Australia’s Prime Minister – Tony Abbott says there is a ‘budget emergency’, Lets see if that is true.
“Thanks to Labor’s poor management over five years, There is now a budget emergency” – Tony Abbott
Lets break it down into 2 parts;
Labor’s Poor Management – Labor allowed the Budget to go into deficit in 2008-09 because the global financial crisis was threatening to plunge our economy into recession. Their action stimulated the economy and kept Australia out of recession and supported hundreds of thousands of jobs.
The deficit peaked at $54.5bn. Then, as the private sector started recovering, Labor started reducing the deficit. In their last full year in office, 2012-13, the federal deficit was $18.8bn. This has bounced back up to $29.8bn for 2014-2015.
Those numbers seem too big to comprehend, so lets compare-
- The Abbott government is spending $12.4bn on fighter jets. – ABC
- The total cost of sending Australian troops to the most recent Iraq war was about $2.5 billion. The total commitment to operations in Afghanistan was far more expensive, at $9.3 billion. – SMH
- The 2014 budget allocates $22.8bn on defence.
- The total budgeted revenue in 2014 is $363.5 billion.
While Australia did suffer it has recovered much better than the majority of other developed nations mostly because people did not stop spending. The new budget proposed by Joe Hockey slashes government spending on health, education and science among other things and increases government spending on thing like defence while increasing taxes, The tax increases and reduced low-income support will lead to less spending- The very thing that helped Australia through the global financial crisis in the first place. Call it poor management if you wish, Seems pretty open to interpretation to me.
There is now a budget emergency– There is 2 ways of looking at this one. If the economy stayed stagnant at current levels into the foreseeable future then yes Australia would plunge into an enormous debt. However the economy is not stagnant and continues to go up and down as it always has. The global financial crisis caused almost all countries to have a budget deficit and they are only just now getting back into having surplus, Australia however since the Abbott government has taken over has increased the deficit and is up to $29.8bn for 2014-2015.
Not to worry, Our treasurer says everything is under control –Hockey tells Kiwis there is no economic crisis in Australia. So there was no budget emergency Mr Hockey?
If you’re now more confused than when you begun reading then my work here is done.