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Budgets and bulldust

Let’s do a big issue Budget recap and while I’m prepared to sign up to good policies to help the disabled and our education system, we shouldn’t presume there’s only one way to skin a better schooling cat.

To Labor, it’s unthinkable, but both policies could ultimately be conceived and funded differently and even better by an alternative Coalition plan. The important issue for voters is that the issues are high on the political agenda for both warring parties.

Too much politics

On the Budget, I was staggered that the Treasurer’s speech looked more like a political document meant to back Tony Abbott into a corner than an economic document. Given the economic show and tell we saw on Tuesday, there was one massive missing offering that I was surprised the media made so little of — maybe it’s because I’m an economist.

To avoid being accused of bias, let me reveal this year that I believe the 2.75 per cent forecast is a chance of happening. Despite what Treasurer Swan has been spinning this week, plenty of economists doubted his 3.25 per cent growth number last year — I can say honestly that I was always warning about the growth concerns — which ultimately explained why his $1.5 billion surplus ended up as a $19.4 billion deficit.

That was why so many economists advised him that a budget surplus was unnecessary. When an economy slows down, trying to achieve a surplus robs the economy of demand, which slows up the economy more and, in turn, makes an intended surplus into a deficit, as we have just seen.

Look at business investment

Getting back to the Budget numbers, it staggered me that Treasury would have told us and the Government business investment rose 20 per cent in 2011-12 — that was the mining boom. It then rose by 10 per cent in 2012-13 — that’s the boom going off the boil — and we’re told for next financial year the rise would only be four per cent.

As business investment drives production as well as income and then creates jobs, wouldn’t you have thought the nation’s Treasurer would have outlined a short-term plan to bolster the stuff that drives employment?
If the economy were more important than the election, the Budget would have been pro-business to boost investment.

Sure $24 billion for infrastructure is a good plan for the long-term but what about the year ahead.

Neglect of business

It’s like, we have an election to win and I know growth will be 2.75 per cent, which will push unemployment up, but we have an election to win.

The Budget needed to encourage business but there was nothing. Finance Minister Penny Wong was wrong when she kept telling us that Tony Abbott had to tell us where the savings would come from.

This is one-sided thinking because our Budget challenges don’t just need saving — less spending or higher taxes — they demand stimulus for growth.

If Abbott resurrects business confidence and investment, then deficits will more quickly turn into surpluses. This is Economics 101.

Peter Switzer hosts SWITZER on Sky News Business and is the founder of the Switzer Super Report www.switzersuperreport.com.au

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

 

Published on: Monday, May 20, 2013

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