The 2003 Commonwealth Budget once again illustrates the benefits of growing economy and reform. The Budget put in place settings of which most Treasurers can only dream—a budget surplus with tax cuts and spending growing faster than inflation and population. No other country in the developed work can match it this year and few have ever done so.
It is able to do this for one fundamental reason—reform. As the OECD stated in it latest survey of Australia: ‘Dogged pursuit of structural reform across a very broad front and prudent economic policies firmly set in a medium-term framework, have combined to make Australia one of the best performing economies in the OECD and also notably resilient to shocks, both internal and external’. The fast growing, stable economy has in turn allowed Mr Costello to produce a beautiful set of numbers.
The challenge for the Governments is to avoid killing ‘the golden goose’. That is to keep tax and spending under control and to keep up the ‘dogged pursuit of structural reform’.
The 2003 Budget addresses this challenges in number ways.
The Budget keeps a steady hand on spending and taxing. Revenue and taxes are projected to decline as a share of the economy over the next four years. The tax cuts are fully funded and the Treasurer has indicated that if revenue growth exceeds expectations, as it has in the past, further tax cuts are likely.
The Commonwealth Budget also advances reforms on a number of fronts including higher education, Medicare, industrial relations and disability services.
Reforms to disability services which have not received much notice to date are arguably the most important. One of the most crucial issues confronting all governments in the western world is the aging of their populations. While Australia is better off than most nations, it is confronting a serious deterioration in economic growth and growing budget deficits or higher taxes unless the issue is addressed. A key to addressing the issue is to ensure that the babyboomers stay in the worker force longer and that younger people with disability join the work force.
In its 2002 Budget the Government proposed a number of measures designed to arrest the trend most noticeably among older men to using the disability pension as an early retirement package. The problem lies not just with the growing cost of the pension but also with the fact that once on the pension older people seldom re-enter the workforce. The reforms were blocked in the Senate; however, the Government has doggedly reintroduced them in the 2003 Budget. The Government has augmented these reforms with measures designed to help disabled people entire or re-enter the workforces.
The real barrier to reform however lies not with the Government or its Budget, but with the populist who control the Senate. They have blocked virtually every reform proposed in the past and are likely to do the same to the reforms proposed in the latest Budget.
For the sake of our future, let’s hope the Government considers an early election.
