Raven
Gold Member
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Australian Politics
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The economy appears to have been a deciding issue in the election so the fact that Morrison was able to win without a semblance of an economic policy is a testament to the fear campaign used. Think franking credits for example.
The Parliamentary Budget Office confirmed that 92 per cent of Australians will be unaffected by Labor’s proposed changes to franking credits. This leaves eight per cent who are likely to be affected, and with all pensioners exempt (along with not-for-profit institutions and self-managed super funds with a pension recipient), this left a very tiny cohort whose income would have been curtailed. Which is surprising given the outcry we heard about the proposal.
Removing franking credits from non pensioners would have been good for two reasons. fiscal responsibility and intergenerational equity.
The cost of the franking credit cash refund introduced by the Howard Government in 2001 was originally manageable, costing the nation $550 million per year.
Fast forward to 2014 when, according to Treasury, it cost us $6 billion per year and is projected to increase to $8 billion per year over the next few years.
Not only do these ballooning costs make retiree credits totally unaffordable, they are also inequitable when they are paid to a handful of retirees who comprise some of the wealthiest households in the nation, while the vast bulk of retirees miss out on this largesse.
One estimate (reported by Duncan Hughes in the Australian Financial Review on 12 March) states that there was a “record $16 billion of franking credits from the latest earnings season, a jump of about 45 per cent compared with the previous period”. Sixteen. Billion. Dollars.
Surely the projected $16 billion used for ‘non-pensioner’ retiree cash rebates could be better spent on home ownership incentives for this generation of taxpayers. At least they are contributing tax, while the recipients of cash rebates most often do not.
Morrison and his team should be thinking about policies to improve productivity growth and low wages, which are central to lifting our economic performance. But in these critical areas, Morrison offers a policy vacuum.
Instead the Coalition is pinning all its hopes on tax cuts. It can be expected to quickly legislate the tax cuts that both sides of politics promised before the election. These immediate tax cuts will provide a boost for low and middle-income earners over the next three years, and this will help sustain aggregate demand.
In the longer term, however, Morrison is only promising further tax relief for high income earners.
Morrison’s proudest boast of returning the Budget to surplus, will require an incredible degree of future expenditure restraint, with real government payments only projected to increase at an annual rate of only 1.3 per cent over the next four years. In the unlikely event that this expenditure restraint can be sustained, that in itself is likely to damage the productive capacity of the economy, as it will require inadequate expenditure on research, education and training.
The Coalition needs to think of some policies quickly before we all go over the cliff.
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The government is lying to us about the economy (Read 8143 times)
