Budget 2007: what it hides!

Now in a tight election year, the Government is trying to hide the extent of the surplus. Thus the underlying budget cash surplus doesn't include the revenue from the Future Fund — estimated to be $2 billion in 2006-07 and $3 billion in 2007-08 — to give a true underlying cash balance of $15.7 billion and $13.6 billion respectively

Without the discretionary tax cuts and expenditure changes, the budget surplus in 2007-08 would have been about $20 billion or about 2 per cent of GDP thanks to the strong growth in tax revenue.

There was no way the Government was going to create the perception that there was all this money available to the Opposition to spend if it won the Treasury benches later this year.

The budget surplus has been generated out of the growth in employment and profits flowing from the resources boom and the very high tax burden imposed by the Howard Government. History shows that resources booms usually end suddenly.

Government spending on health and education has been cut back in favour of private provision, which together with the growing tax burden, has shifted the debt burden from government to households.

The extent of the tax burden has been disguised by falsely claiming the GST (which replaced the Commonwealth wholesale sales tax) is a state tax. When this tax, which now collects some $40 billion a year, is added back into revenue, federal taxes account for 25 per cent of GDP compared with 22.3 per cent of GDP in 1996, when the ALP last occupied the Treasury benches, and 23.2 per cent of GDP in 1999, when wholesale sales tax was last collected.

The amount is not trivial. It is equal to about $20 billion a year or $2000 for each taxpayer. The money has been wasted on all-singing, all-dancing defence equipment with only marginal relevance to the war on terror, propping up a relatively inefficient private health insurance system, leasing back buildings at exorbitant rents privatised by the Government and massive tax expenditures on private superannuation, fringe benefits, negative gearing and capital gains tax breaks that may be good politics but can hardly be justified on equity, efficiency or environmental grounds.

This budget has belatedly attempted to reverse some of the damage done when the Coalition abolished Labor's public dental scheme in 1996 costing some $100 million a year and then in the following year introduced the 30 per cent private health insurance rebate, which provided some $600 million a year for private dental insurance available to the rich only.

This budget provides an extra $127 million to government schools, where the need for resources is greatest, and provides an extra $487 million to non-government schools and attacks those who complain about this inequity.

There was a lot of pre-budget publicity about funding for the Melbourne-Brisbane rail link. The budget shows spending in 2007-08 is $169 million for rail and $2.9 billion for roads and, over the four-year forecast period, $340 million for rail and $14 billion for roads, which reflects the Government's real environmental priorities.

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