Calls for compromise and tough reforms in order to fix the budget in 2015

SOME of Australia’s leading economists and budget analysts have a bold message for our politicians if they want to get our budget back to surplus.

QUIT the bickering and bite the bullet on tough reforms this year to repair the budget.

That’s the call from some of the country’s leading economists and budget analysts at the start of 2015.

But, with a surplus now not forecast until 2019-20, they’re not the only ones stressing the need for urgent reform.

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This week three former Prime Ministers, Bob Hawke, Paul Keating and John Howard, added their voices to the debate, all stressing the need make the hard calls.

Just five months out from the next budget, the government still has $30 billion in measures announced last May that it’s yet to secure.

It heads into this parliamentary year with the Senate crossbench remaining in the way of passing key welfare changes, university fee reforms and the revised GP co-payment.

However it’s not only stubborn Upper House members causing headaches for the government.

It also has to contend with structural challenges and falling revenue — including a recent five year slump in iron ore prices.

Pictured at the Southport Sharks AFL club at Parkwood Mr Craig James Chief economist at Comm Sec gives an economic update for Queensland.

Commsec Chief Economist Craig James believes there needs to be “proper discussions and give and take” between all the political players this year to achieve reform.

“The big problem here in Australia is getting an agreement,” he said, adding it’s not just about compromise between political parties, but also the states.

“What we’re seeing at the moment is constant bickering.

“Politics is the real enemy at present.”

Mr James believes there needs to be a “fundamental stocktake” of both spending measures, as well as tax — which will be looked at through the soon to be launched White Paper.

Thought needs to be given to shifting the burden away from direct forms of taxes to indirect taxes, he said, nominating the idea of raising consumption tax to 15 per cent or higher.

That push shouldn’t just come federally, but from state governments as well, he added.

Despite the focus on slumping iron ore prices, Mr James believes it’s not as important a factor.

“The bottom line is there are other issues at play”.

Securing the Future. How Australian can thrive in a volatile world. The Australian and the Melbourne Institute present their eighth joint economic and social outlook conference at the University of Melbourne. Professor John Daley

“The biggest problem [with the budget] is it doesn’t balance,” according to Grattan Institute CEO John Daly.

Due to years of deficits, younger households aged 25-34 will spend the next 20 years or so paying about $60,000 in taxes, he said.

Therefore, if Mr Daley had to nominate one spending area which needs to be addressed, “the most obvious” would be the age pension.

“It’s the largest single area of welfare,” he said.

Mr Daley believes eligibility requirements around the assets test need to be tightened.

On the tax side, reducing superannuation tax concessions could also help fill the budget hole.

While he admits looking into negative gearing “is not going to make a huge difference,” Mr Daley still thinks it would also be “worth doing”.

Saving money stock image.

With this year’s forecast deficit tipped to exceed $40 billion, former Prime Minister Bob Hawke thinks the answer lies in making Australia home to the disposal of nuclear waste.

John Howard and Paul Keating believe it also comes down to the message.

The former Liberal Leader this week claimed the public could be won over to unpopular, but necessary reforms, but only if they’re in the public interest and fair.

Coalition frontbenchers have already acknowledged this year they’ll have to improve their budget sales job.

With May looming, they’ll have to get cracking.

Originally published as Calls for compromise and tough reforms in order to fix the budget in 2015