delivered......

ReachTEL conducted an opinion poll the day after the Abbott Government delivered its second budget on 13 May 2014.

Due to a number of media releases and ministerial interviews in the weeks before Budget Night these respondents would have possibly been aware of some of what was in the 2015-16 Budget aside from the actual contents of the Treasurer's budget night speech.

There appears to have been no immediate positive bounce for the Coalition in voting intention numbers and Tony Abbott is not seen as the preferred prime minister.

The majority of respondents did not see the budget as making themselves and their families financially better off, while less than half of those respondents identifying themselves as small business owners were inclined to see this budget as one that benefits them directly.

Comparing the two genders, women seem slightly less impressed by this budget than men. 

Question 1:

If a Federal election were to be held today, which of the following would receive your first preference vote? If you are undecided to which do you even have a slight leaning?

Two party preferred result based on 2013 election distribution

Vote intention by employment status:

Question 2:

Who of the following do you think would make the better Prime Minister?

Question 6:

Thinking about the federal budget announced last night; do you think you and your family will be financially better or worse off as a result?

NOTE: This survey was conducted using an automated telephone based survey system among 3,180 voters. Telephone numbers and the person within the household were selected at random. The results have been weighted by gender and age to reflect the population according to ABS figures. Please note that due to rounding, not all tables necessarily total 100% and subtotals may also vary. 

The Abbott Government's 2015-16 Budget is like the curate's egg#

"My determination is to ensure that this budget is fair"

[Australian Prime Minister Tony Abbott speaking with 3AW's Neil Mitchell, May 2015] 

Only time will tell just how 'fair' this federal budget is. It still contains elements of Tony Abbott's desire to penalise the poor and vulnerable at every opportunity, his determination to avoid funding climate change initiatives or water savings measures where possible and his seeming need to stifle innovation and science.

Here are some of the features of the Abbott Government’s 2015-16 Budget:

* The government is providing $131.3 million over three years to help the telecommunications industry meet their initial capital costs of retaining all metadata belonging to phone and internet accounts held by Australian citizens.

* Income management will continue for another two years in all twelve locations where it currently operates, with possible expansion to four new communities at a cost of $145.8 million and with these scheme trials ending on 30 June 2017. However, the scheme will no longer include Voluntary Incentive Payments and the Matched Savings Payment.

* The government will also spend $2.7 million over three years from 2014-15 to undertake a trial of new welfare debit card arrangements in up to three communities, based on the recommendations made in the report Creating Parity — the Forrest Review, with locations to be determined in consultation with key stakeholders.

*Low Income Supplement — cessation. This represents the loss of an annual $300 payment to eligible low-income households.

* Personal Contact Interviews will be removed from the repertoire of activities required of individuals receiving unemployment benefits. However, from 1 July 2016, the Government will extend the ‘no show no pay’ principle to missed appointments and activities like work for the dole, to encourage positive job seeker behaviour and compliance. Job seekers who fail to undertake adequate job search will be subject to income support payment suspension until they demonstrate genuine job search efforts. These job seekers would also no longer be able to have the financial penalty waived by agreeing to undertake a compliance activity.

* Cessation of the Large Family Supplement of Family Tax Benefit Part A. Large families will continue to receive a per child rate of FTB Part A for each eligible child in their family.

* Family Tax Benefit Part A — reduced portability. With some exceptions the amount of time Family Tax Benefit (FTB) Part A will be paid to recipients who are outside Australia will be reduced to 6 weeks in every twelve months they are overseas.

* 1 July 2016 onwards the government is removing all or part of federal paid parental scheme entitlements for to an estimated 79,000 working women expected to take maternity leave. Under federal legislation these women had an expectation of receiving up to $11,500 for maternity leave of 18 weeks duration.

* From 1 January 2017 the government will reduce from 26 weeks to six weeks the period that some recipients of the Age Pension, Wife Pension, Widow B Pension and the Disability Support Pension can be paid their full basic means-tested rate while absent from Australia. After six weeks absence from Australia, pensioners who have lived in Australia for less than 35 years will be paid at a reduced rate proportional to their period of Australian Working Life Residence (AWLR). The AWLR is the period a person has lived in Australia, as a permanent resident, between the age of 16 years and Age Pension age.

