Brainless Budget fails on population, tax etc

The 2021 Budget has been called the recovery budget, responsible, irresponsible, fair, unfair, cautious and reckless. But it has not been called what it should be: “brainless”. This is a really frustratingly dumb Budget on several counts: population, housing, tax, energy, and childcare.

Population.

The gigabytes of comment and information in and about the Budget hardly mention the elephant no longer in the room: high population growth.

The Budget figures show that, in the pandemic-affected financial years (2019-20 to 2021-22) net migration is in total 661,000 people fewer than it would have been under business as usual. 

The Government is patting itself on the back for the marvellous V-shaped economic recovery and bounce back and giving every reason but the real one. Australia is doing far better than all the economists, business, Treasury and Reserve Bank people imagined because of dramatically lower population growth caused by dramatically lower immigration.

This cabal of misguided economists are the people who for decades have banged on about immigration being essential to Australian economic growth and prosperity.

Poppycock. The cabal predicted the pandemic would bring economic collapse and massive dole queues. But with 661,000 fewer people (and their offspring) to cater for we have done much better than they thought.

In particular, we have about 200,000 more jobs than we had pre-pandemic. If we had had immigration as usual, those jobs would have gone to immigrants and the dole queue would have been 200,000 higher. Instead, the 200,000 people are tax-paying workers.

Plus closed borders meant our tourism deficit turned positive as people spent at home.

Small wonder the Budget deficit is much lower than the economic cabal predicted. The cabal believed its own propaganda that high population growth meant high economic growth and higher prosperity. Wrong. Per capita the growth was tiny or negative and the population growth caused a great burden in unmeasured things like congestion and the environment.

They were so blinded by the immigration-growth mantra that nearly all of their forecasts were wrong. They failed to see that without the usual massive immigration, unemployed locals would take up the slack.

Yet here they were in the past week, the same old heads from the economic cabal shamelessly popping up urging a return to what surely should now be a discredited population-growth mantra.

The firm message of this pandemic, bolstered by all the figures in the Budget, is that high immigration is bad for Australia, economically, environmentally and socially.

Notice how the Government is now turning its attention to local training. Business always demands government give it a freebie. If in a pandemic, government cannot give it cheap imported labour then it must pay for local training.

In the past, Governments have provided business with a pool of cheap imported labour to suppress wages and to hell with the broader costs. The pandemic employment figures prove that training people here is more economically sound.

But what does this Budget do? Project a return to high immigration as soon as the pandemic is over. 

Moreover, why can’t the economic rationalists who call for user pays for every other government service apply the same reasoning to immigration. If a business desperately needs someone with skills that they say (usually incorrectly) are not available in Australia, they should pay the cost.

Average wealth in Australia is a little under $400,000 per head. Very few migrants bring that amount in. To the extent they don’t they lower the average wealth of the people here. The businesses that want them should pay the balance as a user-pays tax. They would soon learn that it is better to train locally.

Without the 661,000 extra people, we have not had to build what amounts to a quite large city. The only people who would have benefited were the property developers and the big retailers and big business generally. The cost would have been borne by the environment and the existing population (including migrants and indigenous people) with congestion, higher housing costs and education and health stress.

Post pandemic we should put an end to this migrant-led growth mantra, but the Budget suggests we won’t.

Housing. Treasurer Frydenberg thought that by handing out some goodies to first-home buyers, he would make it easier for them to buy their dream home. But, in fact, he has made it harder. The Budget has added another jerrycan of fuel to the housing market.

The only way to make housing more “affordable” for home-buyers is to reduce prices by reducing the demand driven by investors.

The easiest way would be to remove the big tax breaks for investors: negative gearing and capital gains tax concessions. But if this is too hard politically the government could increase the interest rates for housing investors by imposing a (say) 2 percentage point tax on housing investment mortgages.

That would leave general interest rates low for business, as is needed, and make home-buyers more competitive with investors.

