The tricky problem of the Budget

If you listen to Australia's politicians they will generally tell you that the Australian government spends too much and that is why the Federal government runs a Budget deficit. You shouldn't really listen to politicians.

The problems of Australia's Budget are actually due to both spending and revenue problems. From my point of view far more due to revenue than expenditure.

The article below reports the views of the Treasury Secretary, John Fraser. Mr Fraser is a civil servant and so not bound to give a political point of view. He points out that revenue has continuously been lower than forecast in recent years, and that is why the Federal Budget is further in deficit than various government announcements have predicted.

The article is essential reading for VCE students. It describes the issues facing the Federal Budget and the difficulties of forecasting revenues, which is pretty essential when setting out plans for four years in the future. No government can escape this problem completely.

For Australia the government failed to see the fall in commodity prices which have led to much lower export values and profit taxes. Also growth has slowed which means that taxes on incomes are not rising as fast as hoped. Worse the government failed to tax the resources sector properly during the mining boom.

For those interested in this issue Ross Garnault's book 'Dog Days' is available in all good bookshops and online.

The Age article is here

This article is essential reading for VCE students, but IB students will find it relevant to the issue of fiscal policy.