* The Government will not proceed with changes to eligibility thresholds for Australian Government payments for the next three years that relate to the Age Pension, Carer Payment, Disability Support Pension, and the Veterans’ Service Pension income test free areas and deeming thresholds over three years from 2016-17. The pension income test free areas and deeming thresholds will continue to be indexed annually by the Consumer Price Index. This means that 170,000 extra pensioners with moderate assets will now receive a full or increased pension. At the same time, the asset test taper rate will increase from $1.50 to $3. This means for every $1,000 of assets over the asset free threshold (eg. $202,000 threshold for a single homeowner age pensioner & 286,500 for home owning age pension couples), the pension rate will reduce by $3 a fortnight. Those who no longer receive a pension will remain eligible for a Commonwealth Seniors Health Card or Health Care Card. The Government has decided not to proceed with the 2014 Budget measure to index pension and pension equivalents by CPI alone.

* The government will pause for a further two years the indexation of 78 programmes under the Administered Programme Indexation Pause measure announced in the 2014-15 Budget. For each programme, the extension of the pause to indexation will apply from 1 July 2017 or 1 July 2018 depending on the original start date of the pause.

All elements of the Indigenous Advancement Strategy do not appear to be resuming indexed funding until 2018-19.

Department of Veterans’ Affairs dental and allied health provider payments will not resume being indexed until 1 July 2018.

* A new single Child Care Subsidy (CCS) will be introduced on 1 July 2017. Families meeting the activity test with annual incomes up to $60,000 (2013-14 dollars) will be eligible for a subsidy of 85 per cent of the actual fee paid, up to an hourly fee cap of $11.55 for long day care, $10.70 for family day care, and $10.10 for outside school hours care. The subsidy will taper to 50 per cent for eligible families with annual incomes of $165,000. The CCS will have no annual cap for families with annual incomes below $180,000. For families with annual incomes of $180,000 and above, the CCS will be capped at $10,000 per child per year.

* Cooperative Research Centres — reduced funding. Lost funding will be $26.8 million over four years from 2015-16.

* Industry grant programmes — reduced funding. Lost funding will be  $31.7 million over three years from 2014-15 and will apply to the following programmes; Commercialisation Australia, Enterprise Connect and Industry Innovation Precincts.

* Regional Development Australia Committees — reduced support. This loss of support activity represents $3.6 million over four years.

* Sustainable Rural Water Use and Infrastructure Programme — reduced funding. Loss of $22.7 million in water buyback funding over two years from 2017-18.

* National Low Emissions Coal Initiative — funding adjustment. Funding for the Australian National Low Emissions Coal Research and Development Project will be reduced by a one-off $3.4 million before 30 June 2015.

* The Government will abolish the Commonwealth Scientific and Industrial Research Organisation (CSIRO) Environment Strategic Advisory Committee, as the function has been reallocated by CSIRO to the relevant flagship advisory committee. IIF Investments Pty Ltd, and its assets, have been transferred to the Department of Industry and Science. IIF Investments was established as a mechanism to deliver the Government’s capital into the venture capital funds licensed under Rounds 1 and 2 of the Innovation Investment Fund (IIF), PreSeed Fund (PSF) and Renewable Energy Equity Fund (REEF) programmes. It will also dissolve the Bureau of Resources and Energy Economics (BREE) and the Consumer Advocacy Panel. 

* The Government will reduce the company tax rate to 28.5 per cent for companies with aggregated annual turnover less than $2 million. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30 per cent rate on all their taxable income. Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount of five per cent of the income tax payable on the business income received from an unincorporated small business entity. The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset.

* Application of the Goods and Services Tax (GST) will be extended to cross border supplies of digital products and services imported by consumers from 1 July 2017.

* Under the new arrangements, increased criminal penalties and a new civil pecuniary penalties regime will be introduced for breaches of the Foreign Acquisitions and Takeovers Act 1975. A reduced penalty period for foreign investors that have previously breached the foreign investment rules in relation to residential real estate has been provided until 30 November 2015. These investors may avoid prosecution, but will be required to divest the property.

* Stronger Relationships Trial — cessation. Those couples with a $200 pre-marriage relationship counselling subsidy will have these honoured up until 30 June 2015 for couples who registered prior to 9 February 2015.