Tax. More tax concessions for superannuation? Please. Tax cuts for the rich? Oh no. What about a quick intelligent simplification of the tax system by giving everyone a $3000 deduction, beyond which the taxpayer would have to prove and detail their deductions? At a stroke millions of people would be freed of the burden of doing income-tax returns and the ATO would be freed of the burden of  processing them.

The ATO could then get on with the important work against high-income tax dodging.

Energy. The Budget gives $30 billion a year in tax subsidies to the fossil-fuel industry. It is going to squander $500 million on madcap carbon capture and hydrogen hubs near coal and gas. Spare us the wasteful idiocy.

Childcare. When will the government realise the economic and social value in giving free childcare and early childhood learning to all?

The brainlessness does not end there, but I have run out of space.

Crispin Hull

This article first appeared in The Canberra Times and other Australian media on 15 May 2021.

6 thoughts on “Brainless Budget fails on population, tax etc”

  1. Hi Crispin not sure If you are on the ball with the family visa issues which are coming before a senate inquiry in August 2021 which was initiated by the greens. there has been sever maladministration of the migration program since 2013 but it got exponentially worse with the creation of HOME AFFAIRS on the 20th of December 2017. This was the same day that Our chief rapist was appointed AG. The only thing to stop Home Affairs from exercising arbitrary power was the AG department. Since 2017 a backlog of partner visas being “processed” has arisen to its peak at about 120,000. Another issue that occurred was that a Trump style policy of remain offshore occurred with the partner visas and this caused a major problem in one area which the govt doesn’t stop banging on about. FERTILITY. Visa’s started taking so long that couples didn’t know how to have kids because they didn’t know if the parents visa would be granted to set up a family home. There is also the backlog of remaining relative visas and another conundrum has arisen. When chief APH write Gareth Larsen started penning some papers in 2013 and 14 he was writing about why skilled migration is better than family chain migration which is what is practiced in the USA. Only problem now those new skilled migrations who predominantly work as Uber drivers want to bring in their family. So now the Greens want to bring in the parents of new migrants which the Productivity Commission said costs the average aussie tax payer 400k. This is blatantly absurd.

  2. I remarked on budget night that this budget just moves us closer to the cliff edge. I have sent a proposal to QandA for a scientist only panel to look at this looming cliff edge and how we may get from growth to an environmentally sustainable path. QandA have rejected the proposal. Here it is if your system will take a couple of pages of text.
    A proposal for QandA
    QandA plays an important role in exposing the mismatch between widely held prevailing beliefs and better ways of recognising and coping with emerging problems/threats. Many of the issues dealt with in recent programs, while very important, have not discussed the deepest and most serious mismatch threatening humanity’s very existence. Many scientists over many decades have warned that the course humanity is now on is unsustainable yet the prevailing view in politics, media (including the ABC), economics and popular wisdom is that the new normal (post pandemic) will be the old normal writ large.
    The underlying drivers of this unsustainable path have been repeatedly identified as too many people each, on average, demanding too much from a finite planet or a finite Australia yet the guide-posts dominating the present trajectory is to increase both population and per capita material consumption – grow GDP.
    Globally, the human footprint is consuming at the rate of 1.7 Earths, the Australian footprint consumes at the rate of three to four Earths. As a consequence humanity’s footsteps across the planet, in recent decades, are strewn with the evidence of destruction: massive biodiversity loss, oceans being stripped of fish but replaced with plastic, dwindling fresh water/polluted rivers, loss of soil and soil quality and climate change (I put this last not because it is less important but to stress that it is just one symptom of a much more pervasive problem and it is that that this email is about).
    I think it was about eighteen months ago that QandA ran a program with an all scientist panel which, if it had gone longer was just getting into this area. I believe the program was one of your most popular.
    I am suggesting that QandA should do another program with an all-scientist panel and to cover two things:
    1. The mismatch between the path that humanity is now on and the sustainable path that we need to embrace urgently if we are not to face a major collapse of civilisation.
    2. How do we get from the present path to the new path? What are the steps that we need to follow; the sequence of changes that could and should be made?

