Since I was concentrating on the politics of the budget in my post last night, it’s worth pointing out that there’s an interesting take on Wayne Swan’s first budget from market economist (and former Keating adviser) Barry Hughes at New Matilda this morning. It’s confirmation of some of the early reaction from other economists on Lateline Business that the policy settings in the budget are basically neutral, giving the government (and the Reserve Bank) wriggle room to respond if things take a quick downward turn in an environment of almost unprecedented international instability. But it’s worth remembering one thing. Unlike the previous government, this one actually does have a macro-economic policy:
Financial markets will be thankful for small mercies. Who knows what Howard and Costello might have done? Perhaps they might have finally learnt some economics. But on their past form they would have continued to party. Keeping a budget surplus around one per cent of GDP would have left high single digits of more billions of new spending and tax cuts. And financial markets will also be impressed that the ALP has been able to slot in its new spending without blowing any valves.
Think about that as you assess the economic value (if any) of anything Malcolm Turnbull and Brendan Nelson have to say about the “Labor budget for a nation”.
Update: Also in New Matilda, Ben Eltham on the rhetoric and the reality of budget cutting, an assessment of the “Education Revolution” and the infrastructure fund… And somehow an AFL metaphor slipped into the title of my contribution to the budget discussion the morning after.
I’m not an economist, but there has been a review of the tax system announced to coincide with the budget. Yet this review won’t include the GST or Superannuation.
While the punters will breathe easier at these exclusions, this diminishes the rigour of the review.
Obviously the economists quoted in this entry want less spending. They don’t want massive inflationary tax cuts. However, how can a government achieve real taxation reform without telling someone in the community “you are going to be paying less tax”? Someone out there is going to have more money to spend. Over time it has been the top marginal tax rate that has been mooted to fall. With Robin Hood Wayne Swan on the front of my local paper today, that seems unlikely.
So, the Rudd Government has kept to the request for a certain surplus. But will that be maintained long term? Should it be? And will it need the reversal of a election promise to do it?
I’m happy to get my $10-12 per week tax cut. I don’t know if the economists are happy I’m getting it though.
Update: Also in New Matilda, Ben Eltham on the rhetoric and the reality of budget cutting, an assessment of the “Education Revolution” and the infrastructure fund… And somehow an AFL metaphor slipped into the title of my contribution to the budget discussion the morning after.