* Expenses under the broadcasting sub‑function are estimated to decrease by 3.2 per cent in real terms from 2014‑15 to 2015‑16 and by 8.5 per cent in real terms from 2015‑16 through to 2018‑19. Due to these cuts the Special Broadcasting Service (SBS) is reportedly withdrawing from the digital platform FreeView so if viewers wish to see a certain documentary, drama, comedy or current affairs show they will have to view it on their television at the time of broadcast and wait for any televised repeat in the future if they miss doing so.

* The Australia Council arts funding will be cut by $110 million between 1 July 2015 and 30 June 2019. This arts funding will be transferred to the Attorney-General’s Department to be distributed at its direction of the Attorney-General.

Australian Financial Review 13 May 2015:

While Thursday marks the 29th anniversary of Paul Keating's famous "banana republic" warning that ushered in two decades of more disciplined government, more than $1 out of every $4 created by the economy will be taxed and consumed by the Abbott government. 

According to a Treasury measure of the "call on resources", which gauges the tax and borrowings needed to fund the government, the burden will hit 26.7 per cent in 2015-16 and 2016-17…..

The budget papers show the measure will remain at more than 26 per cent for at least four years, until 2018-19. The figure looks better than it seems in the final year, which is when the federal government plans to cut $80 billion in funding to states.....

Between 1987 and 2013 the size of government breached 26-per cent only once, in 2009-10, when the Labor government's stimulus package led to increased borrowing. It climbed above that level for only the second time in 26 years in 2013-14, which was the Coalition's first budget, and it has remained there since.

# It is said that the term “a curate’s egg” refers to something that is obviously and essentially bad, but is euphemistically described as nonetheless having good features credited with undue redeeming power. It’s origin is thought to be early 20th century from a cartoon in Punch (1895) depicting a meek curate who, given a stale egg at the bishop's table, assures his host that ‘parts of it are excellent’.

Small puzzles in the Abbott Government 2015-16 Budget Papers

Budget Measures Budget Paper No. 2 contains a number of small puzzles:

* Treasury estimates it will be raising $1.18 billion between 12 May 2015 and 30 June 2019 from decisions taken but not yet announced. Apparently we can all look forward to budgetary surprises scattered like rose petals across our path during the next four years.

* The nature of the Combatting [sic] multinational tax avoidance — stronger penalties measures is such that a reliable estimate cannot be provided so there are no figures given for any financial year. However, the Abbott Government expects an unquantifiable gain to revenue over the forward estimates period from companies with global revenues of more than $1 billion. It has this expectation even though there is no proposal to make unlawful the billion dollar tax avoidance schemes currently used by large multinationals such as Google, Microsoft, Apple, BHP Billiton and Rio Tinto.

* Removing access to the government paid parental leave scheme for pregnant women if their employer has a parental leave scheme is listed as an “expense” to the Australian Government of $1.67 billion between 1 July 2016 and 30 June 2019 and will only achieve “savings” of an est. $967.7 million over the same period. Perhaps a reader can explain that one.

* The Australian Consensus — establishment is listed as an expense but no figure is attached for any financial year. Despite the fact that $4 million over four years commencing in 2014-15 (announced as a grant to the University of Western Australia in April 2015 which it quickly returned to federal government coffers) is mentioned in the text, as is the government commitment to go forward with establishing this centre. Because this budget item was not included in the previous 2014-15 budget and is merely a title in this year’s budget it is a rather a strange little orphan whose inheritance is probably stuffed under the education minister’s mattress.

* Government expenses relating to Managing Biosecurity Risks — expanded surveillance and offshore audit are nfp (not for publication). Apparently cost estimates associated with this scheme are too sensitive for voters’ eyes while government is allegedly still in ongoing consultation with industry.

* Cost of the Home Insulation Program Industry Payment Scheme — establishment is nfp. It would appear that the transparent, equitable and evidence-based process for the assessment of business losses and the making of payments to over 200 businesses promised by the Abbott Government doesn’t extend to providing a budget estimate of the total cost of this scheme which was announced in December 2014 and was to be completed by mid-2015.

* One-off Government Response to the Home Insulation Program Royal Commission — act of grace payments made in 2014-15 are nfp. Again, the total cost is not for voters’ eyes and this item brings the total number of not for publication items to around nine.