    The second of these is the hardest to answer given the embedded resistance to change from so many quarters, but it is the most important because discussion of these steps will help all who see the program to understand the scale and difficulty of what is required and it is where most commentators offer vague, impractical or fanciful suggestions.

    Who am I to suggest such a program?

    I am a medical doctor who spent over 20 years in medical research. I have been active in the environment movement since the mid-1950s. In 1971 I formulated an open letter ‘To those who shape Australia’s destiny’ which was published as a full page advertisement in The Australian over the signatures of 730 scientists from all over Australia including Sir Macfarlane Burnet and Sir Mark Oliphant. As a consequence I was one of the first people on the ABC program, ‘Monday Conference’ and which was so popular that the then ABC followed up with a number of other Monday Conferences with others on the same theme. A collection of these programs was published by the ABC in a book, ‘ Saving our small world’. I can send you a copy of the original advertisement if you wish.

    In 1987 I was elected to the Senate as a Senator for S.A. and I retired due to ill-health in 1995. From 91 – 93 I was leader of the Australian Democrats. As a Senator I introduced many private members’ bills relating to environment: ozone depletion, climate change, threatened species, ownership and exploitation of genetic material……………. I have continued to work to bring about an environmentally sustainable future.

    The scale, nature and impediments and thus the great importance of (2) above.

    I am using GDP fully aware of its flaws. I do this because it is the metric commonly used by economists, politicians, most media and is a term familiar to most people.

    Using World Bank figures, in 2017 global GDP was $80,934,771,028,340 or $81 trillion.
    World population was ~7.5 billion giving an average global per capita GDP of $11,500.
    The global human footprint equalled 1.7 Earths, i.e. we were running down Earth’s resources, living on capital not interest. An alternative interpretation is that we would require the resources of 1.7 Earths if we were supporting a barely sustainable human population of 7.5 billion. A footprint of half this size, i.e. 0.85 Earths would be sustainable and leave some wiggle-room. This would equate with an average global per capita GDP of $5,750, i.e. half of $11,500.
    But world population is expected to rise from 7.5 billion to 11 billion by 2100 suggesting that the figure to aim for for an average equitable and sustainable per capita GDP is $3,920. (5750 x 7.5/11)
    This compares with Australia’s 2017 average per capita GDP of $53,831 and with pressure from every conventional economic source, including most ABC commentators for more growth in both population and per capita consumption= environmental impact.

    This is the target if we are to meet both the requirements of a sustainable future and an equitable world. In relation to equity it must be noted that a per capita GDP of $3,920 would put Australia on a par with Sri Lanka, Indonesia, Algeria, Angola and Azerbaijan.

    More importantly 76 nations have a per capita GDP smaller than $3,920 and these nations contain 3.6 billion people or 48% of the world’s population. Thus, not only are we in Australia on an unsustainable path we are on a highly inequitable one.

    I am aware that there are some who claim that technology will solve the problem, that we can have ‘green growth’ but there are sound arguments and observations against this claim.

    So the task for a QandA scientist only program would be to produce evidence that this shift from unsustainable perpetual growth to one of living within the Earth’s capacity is where the most fundamental change ever attempted must be wrought. And then to try and outline the steps by which this change may be achieved while at the same time addressing the important issue of equity.

    If QandA is minded to take up this challenge I would suggest panellists who have thought deeply about these matters: Dr Jane O’Sullivan and Professor Ian Lowe and for an economist Professor Clive Hamilton.

  3. Well put, our COVID economy and jobs, much the better, for the absence of 660K extra punters.

    Hope won’t mind if I cite it in something I’m writing.

  4. Absolutely right! Of course the economic “rationalists” are still not conceding they are wrong just predicting that all us misguided people are leading Australia into the dark ages see Simon Cowan Canberra Times 8 May – “turning out the lights”. Never let facts and figures spoil a nice theory!k

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