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I take umbrage (as an economist) with the assertions of several of these proposals not because they are bad proposals (for example i dislike negative gearing because it is a distortion on Australian housing market) but because they fail to mention the knock on effects they would have to others (and the federal Budget).
So if I may be allowed to explain my reasons and in the interest of informed discussion hear are the parts i disagree with.
1. End the great superannuation concession rort – save $10.5bn
I agree that something needs to be done to stop the incredibly wealthy from using Super as a tax haven, But for the VAST VAST majority of people with Super with will just be a double take tax (your taxed when you put money in and now when you take it out) hardly fair. Particularly when we are trying to encourage people to save for retirement so we don't have them drawing a pension. The Aged pension was designed at a time when there where 13 tax paying workers to each pensioner and the average pensioner only lived for about 5 years on the pension before passing away. Now it is like 3.5 Tax payers per pensioner and they live for 15years. There is nothing wrong with this and there should be a pension but unless we either raise the pension age, decrease the pension $$$ or get those who can save enough in super (middle income and above) to get off we are going to have a major issue. Remember the Pension is paid by today's workers for yesterdays ones.
2. Actually tax the mining industry – add $50bn
Again a good idea in principle but remember the mining industry is highly volatile. Today's super profits where for much of the time between the 70's til 90's very merger. This makes mining companies skittish about the future and given that mining has a multiplier effect in Australia of about 1:4 (couldn't find correct information but this is the number that comes to me) so each dollar earned by the mining industry multiplies 4 times in the general economy put another way each guy at the coal face supports the jobs of 4 other people. Taxing such an industry (particularly above other industries) will have a far larger effects on Jobs in the broader economy than many imagine.
3. Abolish fossil fuel subsidies – save $11bn
again this is the multiplier effect in reverse, 11billion in subsidies means x number of jobs in mining, freight (truckies) ect.ect that wouldn't be there otherwise. There would be a cost on the otherside of the budget to unemployment benefits and tax revenue (from reduced business taxation of those affected) that could cancel out much of these savings. I don't have access to the forecasting treasury or this article is using so i don't know what sort of flow on effect would be. If they are less then $11bn a year cut the subsidies and wear the job losses, reduced business.
4. Defund private schools – save $9bn
OK as a teacher (in training) this is just ridiculous on a number of levels ... firstly private schools educate around 35% of school age children cutting all funding to them (they receive none from the States where public schools get 90% of their funding from) would force many to either close or jack up school fees massively. The public school system couldn't absorb the sheer amount of students that would move from private to public (i would say about half of private school kids would move). The States would have to build the equivalent of the Victorian education system overnight to be able take them.
I believe someone mentioned that private schools are less efficient than public schools. Again this is incorrect, while cost per students have risen slower at public schools than private schools over the last few years this is because private schools are roling out massive technological improvements (many now require/provided every student with a tablet of PC) this isn't the case at public schools yet or they are using education department economies of scale in purchasing computers. If you look however at enrollments compared to total funding private schools are far more efficient at delivering the same level of educational outcome.
Public School Enrollments = 65% of school age children and receive 78% of government funding.
Private schools = 35% of school age children and receive 22% of funding.
This is the only point i completely disagree on only thing i agree with is making sure elite private schools don't get porked barreled. However, many private school are not elite and not wealthy.
5. More progressive income taxes – add $41bn
Again things went to far in 2006 on the tax cut front ... but at the time i didn't see people complaining. income tax is also got a negative aspect to it in that normally the richest of the rich can afford to avoid it. Likewise, their is a multiplier effect on jobs, given the wealthiest amongst us can afford the luxury goods that underpin many retail jobs raising their taxes usually impact on the poorest more then the rich. Rather than raising the top rate to 50% we should make it harder to avoid paying tax for the wealth (means testing deductions for example).
6. Abolish negative gearing – save $15bn
This one sound great on paper and i would support it in a flash if not for one reason. It has distorted the housing market for nearly 30 years already and removing it suddenly or at all will be very painful to the following groups.
Retires, low income earners, middle income earners, people who rent, anyone with a mortgage.
Firstly the values of homes in Australia is inflated by about 30% because of negative gearing. You remove it the poor, retired and middle income people will be worst affected. this is because although they don't benefit directly from negative gearing (they only own one house) a lot of their wealth is in their home. Removing negative gearing would deflate house prices in Australia for at least 10 years. Many people would not be able to move because of mortgage commitment to a house now worth less than the mortgage.
Secondly, renters would be affected you might think they would benefit from lower house prices but rents are now tied to mortgage repayments and since a person in a negatively geared property doesn't want to go broke over it they will either have to sell (at a loss) or jack up rents to cover their mortgage repayments (remembering that negative gearing worked on the premise that your income from the property is less than the cost of owning it.) So while negative gearing inflated real estate prices it also kept rents lower than what should have been the case for that market.
Finally anyone wanting a mortgage or with one will suddenly find it very hard to get one. Banks have calculated the risk of lending in Australia on the premise that house prices will continue on a upward journey. If you remove a major contributor to upward pressure of house prices and the market corrects (like it should if you remove negative gearing, remember 30% overpriced) banks will tighten their lending criteria thus not just making it harder to buy a house but to change to a different bank. Likewise this will feed into a downward pressure on house prices as people struggle to get access to funds to buy property.
Abolish Negative gearing at your own risk and preferably with lots of lead in time to prepare the market.
I am all for finding other ways to balance the budget but you have to remember that every action you take will have a reaction somewhere else in the budget or economy. Often times this will affecting the very people you where trying not to affect by avoiding cutting a service and sometime affect them more than the cutting of that service would have.
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