Budget Deficits have become the New Normal
These are the federal governments’ annual Budget Outcomes since 2007/08.
This is why neither Labor nor Liberal/LNP governments can be trusted to spend our money wisely. In the ten years since Peter Costello’s budget surplus in 2007/08, all you see is red ink – budget deficits.
Between 2009 and 2014, Labor’s treasurer Wayne Swan ran up $235 billion in deficits. Since then, Joe Hockey and Scott Morrison, as Liberal treasurers, have presided over deficits totalling $132 billion, with more on the way. Remember, governments don’t have money of their own – they are funded by all of us. So that excess government spending is OUR lost money.
Why do they do it? Well, there is always another worthy cause, another loud voice asking for more – particularly around election time. There is never someone looking for less. When you think it through, this means the government spends OUR money to aid their re-election! Any long-term vision is replaced by short-term electioneering.
This party trick cannot go on indefinitely – at some point, the red ink comes home to roost.
Budget Deficits lead to Government Debt
Constant deficits also mean increased borrowings. Here is our ballooning federal government debt over the last decade.
From almost zero debt in 2008, the last ten years has seen the federal government expand our debt to over $600 billion. That is debt that someone will have to repay – either through higher taxes, less government services, or more likely, both. The unfortunate outcome of this government incompetence (I don’t know how else to describe it) is that whilst this generation has enjoyed any benefit of this over-spending, our children will suffer the pain of repayment.
The annual interest bill on this debt is now $18 billion – that’s more than the government spends each year on welfare services, or housing and community amenities – and nearly as much as is spent on defence! And interest rates are at all time lows, so you can imagine what will happen as interest rates inevitably rise. The debt and interest can only be reduced by the government getting the budget back into surplus. They must start to spend less than they receive – it’s basic arithmetic. Do we have any government who is prepared to undertake this task? Recent history suggests no.
Wayne Swan was a master at promising budget surpluses, year after year – only to rack up six deficits in six years – and some group named him “Treasurer of the Decade”! Must have been a joke. Upon winning the 2013 federal election, Abbott and Hockey told us we had a debt and deficit disaster that required immediate action. One poorly conceived and negatively received budget, some bad news polls, and plenty of internal backstabbing, and deficits and debt have been relegated to the back bench. The Liberal / NP government has delivered five successive deficits, and debt has blown out from $320 billion to approaching $600 billion.
It is not the colour of the politicians’ ties, but their shared lack of fortitude and vision that has created this disaster.
Time to Set Some Boundaries
This situation cannot be allowed to continue. Governments must be held to account for their spending decisions, and the public must assume more control. We need to establish new rules of engagement for our politicians.
Rule #1 – Stop governments from planning for budget deficits:
This will force some decision making – any new spending must be met from existing funds, or taken from another funded area. The control will need to be set and managed independent of the government of the day – most likely requiring a Constitutional amendment.
Rule #2 – Put in place a maximum level of government debt:
This will stop the “out of budget” spending on pet projects and new initiatives – again forcing governments to make considered choices amongst competing demands for funds. The multi government, bi-partisan Loan Council had once exerted some control, through imposition of a debt ceiling – but this is now regularly ignored and is nothing more than an aspirational goal. As with rule #1, the control will need to be set and managed independent of the government of the day – also most likely requiring a Constitutional amendment.
Rule #3 – Stop asking governments to solve all our problems:
If we, the citizens, want greater frugality from government, we must accept more personal responsibility. If we want more efficient spending, we must take out the middle-men. If we want a greater say in where governments spend our money, we must seek to resolve some perceived problems ourselves. As each new, and potentially, loud voice espouses the latest problem or challenge, we must remain true to the longer term issues that really matter. Moving money to fund the latest demand can only mean taking it away from somewhere else – the two arguments must be made together.
As you can imagine, convincing governments to accept more public control will not be met without resistance – even in a supposed representative democracy such as ours. Amending the Constitution is hard work, will face many hurdles, and will be protected by those who would prefer the status quo. It will require a focussed, dedicated, and dare I say, LOUD voice of reason.
If you would like to be part of that voice, join InToWin now.