Boy, we really are a spoiled and entitled mob. The press at Business Spectator, The Guardian and the Fairfax metro dailies is chock-o-block with whinging about this Budget cut or that. Just about nowhere does anyone say ‘well, if it’s good for the country…’
It’s not a perfect Budget. It’s too weighted towards youth and welfare cuts for the needy. But, overall, it’s a fair effort in its assumptions which clearly point to why some harshness is needed. What’s more, the direction is good in its attack on the entitlement mentality. Here’s what S&P said:
Overall, this budget, along with the nature of the current political debate, is consistent with our view of strong political commitment to prudent budget finances. The government flagged its intention to make politically-sensitive spending cuts of this nature well in advance. It strongly signaled its intentions to address spending pressures since before the September 2013 general election, continuing most recently with the release of the Commission of Audit report. Indeed, ongoing willingness to make difficult budgetary choices may well be needed in coming years. We consider there to be potential for further revenue write-downs, given the current importance of Australia’s terms of trade to the government’s revenue base and the inherent difficulty in forecasting its trajectory.
That’s right, we have little choice and more will be needed. That’s the growth straight jacket we’ve created for ourselves. As I wrote last week:
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There are three vulnerabilities in [Australia’s growth] model. The first is that the income underpinning the borrowing could decline. This is the China shock scenario. The second two follow on and refer to credit quality. At some point the housing quango could run out of steam. It may be happen because it’s unaffordable or, like Moody’s warns today, it may be that offshore investors get spooked by rising prices and the threat of a bubble implosion. In that event the cost of offshore credit that drives the system will get more expensive and growth suffers as a result, chronically and then suddenly.
What prevents this is the government keeping a clean public balance sheet and AAA rating as the guarantor of the bank’s borrowings. For that to work, the same credit rating agencies have insisted that we must “aim for surplus across the cycle”. The government, whomever they may be, has no choice but to put the Budget on a surplus trajectory in reasonable time, or the downgrades will flow and credit will get more expensive for the banks.
Whether its public or private borrowing it can no longer grow sustainably or at a high enough levels to support the standards of living we are used to in our domestic economic activity. So when Moody’s warns about house prices and the Government warns about Budget tightening both are pulling the straps of the same straight jacket a little tighter from opposite sides.
No, it hasn’t yet attacked the black hole of budget rorts but it’s going to have to in the Government’s second term and it’s starting that process now with a taxation review. A little real politik, peeps!
It is useful to remember on such days, as the pampered flowers of privilege bloom in the MSM, that Australia topped the OECD Better Life Index again just last week:
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Australia performs very well in many measures of well-being, as shown by the fact that it ranks among the top countries in a large number of topics in the Better Life Index.
Money, while it cannot buy happiness, is an important means to achieving higher living standards. In Australia, the average household net-adjusted disposable income per capita is 31 197 USD a year, more than the OECD average of 23 938 USD a year. But there is a considerable gap between the richest and poorest – the top 20% of the population earn almost six times as much as the bottom 20%.
In terms of employment, over 72% of people aged 15 to 64 in Australia have a paid job, above the OECD employment average of 65%. Some 78% of men are in paid work, compared with 67% of women. People in Australia work 1 728 hours a year, less than most people in the OECD who work 1 765 hours. Another key measure, however, is how many people work very long hours. About 14% of employees work very long hours, much higher than the OECD average of 9%, with 21% of men working very long hours compared with just 6% for women.
Having a good education is an important requisite for finding a job. In Australia, 74% of adults aged 25-64 have earned the equivalent of a high-school degree, close to the OECD average of 75%. This is truer of men than women, as 76% of men have successfully completed high-school compared with 73% of women. This difference is higher than the OECD average and suggests women’s participation in higher education could be strengthened. In terms of the quality of its educational system, the average student scored 514 in reading literacy, maths and science in the OECD’s Programme for International Student Assessment (PISA). This score is higher than the OECD average of 497. On average in Australia, girls outperformed boys by 8 points, slightly below the average OECD gap of 10 points.
In terms of health, life expectancy at birth in Australia is almost 82 years, two years higher than the OECD average of 80 years. Life expectancy for women is 84 years, compared with 80 for men. The level of atmospheric PM10 – tiny air pollutant particles small enough to enter and cause damage to the lungs – is 13.1 micrograms per cubic meter, considerably lower than the OECD average of 20.1 micrograms per cubic meter. Australia also does well in terms of water quality, as 93% of people say they are satisfied with the quality of their water, higher than the OECD average of 84%.
Concerning the public sphere, there is a strong sense of community and high levels of civic participation in Australia, where 93% of people believe that they know someone they could rely on in time of need, higher than the OECD average of 89%. Voter turnout, a measure of public trust in government and of citizens’ participation in the political process, was 93% during recent elections; this figure is the highest in the OECD where the average is 72%. There is little difference in voting levels across society; voter turnout for the top 20% of the population is an estimated 94% and for the bottom 20% it is an estimated 92%, a much narrower difference than the OECD average gap of 11 percentage points and suggesting there is broad social inclusion in Australia’s democratic institutions
In general, Australians are more satisfied with their lives than the OECD average, with 83% of people saying they have more positive experiences in an average day(feelings of rest, pride in accomplishment, enjoyment, etc. ) than negative ones (pain, worry, sadness, boredom, etc.). This figure is higher than the OECD average of 76%.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
