Economics editor Peter Martin continues to be one of the reasons I read The Age. His article today Federal Budget 2015: Expect a do-nothing budget that will cost us time is an excellent analysis of the consequences of Joe Hockey’s next Federal Budget.
He sounds this grim warning:
A collapse in revenue means this year’s budget deficit will be more like $46 billion than the $30 billion forecast last budget night. Next year’s will be more like $45 billion than the forecast $17 billion. There’s not a surplus in sight. The longer the deficits continue and the longer the interest costs of running the deficits compound, the less likely it is there will ever be a surplus.
Those of us with memories longer than that of the demented goldfish will recall the fevered rhetoric of both Abbott and Hockey over the “budget crisis”.
The rhetoric was overblown but they did have a point. There was, and there continues to be, structural problems in the budget. The steps they took in the last budget was so inequitable that the Senate went into a permanent state of revolt.
But Hockey and Abbott were right in that we needed to address the problem of the deficit. The problem was that the way they went about fixing it was deeply flawed politically, economically and socially.
While the problem of the deficit was greatly overstated, Joe Hockey was unable to explain to people the problem of funding deficits, namely, that eventually the interest payments on the deficit become unsustainable and further borrowing is needed just to pay the interest. This is where the downward spiral begins. And once you’re in it, it becomes increasingly difficult, and then impossible, to get out.
Peter Martin would suggest that we are beginning to get into this downward spiral.
There is no political will in the current Liberal government for dealing with the problem in an equitable and effective way.
Martin also suggests that Hockey and Abbott are frightened of becoming increasingly unpopular as a result of their next budget.
We learned today that Abbott has closed on Bill Shorten in the opinion polls as preferred prime minister. They both have an approval rating of 38%.
I think this means that two thirds of the population doesn’t want either of them as Prime Minister.
And the Coalition continues to trail the Labour Party by at least 6% on a two-party preferred basis. Abbott must be hoping that a “do nothing” budget will close this gap.
Pigs on the tarmac awaiting orders for takeoff.