30/04/2013 - 15:13

Government credibility crisis

30/04/2013 - 15:13

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There are plenty of theories floating around today as to why the Australian Government has failed so badly at managing its finances but behind the politics is a simple fact; it has never understood that business creates wealth and jobs, not government.

Government credibility crisis

There are plenty of theories floating around today as to why the Australian Government has failed so badly at managing its finances but behind the politics is a simple fact; it has never understood that business creates wealth and jobs, not government.

Whether led by Kevin Rudd or Julia Gillard the same core problems can be seen, a deep-seated distrust of business, suspicion of anyone who succeeds, and a bitter hatred of the rich.

The result of that unfortunate view of business and the rich as the wealth creators in the community is the situation reached today, a government scrambling to raise revenue while looking around for someone else to blame.

In her pitiful address yesterday about the need for tough budget decisions Prime Minister Gillard apportioned blame for her problems on the end of the mining boom, the high dollar, and a collapse in revenue raised by company tax.

In truth, company tax has not collapsed. It is up on last year. All that has really happened to company tax is that it has failed to meet inflated forecasts made last year by Treasury officials.

As if the likelihood of a big budget deficit of around $15 billion is not bad enough, there is the prospect of deficits far into the future with taxpayers left to foot the bill left by a spendthrift government with those deficits growing at a time when:

  • Global interest rates are more likely to rise than fall, making repayments more expensive for future generations.
  • An Australian dollar that is more likely to fall than rise, compounding the repayments problem, and
  • The prospect of a debt downgrade by ratings agencies, another target of government loathing, which will add extra millions to the annual interest bill.

Adding to this disturbing financial outlook is the determination of the government to push ahead with fresh experiments in social welfare such as a national disability insurance scheme and a radical overhaul of the education system.

Few critics have dared, yet, to say that the national disability insurance scheme is something the country might be able to afford in better times, but not now.

They will when the cost is revealed, and even though the government proposes to fund its latest piece of social experimentation via a levy on individual taxpayers that means money which might have been spent elsewhere will go into a new government agency to be administered by, you guessed, a freshly recruited regiment of civil servants.

Criticising the disability scheme might be in the “sacred cow” category but someone has to say that it is probably the last thing Australia needs as its economy slides closer to recession.

What is needed, and has been for the past six years, is a government which rewards wealth creators rather than punish them. It sounds awfully simplistic, but it’s true, that encouraging wealth creation expands the national “economic pie” meaning there is more to share on worthwhile social spending.

To go about it the other way, spend first and then try to raise the money, is more than financially irresponsible, it’s illogical.

No-one in the Gillard Government, nor that led by Rudd, has ever understood the importance of making it easier to do business as a way of enriching the wider community.

Rather than encourage business there have been attacks on:

  • The rich, who have simply shifted their wealth offshore.
  • Mining, which has simply invested elsewhere.
  • Carbon intensive industries, such as oil refining, which has relocated operations to other countries, and
  • Major resource projects, which have been jammed up in never-ending government reviews, until they collapse leaving the country with a fading memory of a boom that came and went. 

The great shame is that it could have been so much better if only the government had not attacked the rich and business, saved rather than spent during the boom, and encouraged investment rather than discouraged it.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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