Treasurer Joe Hockey.
Treasurer Joe Hockey. Photo: Alex Ellinghausen



This is the government of cry wolf.

First we had the pre-election Debt-and-Deficit cry. Now we've got the Iron-Ore-Crash cry and The-Senate's-on-the-Loose cry.

The
Debt-and-Deficit crisis was so bad that the Coalition did absolutely
nothing for months after being elected – no mini-budget, no austerity
measures. It just tottered along until the budget and then proposed a
series of grossly inequitable measures.

Now Treasurer
Joe Hockey has confirmed what anyone who looked at the
Coalition's promises always knew – you can't remove two taxes, maintain
expenditure for all major programs and cut the budget deficit at the same time.

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He also now knows that estimating government revenue and expenditure
and getting the budget into surplus is not quite as easy as he thought
when he poured scorn on former Treasurer Wayne Swan for his efforts.

In
addition Hockey wants us to believe that we won't see a surplus in his
term simply because he's copped low iron ore and coal prices and an
obstructionist Senate. Well, let's take a look at that.    

His
Mid-Year Economic and Fiscal Outlook statement tells us part of the
story. But it's not the whole truth. It states that iron ore prices,
currently at $US63 a tonne, are around the lowest level since 2009. That's true.

But
what it doesn't say is that 2009 was a year of historically high
prices. When Labor came to government in December 2007 the iron ore
price was only $US38 a tonne. A year later it was $60 a tonne, a price
well below that at the start of this financial year. 

Not
only that, we must also keep in mind that this year exporters have
dramatically lifted the volume of iron ore exports, raising overall
revenue. 

There are a few other little things Hockey doesn't draw
attention to, though they're in the MYEFO documentation. You recall that
evil Carbon Tax. Well this financial year the government will happily
collect $1.8 billion from it - $105 million more than expected in its
budget. On top of that it's also going to collect a handy $40 million net from the evil Minerals Resources Rent Tax, which it let run until September 30.

But the biggest deceit in ministers' statements is the implication that they're dealing with a major economic crisis. They're not.

This
is not 2008.  We are not threatened with a run on the banks, requiring
immediate government action.  Worldwide confidence has not collapsed,
with major companies going broke. China is not about to introduce a 4
trillion renminbi ($800 billion) stimulus package to help keep the world's economy afloat.

Labor dealt with that crisis, keeping Australia out of recession and preventing a blowout in the deficit flowing from rising social services payments and falling tax receipts.

The
MYEFO assessment is that the global economy is recovering from the
financial crisis but at a slower pace than expected at budget time. 

For Australia the only significant thing that has happened in the global arena is that prices for our coal and iron ore exports are back to normal.

In
the technical jargon, our terms of trade (that is our export prices
related to our import prices) are now at about the level they were in
2003 and are still well above their level for the past 30 years of the
20th century. And that's a crisis!

No, here's the
crisis. We have a bumbling government which took its pre-election
instructions from the mining industry and has since done its bidding. It
got rid of the mining tax and it got rid of the carbon tax. Nobody
likes being taxed.  But if we must have taxes, it's best to tax
something we don't like – carbon pollution – than something we all need,
say food.

Given the sharp rise in the volume of iron ore
exports, a tonnage export levy would be a simple and more assured way of
raising revenue than the complex resources rent tax that Labor introduced and the Coalition abolished. 

But this is not something the business representatives who are trotted out to comment on the economy will embrace. They are obsessed with mining exports. (There is much lucrative work to be had as a consultant to the mining industry.) 

Local
production and import-replacement doesn't matter. So if Queensland
produces $20 billion worth of export coal it's of great importance. But
when Victoria produced $20 billion worth of oil, which we consumed in
Australia and generated billions in government revenue, it was barely worth mentioning.  

When
we put mining into perspective, we find that from World War II until
2009 its share of total employment was less than 2 per cent and rose
only to a peak of 2.4 per cent between 2009 and 2014.  At its height mining made up only 12 per cent of GDP.

The mostly foreign-owned large iron ore companies would squeal blue murder if a political party proposed an export levy and it's not a policy option this government is about to pursue.

Nor it seems is it keen to join the international campaign to tackle tax avoidance by multinational companies that shift billions of dollars in profits to tax havens.

It
also refuses to consider another reasonable revenue option – removing
at least some of the tax concessions for superannuation.  The MYEFO
shows that this year alone the concessions are worth $36.25 billion. 

One
proposed change is that the government should tax the compulsory
superannuation contributions as income, rather than at the concessionary
15 per cent rate. By some estimates this would generate a healthy $12
billion a year and just about fix the short- and medium-term deficit
problem in one hit. But it would of course reduce the
superannuation future retirees would have accumulated and thus
potentially increase pension payments. 

The real economic and political problem the government faces is rising unemployment, a problem for which Hockey offers no answer. 

He's simply going to let the "economic stabilisers" (such as increased social services payments) continue, because to do otherwise would send the economy into recession.