“It’s budget time girls, which means I’ve got lots of work,” I replied. “What does a budget do Daddy”? “Ummm…..,” I hesitated.
Good question and one which, unfortunately, if every toddler around Australia understood, would probably be spitting their dummy over.
So, let me make this simple, knock seven zero’s off the budget and let’s talk about it like a household budget: Household Australia.
Last year, Household Australia made $43,350. But, we spent $45,970, meaning we had to put around $2,940 on the credit cards just to pay the bills and keep food on the table.
$2,940 doesn’t sound like a lot, but unfortunately we already have $53,700 on the credit card from the past few years when we couldn’t make ends meet. Sounds scary? Not even close. Household Australia is getting old and thinking of retiring. Its health care costs are going to go up and there is not enough in the super account.
Every family around Australia who is trying to make ends meet, wondering whether they can assist their children in pulling together a home deposit or questioning whether they have enough to retire knows that this household budget situation is a totally unsustainable situation.
The reality is that without winning lotto, Household Australia will be working well into retirement, living very frugally and will not be providing any support, or leaving much for their kids.
Many Australian households unfortunately face prospects very similar to this and all would give up an awful lot to avoid finding themselves here.
So why then do all sides of government seem resigned to saddle our children with exactly the same problem, anchored around a growing debt burden?
The $2,940 on our credit card is the $29B deficit we hear so much about. The $53,700 is Australia’s $537B gross debt which, incredibly, is now the centre of debate about whether the limit for this should be raised to $600B.
On-top of all of this there is the unfunded liability, the amount the government thinks it will need to spend into the future to pay out superannuation obligations, welfare entitlements and the healthcare needs of an aging population. This is many multiples of our current debt level.
So, what is the conversation we really need to be having each and every budget? First, I don’t want to hear about a balanced budget.
A balanced budget means we are not living beyond our means but, it also means we are not paying back this mountain of debt. I want to hear about a spectacularly unbalanced budget, delivering a surplus that will actually let us pay back what we owe.
Second, I don’t want to hear about good debt or bad debt and I really don’t care who incurred this debt. I want to hear about the plan for no debt, or at very least a sustainable level of debt.
I want to ensure that politicians and voters are acutely aware that the choices that are being made, budget after budget, announcement after announcement, are a conscious decision down one path that assumes our kids can fix up the financial nightmare we are leaving for them.
And to complete this nightmare, fixing this mess will be a lot harder in the future than it currently is now. The numbers will be much bigger and the world economy arguably more competitive.
There is also every chance the political cards will be stacked higher against them as the mass of baby boomers vote to protect a comfortable retirement.
Would any parent ask their kids to do this for them? No. Are politicians asking our kids to do this for them? Absolutely.
We have some options though, and there is some good news. The situation Australia finds itself in nowhere near as bad as the situation in the US, the UK or Japan.
Also, history shows that countries, with strong leadership and rational decision making can turn this situation around remarkably quickly. It’s simple maths: increase the amount of money coming in and reduce or redirect the amount you are spending. Just look across the ditch at the recent success of New Zealand.
But this math requires hard won economic reform and structural change, not just tinkering around the edges. To break this maths problem down further. On the revenue side, there is a plan already sitting there in the form of the Henry tax review. It could be broadened and refined, but it remains an incredibly positive first step.
On the expenditure side it is critical to have a clear examination of how we approach social security, challenge the efficiency of our current systems and a focus on spending that reaps future returns.
I’m told by people that understand politics that these topics are too sensitive, that governments risk losing office should they venture too far into this territory. But this is a big problem that isn’t going away and it will continue to hurt young Australians well into the future.
So as the Budget campaign departs Canberra one has to think: if the toddlers of Australia were doing the doorstops, commanding column inches and twittering their tweets they would sound absolutely incensed, drowning everyone out with their protests. And it would be totally justified.
Rob Tyson is a Director of Economics and Policy at PwC, Canberra and the father of two rambunctious girls. He is 34.
