On thin ice: Labor's optimistic budget surplus - The Drum Opinion - In the face of very real, and mounting, global risks to our economy, this budget has left our economy particularly vulnerable, with little policy capacity to respond. Find More Stories On thin ice: Labor's optimistic budget surplus John Hewson First and foremost, this budget is mostly a political document, but with significant economic and business consequences. This budget misses the important strategic opportunity to announce a substantial package of economic and social reforms, which could deliver a sustained boost in national productivity in the medium-term - fundamental to being able to maximize the benefits of the resources boom.
It is political in several senses: It is short-term, not strategic It is about wealth distribution, not wealth creation It announces a surplus simply to meet a substantial political commitment - to avoid another Opposition attack about another "broken promise" It attempts to lay out the essence of a re-election strategy – a budget that delivers on "Labor values", redistributes wealth in favour of workers, Australian families, the middle class Treasury's forecasting track record makes the point. Email Share x del.icio.us Digg Kwoff. Surplus a lifebuoy Labor can cling to. Wayne Swan’s budget has set out a coherent election platform for Labor. Photo: Alex Ellinghausen Laura Tingle ‘When you are on the high wire,” one Labor figure observed yesterday, “it doesn’t matter how high it is, and there is no point looking down.”
That just about sets the mood of a fatalistic Labor Party, which operates on the presumption that it is just days from losing government as a result of its multiple follies but has produced, at this late hour, by far its smartest political budget. Federal Parliament rose last night and reconvenes in 10 days – on Monday, May 21. Next Friday, May 18, the case of sexual harassment brought by James Ashby against the Speaker of the House of Representatives, Peter Slipper, will be mentioned in the Federal Court. Ashby’s lawyers have not yet filed papers in a form admissible in court but it is presumed they will do so shortly before the matter is next in court.
The question is what Parliament does about Thomson. Is the boost in the tax-free threshold ‘real’? I’ve seen a few people parrot the line that the increase in the tax-free threshold that will take effect from 1 July this year isn’t “real”, because it involves a reduction in the Low Income Tax Offset (LITO). Like most myths, this has a little bit of truth to it.
While references to ‘tripling the tax-free threshold’ are technically correct, the effective threshold (taking into account the LITO) is only going from $16 000 to $20 542. However, while that might sound less impressive and is certainly harder to convey in a sound bite, the increase in the tax-free threshold will still deliver a significant tax cut to low-income earners. In fact, the new tax scales will take the effective tax-free threshold to its highest level on record (the ATO historical tables only go back to 1983, frustratingly). Effective tax-free threshold since 1983-84, in constant 2011 dollars Change in real effective tax-free threshold on previous year Note: Effective TFT = statutory TFT + (LITO amount/lowest MTR). Is Labor Anti Business? On Tuesday night I predicted we should get ready for more unhinging in the wake of Wayne Swan's 2012-13 Budget and it was about six hours before The Australian produced one of the more ridiculous front pages in the dismal history of this once-proud newspaper.
"Smash the rich, save the base" screamed The Australian's headline, accompanied by a bizarre cartoon by Bill Leak that strayed crazily into totalitarian propaganda. I won't rehash the general bemusement at the lurid response from News Limited to what was actually a fairly orthodox and conservative budget by Swan. Luke Ryan wrote a forensic take-down of the woeful effort, while Jonathan Green mourns the departure from public life of politicians courageous enough to demand an informed debate from constituents.
That decision saved billions for a government desperate to return to surplus, incidentally helping it to deliver cash payments to welfare recipients and families. There are some sound economic reasons to reduce business tax. Income taxes get Swan's surplus over the line. Class warfare in the budget? That's a bit rich. The Treasurer Wayne Swan has described the 2012 Budget yesterday as “a Labor budget to its bootstraps”, and commentators have variously seen it as “a big taxing, big spending budget, including a big increase in welfare” and as “a big dose of class warfare”. While the budget aims to achieve a small surplus – which was not a surprise – there were some unexpected changes, including an increase in Family Tax Benefit Part A (FTB-A), the income-tested cash payment for families with children, with the biggest increases going to families with the lowest incomes.
