The 2017-18 Federal Budget: Taxing Our Way to Prosperity

Every year, the government seems to make it harder to really see what it’s doing with our money in the budget – whether by renaming things, requiring an extra click or two to access various papers or simply by the tried and true method of burying its sins deep into the treacherous abyss.

TMR refuses to be beaten.

If you want simple, no-nonsense budget analysis that can’t be found anywhere else, read on.

All figures have been sourced from the official 2017-18 budget papers and are presented so that you can form your own opinion.

Revenue

I’ve already shown on numerous occasions that the government doesn’t have a revenue problem.

Following this year’s budget, nothing has changed and the government’s revenue gravy train is set to roll on (figures sourced from pages 11-6 and 11-7 here):

Budget 2017

It’s incredible that you will not find a graph like this anywhere in the budget papers or anywhere else on the internet. It should be compulsory for every politician to have it posted to their pinup board and on the back of their toilet door.

Just stop and look at that last green bar for 2017-18 and see how much larger it is than the previous green bar. Now look at the last time one of those green revenue bars increased by a similar amount since the government started racking up debt…

(It’s ok, I’ll wait)…

In short, government revenue for the coming year is projected go up by a staggering 6.9% (up from $405.7 billion to $433.5 billion). Are you expecting to get a 6.9% pay rise this year? Probably not.

This year’s tax victims are those nasty foreign investors; the big banks anyone who has superannuation, a shareholding in, deposit, mortgage or employment with a big bank; anyone who pays the Medicare levy (yes, that means you); ‘evil’ multinationals who don’t pay their ‘fair share’; and, of course, smokers.

As you can see, the above graph clearly shows that the government is trying to ‘fix’ the budget by taxing even harder – and continuing to spend money it doesn’t have at pretty much the same rate it has for the last 10 years. In other words, doing what Labor would do.

Any time someone tries to dribble some nonsense about ‘percentages of GDP’ as justification for this budget being ‘ok’ or ‘sensible’, just tell them that the graph doesn’t lie.

Spending

The analysis here couldn’t be simpler: look at spending for the financial year about to end (2016-17), compare it to the budgeted spend for the next financial year (2017-18), see where the biggest changes are – and then ask ‘what the hell are you doing with my money and why you nefarious bastards?!’.

NB: looking at anything beyond the upcoming 2017-18 financial year (i.e. forward estimates) is generally pointless. Governments are already worse than the IPCC when it comes to forecasting.

For each major government function, the following table shows:

  • the 2016-17 budget figures from last year;
  • the 2016-17 actual spending figures (i.e. compared to the budget figures from last year). This is a new feature this year and will tell us some pretty interesting things;
  • the 2017-18 budget figures for the upcoming financial year; and
  • the budgeted increases and decreases in plain dollar and percentage terms.

For further ease of reference, the functions have been ordered by percentage change (I wonder why the government doesn’t do this anywhere in the budget papers?).

2017 Budget Spending

(Figures are in millions of dollars).

The first thing to note is that the government intends to increase overall spending by 3.0% ($13.5 billion).

To put this in some perspective, the current inflation rate is 2.1% and the annual wage growth rate is 1.87% (1.8% for the private sector and 2.25% for the public sector).

That aside, the following may have also come across your mind on reading the above table:

  • Why is welfare being increased by $8.3 billion – and at a rate (5.4%) that is 80% greater than the overall average and NEARLY TRIPLE THE AVERAGE ANNUAL WAGE GROWTH RATE?
  • Why did ‘general public services’ blow out by about $4.5 billion based on last year’s budget figures? (No, the answer isn’t ’rounding error’).
  • On what basis does the government now think that it can simply cut ‘general public services’ by $6.5 billion?
  • As much as the government wants to be seen to be doing something on the ‘housing affordability crisis’ – it has budgeted to spend the same amount that it did last year: about $5.3 billion give or take (here’s hoping they wuss out again and come in well under).
  • Given that ‘security’ was supposedly one of the central planks of the budget, why is spending on public order and safety being reduced by 2.3%?
  • Why is spending on ‘other purposes’ going up by $6.3 billion – and at a rate (7.4%) that is well over double the overall budget average?

‘Other purposes’ – a primer

For those not familiar with ‘other purposes’, allow me to put it in the government’s own words:

Other purposes — the increase in expenses from 2017-18 to 2020-21 largely reflects growing general revenue assistance payments (largely GST) to be made to the States and Territories, increasing public debt interest costs and the conservative bias allowance component of the Contingency Reserve.

If you’ve been a regular reader of TMR’s budget analysis, then you’ll probably have a fair idea on what’s coming on this. But first, let’s dig a little bit deeper to see where the money’s going.

