Knights, Knights, Knights…Remember the Budget?
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Knights, Knights, Knights…Remember the Budget?

Knights, Knights, Knights…Remember the Budget?

It is frustrating that the Coalition Federal Government has attracted more negative attention this week by bestowing a knighthood on Prince Philip, at a time where the national mood is so objectionable. Negative public reactions to political miscalculations have continued in the absence of any genuine solution to the Government’s main battle: Australia’s increasingly dire fiscal problems. Forget knighthoods. 2015 should be a year of one consistent message: the nation is at an economic crossroad.

The Mid-Year Economic & Fiscal Outlook (MYEFO) in December last year should have brought the nation to its senses: the federal budget cannot continue to maintain the living standards we have so enjoyed, if the budget position continues to deteriorate. If we are to ensure growth, and reduce the deficit we must all undergo some adjustment pain. The detachment of the individual from the fiscal crisis is crushing the Government’s message. There now exists a sense of complacency amongst most Australians, driven by a generation accustomed to prosperity. This complacency is now breathing life into the Opposition’s ‘unfair budget’ rhetoric. The greatest act of unfairness however, is denying that there is a problem and making decisions like the ‘captain’s call’ over knighthood recipients that have unnecessarily detracted from what should be a clear economic agenda. The clarity of policy the Coalition once held in opposition has been lost in Government.

From 2003 the world economy turned in Australia’s favour in the form of the skyrocketing iron ore prices and demand has afforded us the greatest increase in national income in our history. The task shifted from wealth generation towards management and distribution of prosperity. The resources boom lifted household incomes and wealth, killing any hunger in the electorate for economic reform or sacrifice for long-term economic growth.

In economic terms our rise in prosperity has left a deadly legacy. Political historian and journalist Paul Kelly argues it has extinguished any desire to reform. What’s more, the commodity boom largely replaced domestic productivity improvements as the driver of higher national income. Wages and living standards have increased not because of an increase in prosperity but because of the resource boom. The nation has hitched its future on a fading star.

The MYEFO should have been another wake-up call. It forecast a $43.7 billion deterioration in the budget over the forward estimates, primarily as a result of the collapse in iron ore prices and weaker than expected wage growth – iron ore being the commodity backbone of this nation and its deterioration signals the end of growth certainty. Not to mention the $10.6 billion lost due to the Senate not passing the Government’s legislation in their intended form.

According to Goldman Sachs, iron ore will likely average $US66 a tonne in 2015, which is a sharp cut to its previous forecast of $US80. It is expected to continue its fall in 2016 to an average price of $US61 a tonne, meaning the Government simply cannot rely on its current company taxation revenue to fund growing expenditures, particularly the funding locked-in outside the forward estimates by the previous government in the health and education portfolios.

Indeed blame has to be laid at the feet of the Government: it should have sold the recommendations of the Commission of Audit last April, 2014 harder before the release of the Budget. Now it is stuck with a matzah ball of policies that aren’t cutting through to the voters, made harder with the Opposition’s ‘unfair budget’ rhetoric, preying on the nation’s sense of entitlement, postponing any chance for serious reform.

It is unfortunate that the reckless spending from six years of Labor’s Rudd-Gillard-Rudd era has only hastened our demise and reinforced the dependence an average family has on the Government dollar.

Now that the bills need to be paid, the Abbott Government is shackled to the problem. Any policy that it introduces is instantly labelled as ‘unfair’ – and this is resonating because it preys upon the great contemporary Australian complacency; a generation of workers that have never suffered a recession, and left relatively unscathed by the Global Financial Crisis. Ours is generation, born into a world that has been relatively stable, having no experience of a Great Depression or two World Wars. JFK adorers from the soft left might consider that ours is a generation that has a high expectation of what their country can do for them, not what they can do for their country.

While the intelligentsia will retort that Australia does not have a debt problem in comparison to other developed economies, they avoid the unfortunate truth that a nation living beyond its means is asleep in a death trap. Blaming the Government for being ‘unfair’ is simply sanctimonious: the Opposition had six years in government and rather than addressing the problem, they made a meal of the economy and became obsessed by internal polling. How is that fair to every man, woman & child that is saddled with the debt that they created, and made no genuine attempt to curtail. It is of course up to the Government to successfully answer the question of the budget’s fairness, a task needlessly distracted by knighthoods and proposed constitutional reforms.
While the Government seeks to address the problem, the Opposition blows its moral trumpet, shouting ‘injustice’ and ‘unfairness’. But without the Opposition saying how they will address the problem, they are  unable to be distinguished from The Australian Greens’ offices.

Surely the greater act of unfairness is to deny the current fiscal situation?

Gone are the days when bipartisan support was achieved on measures seen as being in the nation’s best interest, seen in the Coalition oppositions of the 1980s and 1990s that supported the floating of the Australian dollar and the privatisation of assets. It is now a truism that politics is driven by opinion polls rather than what is in the best interests of the nation. But if we continue to see politics through the lense of a popularity contest, history will judge us harshly.

This brings us to our crossroad: are we mature enough as a nation to embrace structural reform, or will we continue our complacent ways and fall for the Opposition’s victim card? The Government needs to regroup and restart its messaging for 2015 to knock the community out of its slumber and lead it along the hard road of economic reform.

In years to come we will either laugh or weep at the level of care we afforded Abbott’s minor knightly faux-pas. Let’s hope we’ll be in an economic position to do the former.

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