This year’s Federal budget was nothing short of an unmitigated disaster… with a deficit of $50 billion, $200 over the next 4 years.  These nominal levels of debt have never happened before in the history of Australia.  But we are assured by our fearless leaders and economic experts that the solution to an international credit contraction is deficit spending and that we must ’spend’ our way out of this.  I have to restrain myself from calling them names in public… I don’t know what disturbs me more though: 1)  The shocking ‘Robin Hood’ budget and it’s ceaseless class warfare OR 2)  Nobody seems to care, we’re too busy watching ‘Gossip Girl’.  People don’t understand the magnitude of the things going on around them… fine, not my problem.

Here’s my breakdown of the budget:

1)  Economic Growth to fall to -0.5 per cent of GDP

This is just a fantasy… only falling by -0.5%!!  This is delusional if not morally repugnant.  It also happens to be built on an assumption that inflation will average 1.75% next year….

2)  Inflation to average 1.75 per cent

This number is also a fantasy.  All government stats are worth less than the paper they’re written on.  I suggest you do some research on hedonics to understand what I mean.

3)  First Home Owners Boost continued for six months

This program is the peak of moral hazards… house prices have already started to collapse, in spite of this recent boost.  The extension of this program will not stop house prices from falling… the party is over.

4)  Small Business and General Tax Break increased to 50 per cent for order this calendar year

This is one of the few decent moves made by the policy makers… the law of large numbers dictates they had to accidentally get something right.  The issue here is that these tax breaks are canceled out by increases in the Medicare Levy.

5)  Infrastructure spending to total $22b.  $8.5b for road, rail and port.  $4.5b on new clean energy initiative

Infrastructure spending is lower than previous government.  Contrary to popular believe, infrastructure don’t actually make you any money… it just employs people with borrowed money that each individual has to pay through higher taxes.  Unlike this budget, previous governments have spent more on infrastructure with taxpayer/surplus money, not borrowed money like this government.  Infrastructure spending in a time of recession is an old Keynesian economic myth… borrowing money to pay myself for remodeling my house, when I’m unemployed, doesn’t somehow save me out of bankruptcy.

6)  $5.3b on tertiary education, research and innovation.  $2.5b over five years to drive hospital and health workforce refor.  $3.2b from Health and Hospitals Fund to modernise hospitals and and improve cancer facilities.

Of course I don’t think that the government shouldn’t be involved in any of these areas… but that’s my libertarian quip.  In reality, the government is driving the cost for tertiary education, research and health care higher each year.  Each year the government tries to out-do the previous year’s spending on health and education so they can gain political brownie points to look like they’re doing something about these issues.  Well they are: making them more expensive.  If you’re a health care provider and you knew you were going to get money next year from the government, what would you do?  That’s right, costs would mysteriously get higher and there’s no incentive to compete.  The only way for health care to become affordable and prices to drop is to privatize them… let health care providers compete for the best services at the lowest cost.  Poor providers will lose money due to lack of business… excellent health care providers will be rewarded with better business and more capital.

7)  Private health insurance rebate reduced for higher income earners

The government shouldn’t be providing for an insurance rebate or anyone… now higher income earners will have to pay for everyone’s health insurance rebate.  No they don’t deserve it, it’s legalized theft based on a Marxist view of class warfare and retribution.

8)  Medicare Levy Surcharge increased

This is stupid… you don’t raise taxes and raise ‘levys’ in the middle of a full blown recession, when money is contracting.

9)  $731m over five years for paid parental leave scheme

This one has to be one of the worst proposals by the government.  Paid maternity leave sounds compassionate, but it will put extreme pressure on businesses who have to employ staff taking maternity leave, while paying both workers.  What will this lead to:  higher prices for goods and services.  The money has to come from somewhere… $731 million over 5 years is nowhere near going to cover the costs, the shortfall will be paid by business and prices will go up.  This legislation benefits some and the expense of everyone else.  Why should businesses pay for someone who isn’t working?  It’s a path to bankruptcy.

So you know that I’m not a monster, I remember the days when a husband could go off to work and earn enough to pay off a mortgage and thrive, while the mother could stay home and take care of the family (if she choose to).  Thanks to inflation and the housing bubble and credit expansion, brought to you by the last three governments, this is no longer possible.

10)  Pension age increased progressively to 67 years by 2023

Not a popular decision, and not a necessary one if we reduced a lot of our other spending.

11)  Single Pensioners to get extra $32.49 per week, couples to get extra $10.14 per week

Yes the government is subsiding death and divorce… well done.  Was it so hard to give every pensioner at $32.49/week increase?

12)  New $600 a year Carer Supplement for all Carer Payment recipients, plus allowance

Grudgingly in favor of this one.  It would be better if families took care of their grandparents rather then getting a carer for them.

13)  Extra $650m in funding for border protection

Excellent move… a national defense is a legitimate operation of the government.

These are my broad strokes comments about the budget.

God bless,

Washo