Budgeting smarter, not harder: the failure of long-term thinking in the 2015 Intergenerational Report




CPD policy analyst Sam Hurley has responded to Treasurer Hockey’s call for a national conversation on Australia’s intergenerational challenges and opportunities in CPD’s new report, Budgeting smarter, not harder: the failure of long-term thinking in the 2015 Intergenerational Report

Hurley argues that the fiscal consolidation scenarios contained in the IGR are fanciful, with key planks of the Government’s proposed and currently legislated policies unlikely to stand the test of time.

‘Consolidation scenarios that rely on policies like freezing the age pension in real terms, cutting public hospital funding to states and retaining bracket creep simply bake in inequities and double down on problems that will have to be dealt with down the track.’

‘Overall, the Government’s approach succeeded in being harsh on those who can afford it least and shifted costs without solving problems. But the consolidation it forecast was illusory.’

Download Budgeting smarter, not harder

This report seeks to join that conversation on the ground staked out by the IGR. Like
the IGR, it begins by looking backwards – surveying the scorched earth of recent budget debates.

By incorporating a highly-politicised set of projections into the IGR, Government sought to highlight the mess it supposedly inherited, its successes so far, and the challenges ahead.

Budgeting smarter, not harder argues that the government should budget smarter, not harder – by developing measures that build on Australia’s existing policy strengths and smarts rather than directing harsh cuts to the safety net and public services relied on by the most vulnerable.

Insights from Budgeting smarter, not harder

Hurley identifies three areas that must be debated as part of a reform package, namely:

  • Means testing of the age pension;
  • Reforming superannuation tax concessions; and
  • Examining options for broadening the base of the GST.
Budgeting smarter chart

These measures could form the backbone of an approach to budget reform that strengthens the safety net, protects the overall progressivity of the tax and transfer system, and sets Australia up to tackle the real longer-term challenges, Hurley observes.

The report argues that the most worrying gap identified in the IGR is the one between the conversation it contains and the conversation we need to have about our longer term wellbeing. The discussion, Hurley suggests, must be expanded. ‘The IGR’s clear focus on long-term trends in population, participation and productivity is crucial – but it is not enough,’ Hurley writes.

‘Its formulaic nine-page foray into ‘Preparing for the Future’ is a poor substitute for a fully-fledged discussion of what matters to intergenerational wellbeing.’

Budgeting smarter, not harder highlights five issues that attracted only passing attention in the IGR but are fundamental to the sustainability of intergenerational wellbeing. These are:

  • Childhood development and community wellbeing;
  • Cities policy;
  • Changes in commerce and capital flows;
  • Climate change; and
  • Australia’s engagement with Asia.

Australia can shape its own destiny far more constructively than the IGR allows. It is time to get the conversation back on track.