An everyman’s take on the federal budget…

I must say at the start that I’m not an economist, nor yet an apologist for any political party. At the same time, it should be noted that what I write is linked, inevitably, to both economics and politics.

We are facing a frightening budget, one that will hit hardest – as is always the case – those least able to afford it: Typically, the aged, the ill, those on fixed incomes and those with children to educate. Why? Well, that’s hard to fathom other than, like climbing a mountain, the new government can do it. They have one chance to say ‘the economy is in worse shape than we thought’… and this is it.

But is the economy in such a bad way?

My political outlook is a bit left of centre in that I believe, if the underclasses are happy, they will spend and generate a ‘trickle up’ effect that keeps the economy on the move. Go the other way, however, looking after the top end of town – this government talks about a ‘trickle down’ effect, something that is no more than pie in the sky – and the little man, the one who props up the entire economy, gets nothing. The economy is stagnant.

I have nothing against deficit budgeting (after all, it’s how most of us exist as we establish our lives, our homes, our businesses) but it must be responsible. Sadly, probably due, as much as anything, to the instability caused by its internal squabbling, the previous government was far from responsible. May I take one example of a project it implemented that was less than it might have been?

With Kevin Rudd as PM and Julia Gillard Education Minister, there was the BER project (Building The Education Revolution). Our community benefited greatly because of it, taking our High School from year 10 to year 12, while rebuilding and relocating the Primary School onto adjacent land, thus allowing children to attend from K to 12 in the one precinct. As a secondary aspect, the old Primary School building was renovated, becoming a new – and badly needed – health centre.

That was the good. In many other cases, huge amounts of money were wasted as old schools were renovated and soon after closed as children were incorporated into larger, newer schools nearby. New facilities were added on to existing schools whether they were needed or not; extensions made that had no purpose; and many services or items of equipment duplicated (this last, in at least one case, needing the construction of a new extension to store the equipment now surplus to the school’s needs!)

All right, so I’m not politically blind; back, then, to where I intended to go. Australia has a debt problem but it is far less than some – the current government, for example – would have us believe. One report that I’ve seen quoted by some of its senior members shows that, in the past four years, Australia has a greater accumulation of debt than all but two other OECD countries, Spain and Slovenia. I beg to differ.

All things in this life, including financial matters, are relative. A businessman adds one-third to the cost of his stock. He does not then say he has a thirty-three and a third percent profit margin because he knows it is actually a GPM of twenty-five percent… and similarly with the debt percentage of which I speak.

Using figures from the OECD, Australia, in the four years 2011 – 2014, had a 20 percent increase in its debt to GDP ratio while that of Greece was just 5 percent. How can that be? We have what is considered a healthy economy, with Greece pretty much a basket case. Let us then put it into perspective: The 2014 Australian figure is 33.8% against 27.1% in 2011, and Greece 189.2% against 178.9%.

Which would you prefer?

Without bogging down on vast series of numbers, a few of the debt growth to GDP percentages will further explain the difference: Spain, 26.4; UK, 12.6; OECD average, 9.6; US, 8.1; Australia 6.7. Germany and Switzerland are actually cutting debt but still owe more on every basis than Australia does.

I know I’m inviting attack on what I’ve written but I’m thankful for the chance to voice one man’s opinion. I will be accused, surely, of oversimplifying much that I have written. There is nothing simple about an economy and its control. There is no simple answer to controlling debt. Steps must be taken to implement controls but surely not the Draconian measures announced in the past few days. The capacity to rein in debt is well within Australia’s grasp. It could be accomplished over the next ten years – without undue pain.

To conclude my argument, may I make yet another simplification? Our nation’s debt is equal to less than a year’s income. Wouldn’t the average mortgage holder relish that?