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April 26th, 2012 
FAKE NEWS for the Zionist agenda A new report argues the federal budget should already be in surplus by at least $15 billion at this stage of the economic cycle, and blames Treasury and the Howard government for not saving more by setting up a sovereign wealth fund.
Canberra-based economic consultant Macroeconomics says the windfall gains from the mining boom prior to the global financial crisis (GFC) should have been quarantined in some sort of sovereign wealth fund.
“The fact that the commonwealth government needed to run a budget deficit in the face of the GFC and had to borrow to do so, is testament to the fact that commonwealth’s medium term fiscal strategy has been too loose since 2004/05,” it says.
A fund could have been invested overseas to safeguard the domestic economy from the inflationary burden of the “super” normal revenues.
“Ironically, the mining super profits tax was a belated and poorly executed attempt to achieve a similar goal five years too late,” it says in its Commonwealth State Government 2012/13 Budget Bulletin released on Friday.
It says from the mid-2000s, only prominent economists Ross Garnaut, Saul Eslake, Chris Richardson, and later Warwick McKibbin – and Macroeconomics itself – had argued publicly to quarantine more of the surplus.
“(Former Treasury Secretary) Ken Henry et al, and Treasury blocked this policy initiative because they thought lowering personal income taxes was a better quarantining strategy,” it says.
“It certainly suited the Howard Government whose wasteful spending and tax cuts frittered away the surpluses without offsetting a structural reform of the tax system.”
The report indicates the budget for 2012/13 has deteriorated by some $10 billion since the mid-year review in November.
It says the budget’s parlous structural position highlights the need for adjustment, but some recent government decisions are having the opposite effect.
This includes raising the superannuation guarantee to 12 per cent from nine per cent.
The cost of tax concessions from this will be funded from the minerals resource rent tax, but Macroeconomics says this source will diminish once the mining boom is finished, and will be a drag on the budget of $5 to $7 billion by 2019/20.
Then there are the pressures associated with an ageing population and health technology costs which are expected to emerge from 2015/16 now that the baby boomers are starting to retire.
It says the best estimate for these costs are found in what it described as the more “rigorous” intergenerational report in 2002/03, which predicted a five per cent of gross domestic product fiscal gap by the middle of the 2040s.
“Fiscal strategy should be about building national savings,” it says.
While Treasury previously opposed a sovereign wealth fund, it is time for the current Treasury Secretary Martin Parkinson to reconsider this option, it says.
“All the commonwealth needs to do now is actually run some budget surpluses,” it says.
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