Will the Budget be balanced?

13 MAY 2014

With the federal Budget due to be handed down by Treasurer the Hon. Joe Hockey, MP in Canberra on Tuesday 13 May, CSU has a number of economics experts available for comment.

With the federal Budget due to be handed down by Treasurer the Hon. Joe Hockey, MP in Canberra on Tuesday 13 May, Charles Sturt University (CSU) has a number of economics experts available for comment.

Professor of Economics John Hicks, based in the School of Accounting and Finance at CSU in Bathurst. In the lead up to the Budget, Professor Hicks said, "Bringing the budget into surplus can only be achieved by raising taxes, lowering government expenditure or some combination of the two. The government appears determined to raise taxes. From a macroeconomic perspective this is the more risky strategy. Firstly, because it runs the risk of pushing the economy into a recessionary gap through the adverse impact on consumption and savings - the latter reducing the supply of loanable funds, raising real interest rates and reducing investment. Secondly, because the supply side implications of a rise in taxes is a fall in potential GDP – and therefore a fall in the potential tax base - which, at the extreme, could make the policy self-defeating. That is, a structural surplus may not be attained."

On the effects of the Budget on regional Australia, Professor Hicks said, "Seeking to establish a structural budget surplus through raising taxes is preferable – especially when the additional tax is targeted at the 'wealthy' in society. Both hourly wage-rates and weekly incomes tend to be lower in regional Australia than in metropolitan Australia, suggesting that a greater relative burden of the increased tax will be borne by metropolitan residents. Further, government employment plays a more important role in underpinning the wage rates and weekly incomes of those living in regional areas than is the case for those living in the city, so that a government decision not to target expenditure cuts will be more beneficial for regional Australians than for those living in the cities. Of course, the microeconomic structure of the budget will also be important in determining the overall impact on regional/metropolitan Australians and we will need to await the Budget details."

Hear Professor Hick's summary here

Professor in Economics Kishor Sharma is based in the School fo Accounting and Finance at CSU in Wagga Wagga. Professor Sharma said, "Economic circumstances in Australia are not as bad as the ruling government predicts. Our budget deficit as a percentage of GDP and the rate of unemployment at less than 6 per cent is much lower than the most OECD countries. Australia's budget deficit of 2.5 per cent of GDP in 2014 compares favourably to about 65 per cent in US and UK. Any cuts in government spending and increase in income tax, including deficit tax, will have flow on effect on ordinary Australian. Most hardly hit by the proposed cuts in public spending particularly on health and education and  increase in fuel excise will significantly hurt those living in rural Australia."

Leader of podiatry program in the School of Community Health at CSU in Albury-Wodonga, Associate Professor Paul Tinley, is concerned for the future for preventative health programs, saying, "funding for Enhanced Primary Care (EPC) was introduced by the former Labor government for people with chronic diseases such as diabetes. EPC has made a major difference to a huge number of people's health and quality of life and provided funding to allied health workers that was previously not available through the Medicare system, which is mainly the domain of the medical profession only.  This provided significant additional funding issue for health in Australia.  It would be a tragedy if this was scaled back by the current Federal government, as many thousands of people would be effected by any change to this system.  For example, for people with diabetes where there is always the risk of amputation for those with poor  control of the disease or for those who have lost feeling in their toes or fingers."

Other economics commentators include:

Associate Professor in Finance and Economics Parikshit K. Basu. He is based in the School of Accounting and Finance at CSU in Bathurst.

Professor of Finance Adam Steen is based in the School of Accounting and Finance at CSU in Bathurst.

Media contact:

Wes Ward, 0417 125 795

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