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Government decisions going back to the Howard years have been blamed for the current 'crisis' situation.
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01.Budget crisis - how did we get there?


Different opinions have been sounded recently on whether or not the federal budget is in crisis and whether deep cuts and new taxes will do harm or good.

The fact is that the Mid-Year Economic and Fiscal Outlook (MYEFO) released last December projected a deficit of $47bn for 2013-14 and a total of a deficit of $123bn over the four years of the forward estimates. 

There are a number of government decisions going back to the Howard years that have been blamed for the current crisis:

Petrol excise

November 2001 election campaign (shortly after introduction of the GST):  PM Howard reduced indexation of petrol by 1.5 cents a litre and ended the twice-a-year indexation of the excise. The petrol excise has remained since then at 39.14 cents a litre, while fuel prices have risen from less than $1 per litre to up to $1.60 per litre in some areas.

  • This resulted in a loss of revenue of $5bn, according to News Corp.

GFC stimulus

December 2008 and February 2009: Under PM Rudd, two massive stimulus programs were announced to boost the Australian economy during the GFC. These included a one-off $950 cash payment to eligible Australians, a free ceiling insulation scheme, a school building and upgrade program, and increases to the First Home Owner Grant.

Deficit blow-out

The Pre-Election Economic and Fiscal Outlook released in August 2013 estimated a $54.6bn deficit over four years, less than half of the $123bn estimated by the MYEFO in December.

How did it blow out so much by December that year? According to ABC Fact check there are a couple of reasons it has appeared to double over this period, including:

  • Changes to government spending, which include, for example, an $8.8bn grant paid to the RBA, accounting for $13.7bn.
  • A gloomier economic outlook leading to lower projected government revenue from tax adding $37.8bn.

Of course, both the MYEFO and PEFO are estimates and a lot can happen over four years - not forgetting policy and tax changes in the upcoming budget - so how our economy and the budget deficit really look in four years' time remains to be seen.



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