Wednesday, June 13, 2012

A Goods and Services Budget

The NSW State budget was released yesterday with the usual fanfare.

Journalists were locked away for hours to pore over the documents and then breathlessly emerge like time travellers to frantically tweet and post articles telling us who the WINNERS AND LOSERS were, and the reasons that people would spend the next few days being very very outraged.

The budget is obviously a complex creation, and I'm not going to try and summarise the whole thing. If that's what you're after you'll find that information easily enough somewhere else.

I still view my task as a blogger to plug a gap that the mainstream media is leaving, and that's what I plan to do tonight.

So, what particular issue is it that is most deserving of further attention?

Cut from this SMH article
$5 billion??? That is an enormous number. To provide a sense of scale, that is an average of $1.25 billion per year, or more than 2% of the projected revenue for 2012/2013.

ALL gambling revenue in 2012-2013 comes to approximately $1.8 billion revenue. A similar amount will be received in royalties -  the amount paid by mining companies to the state for the right to mine our minerals (in NSW, mostly coal).

So I thought a closer look was required at how this enormous amount of money was stripped from our books, and why.

To start with, it's important to look at last year's budget to work out exactly how big the change was.
And this year?
The difference?
2012-2013: $1 424 000 000
2013-2014: $1 443 000 000
2014-2015: $1 394 000 000

That's a total of $4.3 billion just over the next 3 years - presumably the figure for 2015-2016 (not provided in last year's papers to enable a comparison) brings the total to $5 billion.

What do this years papers have to say about this?
Further on:
Chapter six of the budget papers tells us more about why the total GST collected by the Federal government is falling.

These reasons include:

  • People are saving more and spending less
  • The price of GST-exempt goods are rising faster than the prices for taxable goods, meaning we are spending a greater percentage on GST-free goods:
  • Finally, NSW's GST share has fallen from 30.9% to 30.7%
These changes are significant, and place enormous strain on an already stretched budget. The Coalition can't be blamed for it, but most punters are not going to understand or even be aware of the fall in GST revenue, meaning that whilst they won't be blamed for it they also can't use it an excuse.

How permanent the loss is also remains to be seen. Certainly the trend in food increasing in price is likely to continue.  Of course, that only serves to further highlight what utter folly exempting food from the GST was, but that is a battle lost.

This $1.25 billion per year will barely garner a headline, mostly because it is boring and no one is going to march anywhere because of it.

But it is important to contrast it to the viciously derided "Labour Expense Cap" that will result, apparently, in the loss of 10,000 jobs and result in compulsory redundancies. IT will save just $2.2 billion over 4 years, or approximately $500 million. 

THAT is just how significant this figure of $5 billion over 4 years is. And why it is a little amazing that it is not getting more attention.

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