This comes at a cost of around $1.8 billion over four years. A new Income Support Supplement to be paid to Newstart recipients and people receiving Youth Allowance will cost around $1 billion over four years, and give recipients $210 a year for single people and $350 (combined) for couples. These figures need to be put into context. Whether these changes constitute “class warfare” is also debatable. Social welfare and class warfare: the give and take of budget balancing. TREASURER Wayne Swan has described the 2012 federal budget as a “battler’s budget” and “a Labor budget to its bootstraps,” and commentators have variously seen it as “a big taxing, big spending budget, including a big increase in welfare,” “a big dose of class warfare,” or a bid to “smash the rich.”
Indeed, the class war aspects of the budget have been seen as undermining previously announced reforms. But the real story of this budget is less about class war than about a complex interplay of measures in the context of a series of Labor budgets. While the budget aims to achieve a small surplus – which is no surprise – it brings some unexpected changes, including an increase in Family Tax Benefit Part A, or FTB-A, the income-tested cash payment for families with children, the biggest share of which goes to families with the lowest incomes.
These figures need to be put into context. Whether these changes constitute “class warfare” is also debatable. Now that’s what I call redistribution! The myths that abound in Federal Budget Papers. Last night’s Federal Budget in Australia proved once again how dominant the macroeconomic myths are in policy development. You can read my pre-Budget comments – Budget 2012: a recipe for disaster – and apart from the 2011-12 deficit being larger than the Government planned as a result of the slowing economy undermining its estimated tax revenue (in other words, the Government was overly optimistic in its forecasts last year) I would not have written much different after seeing all the Budget documents. It remains the largest fiscal consolidation attempted in one fiscal year (equivalent to 3 per cent of GDP) at a time that GDP is growing around 2.5 per cent.and I cannot see private spending growth picking up to fill the gap. Outcome – a movement towards recession.
Conclusion – poor fiscal management. The myths in order of discussion in Statement 4: 1. 2. 3. 4. Return to more typical behaviour Statement 4 says that in recent years the: The behaviour was very odd by historical standards. 1. Battlers and the big picture: budget's no game changer - The Drum Opinion - Clearly the sound-bite phrases of "fair go" and "battler's budget" imply what Swan wants us to think is the story, but do the cuts match it? Find More Stories Battlers and the big picture: budget's no game changer Greg Jericho Well Swan did it. He forecast a surplus. Before we look at some of the entrails, let's look at the big numbers. Tax revenue continued to decline in the 2011-12 year to the tune of $5.6 billion less that the Government expected to get six months ago.
Of course this shifting around of money leads to the inevitable claims of cooking the books. All up the Government has transferred $1.9 billion of spending into the 2011-12 financial year. Clearly the Government wanted politically to have the budget in surplus in the 2012-13 financial year. But one fact that can't be ignored is that this budget has for the first time in 40 years reduced the dollar amount of expenditure, and for only the fifth time in that period it has also reduced expenditure in real terms (ie taking into account inflation).
Last night on Lateline , Opposition spokesman for finance Andrew Robb suggested: Actually Robb is wrong. Email Share x Digg. Budget 2012 – Pass or Fail? | Lighthouse Securities. When you run a big business like Australia you need to take account of many all your stakeholders and you make choices. That’s what Labour has done last night – they have favoured their political constituency at home over the wealthier. They have played to the international audience by delivering a surplus HEADLINE – this keeps us out of the mess that is engulfing Europe and concerns about deficits, fiscal positions and fiscal space. But what have they really done and how will it impact our economy. Certainly it’s easy to knock Wayne Swan and Labour for last night’s Budget given the apparent chicanery used to achieve the wafer thin surplus of $1.5 bln for the next Financial year.
I think the best summary along these lines that I have read comes from Adele Ferguson in the Fairfax press, But I guess the key thing to say is that this is always the case – the budget is always hostage to the expectations that back it up. I would say both yes and no. Ironic isn’t it! Have a great day Like this: Government’s reverse psychology. Treasurer Wayne Swan’s message as he delivered the budget was that its initiatives were designed to share the benefits of the boom directly with families, rather than through business. Photo: Rob Homer Laura Tingle The story of the Gillard government is a story of a government that rarely seems in control of its fate.
Wayne Swan’s fifth budget provides a brief respite from this story for it reveals ministers grown more confident with experience, fashioning a budget that seeks to maximise Labor’s fiscal and economic record and its political opportunities. Experience and pragmatism see Swan and his colleagues prepared to dump their own initiatives – some even before they hit the statute books – and cobble together new strategies that maximise their chances to turn the pressure onto the Coalition about its alternative economic strategy.
