Tuesday, 9 May 2017

The Budget 2017/18

I smell an early election from this budget. No hard decisions and pinching labor policies.

On an underlying cash basis the budget deficit falls from 2.1% to 1.6% and then to 1.1% and after that it is essentially in balance. So far so good.
Most of the improvement in the budget is in revenue.

Pity the Infrastructure spending is so late in the peace although the inland rail looks very iffy.That might come back and bite them in their backside.

Assumptions look okay BUT the wages forecast is very optimistic. It is almost at odds with what it is saying on unemployment. So are the forecasts of company profits and consumption. the rise in personal income tax is nothing short of extraordinary.
So the risks are on the downside.

The biggest question is why is spending so high as a % of GDP? The ALP had it on a declining path which the Government changed. I understand this was done originally to put blame on the ALP but that didn't work. It surely cannot be because of automatic stabilisers so what is the story.

The reason can only be they were advised by Treasury aggressive fiscal consolidation ( such as Wayne Swan did in the last budget he had responsibility for) could weaken the economy. They cannot for political reasons admit to this.

I will link various budget articles as I find them. Some on specific topics others not.

Why do certain welfare recipients have to do drug tests? This makes no sense at all.

Okay sorry but my back of envelope calculations has the banks merely raising rates by 3 basis points to 'pay' for the bank levy.