Once again Wayne Swan has promised The Texas Chainsaw Massacre and delivered Twilight, with a suite of modest spending cuts over the remainder of this financial year and then the four years over the forward estimates.
Of the savings, $3.9 billion has already been announced in response to the floods over summer, so we’re looking at just over $18 billion worth of savings over four and a bit years — not the $22 billion that will feature prominently in government budget rhetoric.
Bear in mind the collapse in revenue that has savaged Labor’s deficits this year and in 2011-12 is essentially confined to those years. In 2012-13, the year of the much-promised return to surplus, there’s actually been a small revision upward in revenue from the Mid-Year Economic and Fiscal Outlook (MYEFO).
Rather than go hard early for savings in response to the collapse in revenue, the government has copped it sweet this year and next with bigger deficits and pursued savings that will accelerate over the forward estimates, with $7.2 billion of identified savings being found in 2014-15.
One of the biggest savings isn’t actually a decision at all — $1.2 billion will be generated simply by continuing the pause in indexation of the income thresholds at which the Family Tax Benefits A and B and the Baby Bonus cut out, a decision first taken in 2010 that has generated substantial returns for the government. The trick will also be extended to pausing indexation of Family Tax Benefit A and B supplements, which are normally indexed at CPI. That’s another $800 million.
A further $1.2 billion will be saved by slowing the expected growth of the Defence Department and nearly as much from reprofiling Defence capital expenditure. As already announced, the government will reform the FBT company car rort, a saving of $953 million that looks as though it will generate further substantial savings in out years. Phasing out the Dependent Spouse Tax Offset will save about $750 million annually, and reducing income splitting between parents and children via trusts will yield another $740 million.
There are dozens and dozens of smaller savings or additional revenue measures: $300 million-odd from an increase in visa fees; the already-announced cut in discounts for HECS payments; an unlikely-sounding $340 million from a reorganisation of Human Services; a nearly $200 million cut in the Department of Immigration. These smaller cuts will be the ones that cause disproportionate trouble for Labor as constituencies go into bat for their expenditure.
Swan in his press conference made much of the government’s spending growth cap — a notional limit of 2% a year real growth, but on average 1% over the forward estimates.
But the real spending levels, which cover all government spending, tell a slightly different story to the savings figures. A lot of spending has been backloaded into 2013-14 and 2014-15, when spending rises in real terms at 1.9% each year. This is a rise from MYEFO, when real growth in 2012-13 and 2013-14 was forecast to rise by 1% and 1.6% respectively. Spending in 2012-13 is now forecast to fall by 0.1%.
In short, while it may not show up in the major spending initiatives, the government has shunted spending from its key “return to deficit” year from 2012-13 to 2013-14 and beyond. It’s called “reprofiling” and it’s a great way to fiddle the numbers when the media focuses on a single year’s outcome.
So, another budget goes by without major spending cuts, and with it probably any chance of serious reforms to middle class welfare, business welfare or defence spending until after the next election. Indeed, Swan made a point at his press conference of saying he was a believer in family payments, dismissing the description “middle-class welfare”.
That’s not to say Swan’s razors aren’t welcome — there are some quality cuts there, and for once they’re not tax rises disguised as cuts. But yet again the fiscal hardliners are left to wonder what might have been.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.