Tuesday, June 19, 2012

Get real, you can't have it all - Parkinson

The next election will be austere if Treasury boss Martin Parkinson gets his way.

He told the Committee for the Economic Development of Australia in Canberra last night Australians to get real and realise they couldn’t “have it all”.

Ageing and rising expectations were likely to put “enormous pressure” on budgets. The taxation base was “weaker than had been imagined in the mid-noughties”.

“Much of the debate assumes we can have it all, with people simultaneously believing we can maintain or even reduce taxation levels while keeping the current range of social policy interventions with limited targeting and self-provision – and indeed adding to this with a long list of worthy, but expensive, new proposals,” he told the conference.

“The key point is that choices need to be explicitly debated. The examples of the United States and Europe, where decisions have repeatedly been put off in good times, are not models to emulate.”

Australia needed a “sensible discussion on what we expect governments to provide, and the tax system needed to support these expectations.”

Treasury will soon publicly release its methodologies for costing political promises, giving the community and political parties a clearer idea of how it evaluates policies. It was severely criticised by the Coalition after the 2010 election when it found what it said were up to $10.6 billion of errors in costings the Coalition had had certified by a two Perth accountants... The Coalition said the accountants were unable to replicate the Treasury’s methods because it had not made them public.

Treasury will also make the methodologies available to the new Parliamentary Budget Office which will independently cost political promises on request.

Dr Parkinson told the conference the typical Australian voter was ageing. By 2050 almost one quarter of Australians would be aged over 65.

“It is unclear what impact this will have on future Australian policy debates, but the experience in Europe and Japan hardly suggests that ageing populations are enthusiastic advocates of structural reform,” he said.

Australia’s economic success had been built on the “three pillars” of a floating exchange rate, an independent monetary policy and budget policy that aimed at running surpluses over the business cycle to build national savings.

“In the current environment of volatility and uncertainty with what can seem overwhelming global and domestic pressures, some have been tempted to suggest dismantling or undermining this framework,” Dr Parkinson said.

“I refer to a range of views – from questioning the value of the Reserve Bank’s current mandate, proposing a return to industry protection or exchange rate intervention, to significant restrictions on foreign investment while ignoring the role of foreign capital in raising Australian living standards.”

“It is our frameworks that have stood us in good stead through the global financial crisis and recent period of structural change, and they will continue to do so. And if you don’t believe this, ask yourself the following question: what would Australia look like today had any one of those policy pillars been missing in recent years?”

Dr Parkinson said he supported greater public reporting of foreign holdings of agricultural land, saying it could help dispel “myths and uncertainties”.

In today's Sydney Morning Herald

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