Monday, 22 February 2010

Spend, spend, spend...

Transparency may not be Paul Lennon’s abiding legacy, but that was the stated intention of the Charter of Budget Responsibility Act 2007 enacted during the ex Premier’s unforgettable tenure.

The CBR Act requires a Government to set out its fiscal strategy and to report its performance at regular intervals.

It also requires Opposition parties to release a fiscal strategy at election time.

The purpose of a fiscal strategy statement according to the Act is to establish a benchmark for evaluating the Government’s fiscal performance; and increase public awareness of the fiscal policies of the Government and Opposition parties.

This is the first election campaign to which the CBR Act will apply

The head of Treasury Don Challen issued a media release on 16th February reminding all parties of their obligations under the Act by setting out a timetable for those obligations.

Mr Challen has until Wednesday 24th February to decide whether he needs to update the Government’s latest Mid Year report by releasing a Pre Election Financial Outlook report. It’s likely that all the $ figures we’ve heard lately have merely been promises not decisions and hence a PEFO will not be required.

The Opposition parties have until 6th March to release their fiscal strategies. The fiscal statement needs to be based on sound fiscal management. The principles are set out in the Act so Mr Hodgman and Mr McKim’s won’t have far to look.

One issue that Mr Hodgman in particular will need to address is the risks associated with the erosion of the tax base (Clause 3(2) (b) in Schedule 1) given his proposal to abolish land tax. Land tax provided a stable base which withstood the ravages of the GFC. Without it we will be more vulnerable.

Mr McKim will have to address how he will overcome the shortfall when gaming machine tax is abolished. It may well be a commendable policy, but it will leave a shortfall.

To date everyone’s just been promising to spend, spend, spend, without any regard to the bank balance, which on latest Government figures will fall to $300 million in 3 1/2 years time. No one seems to be too worried about our fiscal position. Every day another wish is granted, it’s like all parties have gained access to Santa’s mailbox, and are gradually opening the ‘Dear Santa’ letters.

Glancing at the TV news last night I swear I saw Mr McKim promise fresh fruit for schoolchildren. Only $8 million pa. But that’s $32 million over the period of the forward estimates. We’ve only got $300 million Nick. And remember there’s supposed to be $1,500 million in the Superannuation Provision A/c that you’re yet to say anything about. Saving it up for the fiscal strategy statement maybe? Or maybe because none of the obligations outlined in the Act are enforceable in judicial or other proceedings, it’s easy to keep making promises. But that’s hardly in keeping with the spirit of the law.

It will be interesting to see how well equipped the Opposition parties are to prepare a fiscal strategy. To date there’s been no evidence of any integrated plans. Just a mish mash of promises. Those preparing and framing policies at this stage seem to be outnumbered by the mindless minders.

Not only do Mr Hodgman and Mr McKim have a statutory responsibility to detail a strategy, it is incumbent on them to outline an alternative after all they’ve been saying about the Government’s shortcomings. Start telling us how the State will continue to raise its share of revenue, not just how you’re going to spend it.

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