Wish list for Wayne Swan: what the experts want from the budget
8 May 2012
Two University of Sydney experts have advocated what they would like to see from the 2012 Federal Budget.
Budgets are largely symbolic statements. Most expenditure and revenue is already locked in from one year to the next. Budgets are about tweaking those numbers, but mostly also about symbolism - the message is as important as the content. I don't have any problem with symbolism per se, but with the quality of political commentary at such an all time low, symbolism is everything - and nothing. What symbolism is there in targeting an accounting residual like the deficit?
I'd like to see some debate about how we can spend $30 billion on superannuation tax concessions and only $30 billion on the age pension. I'd like see some debate about why a society that is so much wealthier than even 20 years ago yet is making access to rights to basic sustenance conditional on presenting oneself in the labour market.
I'd also to see people, corporations and institutions with so much economic power asked about their obvious interests in political positions and about the obvious materiality of their interests.
So I'd like to see different questions asked by different people. That would make a great change to current budget symbolism with real economic potential.
My wish for tomorrow night's budget is that the government backpedals on the goal of delivering a surplus and defers until the signs of softening in the economy are past.
But failing that - and I'm not naive enough to believe that they will backpedal - the attempt to bring in a surplus should be focused more on the revenue side than on the expenditure side and should be targeted away from low to middle-income earners towards high-income earners.
Both of these objectives could be justified on economic grounds, although targeting the higher income earners can obviously be justified on equity grounds.
If the government seeks to bring in a surplus, it will be less depressing on overall aggregate demand if done through taxes, rather than curtailing expenditures. And if we are to have a surplus, we need it to be done in a way that minimises the depressing effect on overall spending.
There is a similar justification for having less pain for lower-middle income earners than high-income earners to the extent that the latter spend a smaller proportion of their income. Cuts to higher income earners will likely have less of a depressing effect on consumer demand.
The qualification to all of this is that bringing in a surplus will likely require expenditure cuts - and cuts which will affect low to middle-income earners at least indirectly. Hence it would be best if the achievement of the surplus at this time was put on hold.
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