So I was reading the Sydney Morning Herald yesterday when I came across this article. In actual fact, I was halfway through the article before I checked who had written it. And that was because it sounded like such propaganda to me. I wasn’t disappointed.
I’m not one that usually uses my blog as a platform for getting on my soapbox and having my 2 cents worth. One, because I’m not particularly good at constructing arguments (discussions) in written form and also because I don’t like how easily misconstrued your arguments can become. Added to this is my lack of research and some gross generalisations. However, I feel the need to at least highlight some of the downfalls of what is touted to be ‘good economic policy’ by those in government.
The basis of most economic theory is founded upon a 2-5 sector model of the economy. The Goverment sector has income in the form of taxes and expenditure in the form of unemployment benefits and other ‘public goods’. Costello freely admits that Government spending as a percentage of GDP has fallen in the 10 years to 2005-06. This is not surprising in the least.
As a university student, the most obvious example of reduced government spending is in tertiary education. I pay my uni fees upfront, because my parents can afford to. However, many of my friends choose not to, or are unable to pay the $2,000-3,000 fees required each semester. This leaves them with no choice but to leave uni with a HECS debt. For your average 3 year degree, this debt will be in the vicinity of $18,000. For others, this could blow-out to $30,000. In today’s terms, that’s a deposit on a house. Whilst I’m not an advocate of free tertiary education for all, I don’t believe that increasing the cost of tertiary education is in the interest of our country. Australia is currently in need of skilled workers in many industries. Whilst some of those vacancies can be filled by migrants, it is in our best interest to also foster those about to enter the workforce. Otherwise we will see that talent go elsewhere – overseas. In all honesty, that’s an issue which is entirely separate to my original one, so I really should leave it there.
What I really did want to point out is this: the Federal Government is responsible for spending on health care, infrastructure, education, defence, environmental protection and lots of things I can’t think of. We know that the Government has cut spending on health care, education and infrastructure. With the war in Iraq still in full swing, and a confirmed policy, spending on defence is committed for at least the next 5 years. Fine. But does anyone ever really question why it is that they pay for private health insurance, private school, tertiary education and pay tolls to use roads? Why is it, that the GST is considered a ‘State’ tax when it is clearly collected by the Federal Government and redistributed back to the States in an uneven manner? And why is it, that when the Government introduced the GST, which is a growth tax, that its spending has decreased?
What’s a growth tax you ask? Well, I remember back in Year 11 when I was studying 2U Economics, and the GST had yet to be introduced, I asked my economics teacher why our Government had set the GST rate at 10% instead of the 15% that had been proposed by the previous Liberal party (led by Andrew Peacock, if I recall correctly). The idea is that, as consumers spend more, the Government will collect more GST. As the economy grows, the Government’s tax intake will grow accordingly. Such that the GST rate does not need to be high, just at a rate where Government is receiving enough income to cover its expenses. That’s all well and good, except Australia’s economy has been growing for well over 10 years and in that time, we have seen a general deterioration in investment in this country by the Government. I guess I just don’t understand how people can welcome tax cuts, and yet turn around to say that they ‘pay their taxes’ and as such demand good health care, public transport and education. Quite simply, you can’t have it both ways. If you want to pay less taxes and you’re happy for the Government to keep its (apparently gigantic) surplus, then the flipside is that you *won’t* be receiving these basic services because they’re not being invested in. Moreover, if the economy does (and will) go into recession and people can no longer afford to pay for these services from the private sector, this is when we’ll see the public demanding that the Government put more into providing these services. What worries me is that for our generation, the damage has already been done.
P.S: I have come to realise two things about writing this sort of article:
I am no good at writing a structured argument in a blog, because when I blog I’m essentially writing my ’stream of consciousness’. That is, I write whatever comes into my head at that time and whilst I do filter for it to make sense, I’m usually just writing how I feel. To bring that style of writing to a topic that requires discussion tends to fall over. You can’t write what is essentially an essay in that way. After re-reading what I wrote, some of it doesn’t flow very well and frankly, I didn’t reach a conclusion. At the same time, I’m not sure there is one. I’m not sure anybody else really cares either.
Secondly, I became distracted halfway through writing this and hence why I am now posting this today, instead of yesterday when I started it. Don’t worry, we’ll be going back to the regular show tomorrow (or later today).
Edit: As a follow-up, you may like to read this article by Ross Gittins and this letter to the editor from today’s SMH.
