As we all know, it took 10 years for the Howard government to pay off
the debt that the Keating government had left and when Rudd took office Howard
handed over a government with $20 billion cash in the bank. In other
words Howard left the country in a very healthy position to weather any storm
such as the GFC which occurred in 2008.
Howard sold off assets such as Telstra and various others in an attempt
to pay off Labor’s debt, but Abbott has not indicated selling off any assets
although he did say that the budget was the beginning and not the end and there
is more pain to come.
We are currently paying off $12 billion a year in interest payments or
$1 billion per month which could have gone back into the economy.
Even though the current debt is much higher than when Howard took
office, the measures the current government have taken is much softer than what
the Howard government implemented in their first budget.
Whilst we are constantly told that our debt is small when compared to
other countries by those who put us into this debt position, I simply cannot
buy this argument.
For me what is troubling is the trajectory that we were on. We were
heading into much more debt without even an acknowledgement by the previous
government that we had a problem. This was dangerous territory. If we do
not acknowledge that we have a problem then no one is even looking for a
solution.We are also told that we needed to stimulate the economy to ensure
that people kept their jobs during the GFC. I think most people accepted
that we needed to stimulate the economy but I think most people were upset by
the waste, inefficiency and poor implementation whereby we will be leaving a
debt that our children will have to pay off.
We could have spent half the money for double the stimulus and effect if
things were managed much better. I believe that is what the Australian
electorate demanded and consequently, removed an extremely poor government to
achieve.
The Federal budget pretty much left property investors alone. Whilst
there was a push by some towards eliminating negative gearing to save $8
million dollars a year in tax benefits it seems that the message has been loud
and clear that public government housing only accounts for around 4% of
investment properties. Should they disincentivise property investment by
removing negative gearing we would see the government having to shoulder the
weight of providing a much larger percentage of properties for tenants. This
would in effect cost the government much more than the $8 million dollars a year
it is forgoing in negative gearing benefits.
So thank goodness there was some clear thinking shown around negative
gearing.
However negative gearing is only one piece of the jigsaw puzzle when it
comes to the property market and many other factors such as jobs, interest
rates, confidence, supply, etc. have far greater effect on the property market
than negative gearing.
We need to have a growing economy which leads to increased revenues for
the government. As businesses do well and are able to hire more people
and create more jobs, our standard of living is improved. This will ensure the
property market is stable and continues to grow steadily.
As the mining boom only provided around 2% of our economy and job
prospects and as it transitions into a production phase from a construction
phase we need to stimulate the other 98% of the economy that provides the
majority of our economic growth and job prospects.
We have never supported property investments in mining towns despite the
great rents and as the mining boom subsides many more people will be stuck with
properties in mining towns that they cannot sell. We will continue to see these
properties drop in value.
There were tax cuts of 1.5% for companies, (except big companies) which
is an incentive for companies to invest more and hire more people which should
increase economic activity and reduce the unemployment rate.
However we have probably seen the middle class shoulder a large
percentage of fixing the budget with the elimination of many family tax benefits,
whilst the wealthy has been asked to pay a 2% levy on income above $180,000.
Whilst I believe this budget was a step in the right direction (i.e. at least
it acknowledged we had a debt problem), I believe the Abbott Government has a
long way to go in fixing the budget and getting our economy going.
They still have to get the support of the other parties and by the way
the dialogue is at the moment I think Abbott will have his hands full in
convincing the others that this is a Budget in the national interest.
Only through a strong economy can we have a strong country and only
through a strong country can we look after those in need and the average
Australian’s hope to have a better standard of living.
