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Grattan Newsletter 19 May 2015

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Budget Policy

This year’s Budget might be good politics but the long-term costs of a timid budget are insidious and they fall heavily on middle-income earners, young people and people who are not even born, write Grattan Institute CEO John Daley and Grattan Fellow Danielle Wood in The Australian. The Budget is likely to keep more people happy than the 2014 Budget, but it not only does nothing to address Australia’s long-term budgetary challenges, it is built on denial that we have a problem at all, write John Daley and Danielle Wood in The Conversation. Three days after the Budget, Commonwealth Treasury Secretary John Fraser made his only public statement on the Budget and Australia’s long-term economic outlook in conversation with John Daley at the State Library of Victoria. See the podcast.

The biggest change over the past two Budgets – the Commonwealth’s tearing up of agreements with the states over health and education funding – remains the least discussed, writes John Daley in The Australian Financial Review. States should claw back the money they lost with a new “Commonwealth hospital contribution replacement levy” on property.

There are other opportunities to reduce the Budget deficit without hurting the economy, and John Daley sets out some of them in The Australian Financial Review. At the State Library, John Daley and Danielle Wood hosted an expert panel discussion on the most attractive and realistic options for repairing Commonwealth and State revenues. Labor’s proposal to rein in superannuation concessions is a step in the right direction but what it leaves is still far too generous, writes John Daley in The Australian Financial Review. Wealthy people will continue to receive excessive tax benefits from super, and younger people and those on low and middle incomes will keep footing the bill.

It is also State budget season. Victorian Treasurer Tim Pallas could have made better use of the beautiful numbers in his first Budget, writes Danielle Wood in The Drum. The Treasurer would do well to heed the lesson his federal counterpart is now enduring: Victoria shouldn’t bank on the good times lasting. Western Australia has already spent the boom-time money and plans to repair the Western Australian budget rely on optimistic forecasts, as John Daley and Brendan Coates write in the Western Australian.

Transport

Tony Abbott promised to be the infrastructure prime minister, but the 2015 Budget has only three infrastructure announcements and two of them appear to be good politics ahead of good policy, writes Transport Program Director Marion Terrill. It is time to have another go at making big project decision-making more transparent.

Health

In the lead-up to the Budget the Government promised to go to “war” with pharmaceutical companies over high drug prices. Instead, it capitulated, writes Health Fellow Peter Breadon in The Australian. The Budget introduced some useful measures to improve cancer screening and access to online medical records but lacked a big picture agenda on primary care, writes Peter Breadon in The Conversation.

The Government has replaced Medicare Locals with Primary Health Networks in an attempt to better co-ordinate primary health care. The two documents that shaped the establishment of the Networks are strong on clinician engagement but weak on community engagement, writes Health Program Director Stephen Duckett in Health Voices, the Consumers Health Forum journal.

Productivity Growth

High fees are hurting the superannuation balances of Australians, taking at least $40,000 from the accounts of millions of people before they retire, according to the Productivity Growth Program’s latest report, Super Savings. Government action can drive them down, taking the pressure off individuals at retirement and off government pension payments. Both superannuation administration and investment fees are too high, and could be reduced if the Government ran a fee-based tender for the right to administer default funds, writes Program Director Jim Minifie in The Financial Review.

Energy

The Commonwealth Government consistently portrays a positive future for Australia as a global energy superpower in coming decades, yet that future only exists if global temperatures rise beyond two degrees, an outcome the Government has pledged to try to stop. It’s time to be consistent, writes Tony Wood in The Conversation.

The Commonwealth Government’s new target for emissions reduction, due to be announced by mid-year, could be a real opportunity to restart serious action on climate change, writes Energy Program Director Tony Wood in The Financial Review. But it requires a level of commitment from the Government that has been absent so far, and time is running out. The Climate Change Authority has already recommended that Australia adopt tougher targets of 19 per cent reduction in emissions below 2000 levels by 2020 and 30 per cent below 2000 levels by 2025. In this event at Melbourne University, Tony joined Shayleen Thompson, acting CEO of the Authority, and Erwin Jackson of the Climate Institute, to discuss why the Authority set these new targets and how Australia might meet them.

The Safeguard Mechanism introduced under the Emissions Reduction Fund to prevent unplanned rises in emissions has many weaknesses, but it could form the base of a new emissions trading scheme, writes Tony Wood in The Conversation.

Higher Education

In recent years the number of students in higher education has surged and so has the cost of the Higher Education Loan Program (HELP), putting pressure on the budget. The government is right to move to collect student loans from overseas debtors but of all possible reforms to the loan scheme, ending the debt write-off at death would do most to ensure it remains viable, writes Higher Education Senior Associate Ittima Cherastidtham in The Conversation.

Cities

Councils in Melbourne’s inner and middle suburbs are continuing to block new housing development, no doubt as a response to the wishes of vocal residents. The trend must stop if we are to keep Melbourne from becoming a divided city, writes Cities Fellow Paul Donegan in The Age.

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