Without a doubt, money has been shuffled. If business squeals about losing company tax cuts, Labor will simply blame Abbott and his refusal to pass the cuts. Cash splash takes us back to stimulus levels. Back to black as Swan budgets for the boom - Federal Budget 2012. By Simon Cullen Updated Tue 8 May 2012, 11:50pm AEST The Federal Government is scrapping billions of dollars worth of company tax cuts, instead redirecting the money to welfare payments as it reaches for a budget surplus. The company tax cuts were promised as part of the mining tax but were unlikely to pass the Parliament because of opposition from the Greens and the Coalition. Treasurer Wayne Swan says he will not allow the "parliamentary gridlock" to get in the way of sharing the benefits of the mining boom.
"These new measures are good for low- and middle-income families because they will help them make ends meet and get ahead," Mr Swan said. "It's a Labor budget to its bootstraps. " As expected, the Government has announced billions of dollars in savings to return the budget to a modest surplus of $1.5 billion in 2012-13. The major spending initiatives are: Major budget savings: Path to surplus How it's spent "The deficit years of the global recession are behind us. A Labor budget. Infographic: Budget by the numbers - Federal Budget 2012. Hey presto! A horror budget without the pain - The Drum. Posted Tue 8 May 2012, 8:09pm AEST It's a horror budget without the pain. The biggest fiscal contraction in the nation's history - $46 billion, more than three per cent of GDP, bigger even than Arthur Fadden's nightmare budget of 1952 - yet still delivering a fistful of handouts to low and middle income families.
Hey presto! Call Wayne Swan a magician. There's some fiscal magic in the way the surplus, a core political promise, has been achieved: the Government's effectively shifted about $7 billion in one-off payments forward into this financial year, and its deferred spending on defence and foreign aid. But the forecast surplus of $1.5 billion could still easily vanish before it appears. Why? Treasury has been far gloomier in its assessment of the troubled region than the International Monetary Fund. But even Treasury's forecasts are optimistic.
Europe is hitting the political limits of the austerity: the election results in Greece and France demonstrated that. Topics: budget. Infographic: Budget forecasts versus reality - Federal Budget 2012. Federal Budget 2012 | Budget gifts mining boom to families. Swan budget big on class warfare | Federal Budget 2012. Federal budget | This budget is too good to be true.
A classic Labor budget - The Drum Opinion. Find More Stories A classic Labor budget Tom Elliott The 2012 Federal budget is, in many ways, a classic Labor budget. In essence, wealthy people and businesses will pay more tax, while low-to-middle-income families will receive more. One wonders, however, whether such preaching to the converted will gain Labor any new votes. Corporate Australia – the company tax rate will now not be cut from 30 per cent to 29 per cent. Mining companies – the Mineral Resources Rent Tax (MRRT) is now a reality. Wealthy superannuants – people who currently earn over $300k per annum will now pay more tax on their superannuation. Small Business – perhaps curiously, the ability of small business to claim back previous tax paid in the face of current losses is an excellent idea. Low income families – whether it's carbon tax subsidies or more funds for Part A family payments, those earning less than approximately $80,000 per annum will receive more from Mr Swan.
Email Share x del.icio.us Digg Kwoff StumbleUpon. The era of surpluses are upon us: Swan. Treasurer Wayne Swan is predicting budget surpluses from now on, but one leading economist does believe this will not automatically translate into lower interest rates. As was widely expected, the treasurer's fifth budget released on Tuesday projected a $1.5 billion surplus in 2012/13 and bigger surpluses down the track to 2015/16. "The deficit years of the global recession are behind us. The surplus years are here," Mr Swan told parliament. The turnaround occurred despites the deficit for this financial year deteriorating to $44.4 billion, from $37.1 billion. Advertisement Labor's first surplus since 1989/90 will mark the biggest fiscal consolidation in over 50 years. However, shadow treasurer Joe Hockey said over the year there had been a $22 billion blowout in the 2010/11 deficit. "And they expect us to believe they will deliver a surplus next year," Mr Hockey told ABC television.
Mr Richardson said while the RBA might cut rates again, it wouldn't necessarily be because of the budget. Wayne Swan plays Robin Hood for votes. Australian #Budget Speech Synopsis - Australian Modern Money. Ben Eltham On Budget 2012. The Budget At A Glance.