Return to surplus in 12 months achievable: Liberal Democratic Party
The Liberal Democratic Party has released its own federal budget in an attempt to demonstrate that a return to surplus can be achieved in the next 12 months without harming the economy.
The party believes that tax cuts to offset reductions in middle class welfare would in fact strengthen the economy. Published in the Financial Review (12 May), the budget is designed to show it can be done, according to the party.
"We believe the Commission of Audit was a good start but didn't go far enough. Unfortunately, the government is probably going to water down the recommendations even further, announcing yet another budget deficit and (like Labor) making vague promises about a surplus somewhere in the future," says Senator-elect David Leyonhjelm.
"We argue there are three steps necessary to bring the Australian economy back to health: (1) tax reform and deregulation to boost economic growth; (2) cut government over-spending to immediately bring the budget back to surplus and start paying down the national debt; and (3) structural reforms that ensures government spending is sustainable in the long run," he said.
The budget was prepared by a former Treasury analyst who worked in revenue analysis, advised by a team consisting of academic and other economists with Treasury and/or economic modelling experience. It is fully costed based on the most recent information.
In summary, the Liberal Democrats' budget involves $3bn lower tax revenue and $40bn in spending cuts. That shifts the budget from a $34bn deficit to a $3bn surplus.
Most of the spending cuts are focused on reducing middle-class welfare, accompanied by a tax cut for the same people by reducing the top two tax rates.
Measures include a ten per cent cut in salaries for all federal public servants and politicians (saving over $2bn), eliminating Family Tax Benefit B and the Schoolkids Bonus ($6bn), a one year freeze in welfare payments ($4bn), inclusion of homes in the pension assets test ($5bn), means-testing Medicare ($6bn), a medical co-payment ($2bn), halving higher education subsidies ($5bn), winding back corporate welfare and R&D subsidies ($7bn) and privatising the ABC and SBS ($1bn).
There would also be a one-year freeze in the minimum wage, estimated to create 100,000 new jobs for low-skilled workers, thus reducing unemployment payments.
More fundamental structural changes to strengthen the economy are also proposed.
"The budget should be in surplus in 2014/15 and that is what the Liberal Democrats' proposed budget would achieve. Anything less should be considered failure. If the Liberal/National government does not make the tough decisions now, they never will," Leyonhjelm said.