Spending – a closer look

The following expanded table provides a further breakdown on spending for each of the above functions.

In what a hard leftist would probably describe as sheer lunacy, TMR has ‘radically’ put everything in the one table and organised the components of each function according to percentage change (someone send me to The Ministry of Love already):

Breakdown

(Figures are in millions of dollars).

Now that we have some more information, let’s see what else there is to notice.

Other purposes – the main course

This category is always the star of the show these days:

  • Firstly, the interest payments on the government’s $490 billion debt will cost about $17.2 billion in 2017-18. In other words, well over half the $29.4 billion budget deficit that’ll be added to the debt this coming financial year will be used just to cover this.
  • Yes, that’s right, over half the $29.4 billion the government will be borrowing in 2017-18 to ‘fund our lifestyle’ will be used to pay the interest on our debt.
  • Again, you are correct: the government is borrowing copious amounts of money simply to pay the interest on our debt.
  • Please stop what you’re doing and process this… if you’re not quite angry enough about this yet, go here.
  • Moving on, local government assistance will bizarrely plummet, from the $3.4 billion or so that will have been spent by the end of 2016-17, to $1.2 billion for the upcoming financial year.
  • Hang on a minute, let’s get this straight: in 2015-16, the amount spent on local government assistance was $1.1 billion and the budgeted spend for 2016-17 already doubled this to $2.2 billion. Then, actual spending went out to $3.4 billion. Excuse me? Does anyone know why we needed $3.4 billion in federal assistance for local governments last year or how or why the budget blew out by so much? I sure don’t. As for the government’s explanation (at page 6-45):

Expenses under local government assistance relate to financial assistance grants made to the States and Territories and consist of a general purpose component and an identified local road component, both of which are untied, allowing councils to direct the grants to local priorities [TMR: aaaaarghhhh!]. The expenses are expected to decrease by 66.0 per cent in real terms from 2016-17 to 2017-18, reflecting the bringing forward of the first two instalments of the 2017-18 Financial Assistance Grants program for payment in 2016-17. Further information on Australian Government assistance to local governments can be found in Budget Paper No. 3.

  • By all means, hop on down to Budget Paper No. 3, type ‘local government’ into the word search and go nuts in trying to explain where the money went and why an extra $1.2 billion absolutely had to be ‘brought forward’ last year without delay – on top of the $1.1 billion increase that was already budgeted. That aside, I suppose any time you can use two levels of government bureaucracy to get things done with other people’s money instead of one, then you absolutely must do it before the opportunity disappears or before common sense makes you change your mind.
  • However, taking the cake for sheer stupidity this year is the budgeted amount for natural disaster relief – which is set at a paltry $9 million for 2017-18, then $2 million for 2018-19… and then a stone cold zero for the next two years after that. Yes, really (go to page 6-44).

And here I was thinking that climate change was going to lead to more severe weather events and bushfires. Or is it the case that our reduced emissions are already reaping the benefits by reducing natural disasters?

Gillard’s NDIS keeps coming home to roost

Last year, as the NDIS kicked into gear, spending on people with disabilities was budgeted to go up by $4.3 billion (from $29 billion to $33 billion – an increase of 14.8%).

(NB: in the end, the government managed to defer about $1 billion of this spend).

This year, the overall disability spend is set to go up by another $6.8 billion (an increase of 21.5%) – a further sign that the government has already completely lost control of the NDIS. If anyone can tell me what’s actually been delivered under this scheme for the $10 billion or so spent so far – along with who qualifies and who doesn’t – that would be great.

Meanwhile, the forward estimates don’t make for better reading, with another $20 billion being added to the overall disability bill over the next four years – bringing the total annual disability spend to a cool $50 billion ($20 billion of which will be for the NDIS alone – by which time about $68 billion will have been spent on the project):

NDIS

An increase in the Medicare levy was somewhat inevitable given that:

  • there was never the money to pay for the NDIS to begin with;
  • ditching the NDIS would have been political suicide (you don’t hate disabled people do you?); and

Don’t worry, if you’ve got that Groundhog Day feeling, you’re not crazy (yes, that’s right, the Medicare levy was already increased to ‘fund’ the NDIS back in 2013/14).

Veterans

Of all the people to throw a bit of extra charity to, you would think our veterans would be near the top of the list – especially while the government is on a welfare spending spree. Right?

Please, don’t be ridiculous (see pages 6-22 and 6-24):

Veterans

Veterans 2

Veterans 3

As it turns out, according to the government, we’re just plum out of veterans (apparently):

The estimated decrease of 13.3 per cent in real terms from 2017-18 to 2020-21 for veterans’ community care and support is mainly attributable to the decrease in the number of veterans and relevant dependants accessing residential aged care.

