fiscal policy

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Election 2013 – let’s talk tax reform!

This article forms part of an ongoing series looking at economic issues as Australia heads into the Federal Election. More coverage can be found on the Election 2013 page of ESSA’s website.

This election campaign has already seen its fair share of gaffes, negative ads and costings claims. Perhaps it’s time we debated the pressing need to reform our tax system, starting with the GST.

The Problem

As I watched ABC’s Q&A Monday episode, The National Economic Debate, I sat despairing at yet another missed opportunity to talk ambitiously about policy reforms in Australia. After an excellent question from the crowd about the merits of reforming the Goods and Services Tax (GST) to broaden its base and potentially increase the rate (whilst concurrently reducing and eliminating other inefficient and distortionary taxes), both Treasurer Chris Bowen and Shadow Treasurer Joe Hockey manoeuvred their way out of discussing what is a sensible reform. It was arguably the most disappointing element of what was a very entertaining and substantive debate between Bowen and Hockey that covered the breadth of economic issues facing Australia.

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The economics behind the politics of the federal budget

The Federal Budget is fundamentally – perhaps with a bit of accounting incorporated – an economic conception, right? Wrong. While in an ideal world the political implications of fiscal budgetary processes would be disregarded, the reality is that politics ultimately determines the economics of all government budgets – albeit to various extents. Perhaps paradoxically, however, economics still trumps out in the end. How so? Because the use of economics is often the best way to explain the politics behind the economics.

While last year the use of accounting manipulations was the most demonstrable element of the Federal Budget assailable for extensive analysis, this year there are myriad of components. These will now be explored – largely within the context of the economic concept of private interest theory. This theory is essentially that politicians, including Wayne Swan when preparing the budget, will make rational choices based on their own objectives when in a decision-making position. The primary objective pertaining to the budget for Swan, and by extension the Gillard Government, would ostensibly have been to deliver a well-received budget that will maximise their chances of being re-elected (or at least minimise the number of seats they lose) on September 14.

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Two Sides of Politics – A Fiscal Tug of War

swan hockeyWith the September Federal election looming, both Labor and the Coalition are expected to use every political weapon in their arsenal, aimed at capturing every possible vote. Undoubtedly some of the most lethal are fiscal policies offering the highest possible marginal political benefit. Already, treasurer Wayne Swan’s decision to rescind the long held promise of a budget surplus has captured headlines in almost every major print newspaper in Australia. In contrast, the Coalition remains loyal to a surplus even though the budget’s automatic stabilisers are dragging it into a deficit. Juxtaposing these two budgetary stances, it is important to ask: which of the two is the better policy?

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Australian Economic Prosperity a Double-Edged Sword

The Australian economy continues to defy economic gravity, with the latest round of economic statistics released last week showing an economy growing above trend over the last 12 months, full-time job creation ticking up in May, and a higher participation rate as people become more confident in finding a job.

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2012-13 Federal Budget – Beyond Robin Hood and Carbon Tax Bribes

It’s Budget time! On Tuesday May 8th, Treasurer Wayne Swan handed down his fifth budget to an eager and expectant crowd of media commentators following a significant lead-up of leaks and speculation. This crowd has since devoured the budget’s contents and embarked upon a reporting frenzy that has been nothing short of what’s expected. There has been tremendous coverage on the politics of this Budget, with the Government accused of playing the class warfare card to appeal to traditional Labor supporters.

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Party Politics Trumps Policy Detail

George Megalogenis’ quarterly essay titled ‘Trivial Pursuit: Leadership and the end of the reform era’ highlights the worrying lack of political leadership on both sides of the parliament in the aftermath of the 2010 Australian federal election. It argues that political short-termism and party politics has become the order of the day, leaving proper policy debate and detailed analysis out of the picture. It means that governments are focussing on winning the next 24-hour news cycle, or the next opinion poll rather than focussing on creating an enduring economic reform agenda that builds on our prosperity in Australia. Many prominent Australian journalists, including Megalogenis and Annabel Crabb of the ABC, have vowed not to discuss opinion polls to reflect their distaste of the current political atmosphere.

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Understanding the crisis that embroils Europe

I am sure you have heard of the commotion unfolding in Europe, dubbed by many news media outlets as the ‘European sovereign debt crisis’. But what does this all mean? Ric Battelino, Deputy Governor of the Reserve Bank of Australia, spoke in Sydney about the ‘European Financial Developments’ and what it means for the world …

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