Expenses for the assistance to veterans and dependants sub-function are estimated to decrease by 5.0 per cent in real terms from 2016-17 to 2017-18, and by 12.4 per cent in real terms from 2017-18 to 2020-21, predominantly reflecting an expected reduction in the number of beneficiaries.

ICB

This year, I have a special section dedicated to things that just simply don’t add up or make any sense whatsoever.

Here’s the list:

  • The budget magically goes from a $21.4 billion deficit in 2018-19 to a $2.5 billion deficit in 2019-20 – and then a $7.4 billion surplus in 2020-21(see page 11-7). I wonder if anyone in the Press Club is going to inquire as to how that’s actually going to be achieved? I guess anticipating absolutely no natural disasters whatsoever for the next four years must help – it’s not like the Queensland floods cost the Federal Government $6 billion or anything. That aside, I’m going to leave this one to Jalen Rose:

  • Speaking of the foreign aid budget, Bishop was ‘only’ supposed to spend $6.09 billion in 2016-17 (see table 4) – an increase of 11.3% on the previous year’s spend of $5.47 billion. Instead, she ended up spending $6.69 billion – an increase of 22.3% on the previous year’s spend (see page 6-51). Why has nobody asked about this? Where did the money go? What benefit did we get?
  • I questioned above how the government expects to cut ‘General public services’ by $6 billion – particularly when this item blew out by $4.5 billion last year. Turns out, all it needs to do is tweak a few things with the ‘Government superannuation benefits’ and, voila! Something that cost $9 billion last year will now only cost $3 billion a year (shhhh, be cool man). Given that this item is worth more than the new Medicare levy and almost as much as the new bankeverybody tax, I’ll leave you to decide what to make of this explanation contained in the budget papers:

The fall in expenses from 2016-17 to 2017-18 in the government superannuation benefits sub-function reflects the use of different discount rates. In accordance with accounting standards, the superannuation expenses for 2016-17 apply a discount rate based on long-term government bonds at the commencement of the financial year (2.7 per cent). Forward years are estimated based on the discount rate applied by the superannuation scheme actuaries in preparing long-term cost reports (6 per cent).

(See page 6-15).

  • Ohhhhhh – discount rates. I get it now. I’ll have to apply this method to my mortgage.
  • Last but not least is ‘general administration’ which:
    • for agriculture, forestry and fishing, amounts to an insane 25.6% ($761 million) of the function’s budget (second highest);
    • for social security and welfare, amounts to 2.5% ($4.1 billion) of the function’s budget;
    • for health, amounts to 4.0% ($3.0 billion) of the function’s budget; and
    • for education, amounts to 0.9% ($304 million) of the function’s budget.

Aside from the $8 billion being spent overall, if someone could sensibly explain how this set of circumstances came to be, that would also be great.

Slip sliding away

Lastly, for some reason, I just couldn’t get this song out of my head as I was writing this:

As it turns out, the fourth verse says it all:

God only knows
God makes his plan
The information’s unavailable
To the mortal man
We’re working our jobs
Collect our pay
Believe we’re gliding down the highway
When in fact we’re slip slidin’ away

Now where’s that stiff drink?

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10 thoughts on “The 2017-18 Federal Budget: Taxing Our Way to Prosperity”

  1. Still on the second (excellent) table: what does “actual” mean? Do departments maintain such stern discipline that numbers created in perhaps April or very early May refer to 30 June?

    Meanwhile, the post is a great effort, well done. I had concluded recently that the achievements of Australian civilians and soldiers alike in the Great War was not worth the effort, let alone the cost. Government proves it with budgets of this sort, not to mention most “policies”. Your own effort helps, at least, to keep the notion of liberty alive.

    Like

    1. Hi Paul – sorry for the delay in replying. ‘Actual’ in this context means ‘best estimate as at May 2017’. Often, it’s pretty accurate when the final numbers come in after the end of financial year – but I have seen variations of a few hundred million here and there. So you have every right to be suspicious and cynical!

      Like

  2. Thanks for spending time on your analysis. If nothing else, and regardless of what one thinks of the banks, a policy that says, “We need more money; we think you have too much of it, so we’ll take it” is a terrible policy.

    Like

  3. Any chance that the second table (i.e. the detail of the various areas) could be made available in a somewhat larger font?

    My old man (87) has been looking for something like that and the font size is just too small.

    I could re-type it, but if you happen to have it to hand…

    Like

  4. It’s incredible that you will not find a graph like this anywhere in the budget papers or anywhere else on the internet. It should be compulsory for every politician to have it posted to their pinup board and on the back of their toilet door.

    Tattooed on their foreheads would be better.

    Liked by 1 person

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