tag:theconversation.com,2011:/au/topics/myefo-2015-23391/articlesMYEFO 2015 – The Conversation2016-03-01T05:36:58Ztag:theconversation.com,2011:article/551702016-03-01T05:36:58Z2016-03-01T05:36:58ZFactCheck: has Australian government spending as a share of GDP been at GFC levels since last election?<blockquote>
<p>Since the election, this government has had spending as a percentage of GDP at GFC levels. <strong>-– Shadow treasurer, Chris Bowen, <a href="https://cdn.theconversation.com/static_files/files/17/55170-2016-02-26-labor-media-release-media-release-labor-chris-bowen-2016-02-26.pdf?1518058726">media release</a>, February 17, 2016.</strong></p>
</blockquote>
<p>During an election year, the focus is once again on the federal <a href="http://www.budget.gov.au/2015-16/content/myefo/html/03_part_3.htm">budget deficit</a>. According to the most recent estimate in the government’s Mid-Year Economic and Fiscal Outlook (MYEFO), the <a href="http://www.budget.gov.au/2015-16/content/myefo/html/03_part_3.htm">deficit</a> is estimated to be around A$37.4 billion for 2015-16.</p>
<p>One of the main questions is whether the current and forecast deficits are due to not enough tax revenue or too much spending, or both.</p>
<p>Labor’s shadow treasurer, Chris Bowen, told journalists that the government has had spending as a percentage of Gross Domestic Product (GDP) at global financial crisis (GFC) levels since the last federal election, which was in 2013.</p>
<p>Is that right?</p>
<h2>Checking the source</h2>
<p>When asked for official data to support his assertion, Bowen’s spokesman referred The Conversation to the <a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">MYEFO 2015-16</a>, saying:</p>
<blockquote>
<p>Here’s the official data for the purpose of comparison.</p>
<p><a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">MYEFO 2015-16</a> (most recent data available)</p>
<p>Payments as a % of GDP</p>
<ul>
<li>2009-10: 26.0%</li>
<li>2014-15: 25.6%</li>
<li>2015-16: 25.9% (estimate)</li>
</ul>
</blockquote>
<p>Those numbers are found in Table D1 of the MYEFO, which show general government <em>cash payments</em> as a percentage of GDP. Here’s how those figures look in a chart.</p>
<iframe src="https://datawrapper.dwcdn.net/MOgvq/2/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="400"></iframe>
<p>Bowen’s spokesman also referred The Conversation to a September 2015 <a href="http://www.abc.net.au/7.30/content/2015/s4318562.htm">interview</a> in which treasurer Scott Morrison said that:</p>
<blockquote>
<p>… we’ve got 26% or thereabouts of GDP of government expenditure. Now that is at the level of what we were at in the GFC. </p>
</blockquote>
<h2>Cash payments vs expenses</h2>
<p>If you’re using the cash payments data in Table D1 of MYEFO, then Bowen’s statement is in the right ballpark – as long as you’re comparing with 2009-10 spending to represent “GFC levels”.</p>
<p>Bear in mind, though, that cash payments for the current financial year are an estimate only. Pedants will also note cash payments did, in fact, drop slightly as a percentage of GDP in 2014-15.</p>
<p>And as <a href="https://theconversation.com/factcheck-is-australian-government-spending-as-a-share-of-the-economy-falling-53962">this previous FactCheck on government spending</a> explains, it may be better to measure expenditure by checking the expenses data in Table D6 of MYEFO. That data shows expenditure when the expense occurs rather than when the cash payment is made (which is what Table D1 shows).</p>
<p>The expenses data detailed in Table D6 of MYEFO show expenses as a percentage of GDP as follows:</p>
<iframe src="https://datawrapper.dwcdn.net/Xodqt/3/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="400"></iframe>
<p>Still, Bowen’s statement is broadly correct – as long as you remember that the 2015-16 figures are an estimate only and you take 2009-10 as your reference point for “GFC levels”.</p>
<h2>What do we mean by “GFC levels”?</h2>
<p>The <a href="http://www.sbs.com.au/news/article/2009/09/15/gfc-timeline">global financial crisis began in late 2007</a> and continued throughout 2008. A literal interpretation of Bowen’s statement could compare current government spending with spending levels in 2007-08, when the GFC was beginning and when expenses as a percentage of GDP was at 23.8%.</p>
<p>The effects of the GFC really began to take hold in late 2008-09.</p>
<p>Former prime minister Kevin Rudd launched the A$42 billion <a href="http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/009.htm&pageID=003&min=wms&Year=&DocType=0">Nation Building and Jobs Plan in February 2009</a>, and by 2008-09 expenses as a percentage of GDP was at 25.8%.</p>
<p>In other words, both Bowen and Morrison have compared current expenditure with a period of time in which the federal government was spending heavily in an effort to stimulate the economy in a time of global crisis.</p>
<h2>The economic context</h2>
<p>While comparing spending between years is important, it can be a misleading snapshot when viewed without further context.</p>
<p>It’s worth noting that current government spending is, in part, due to commitments and policies of previous governments. The Coalition government is, to some degree, locked in to policies that began under their predecessors, such as the Gonski education funding agreements, the National Disability Insurance Scheme and the National Broadband Network.</p>
<p>The 2015-16 Budget also includes <a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">interest repayments</a> of A$11.166 billion on government debt that resulted from the huge increase in government borrowing to fund the previous government’s stimulus spending.</p>
<p>More broadly, the Australian economy has been <a href="https://theconversation.com/australias-economy-is-slowing-what-you-need-to-know-47036">growing since the 2013 federal election, but at a slower rate</a> than its long-term average rate of economic growth. </p>
<p>This means that the unemployment level has been higher recently than it was during the strong growth years. That reduces tax revenue for the government and means the government has to spend more on unemployment benefits and concessions.</p>
<p>But the economy is growing – the most recent annual figure from the Australian Bureau of Statistics puts <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">economic growth</a> at 2.3%. This compares to 0.3% during the <a>financial year 2008-09</a> – the worst growth year following the global financial crisis (GFC).</p>
<h2>Verdict</h2>
<p>Chris Bowen’s statement that government spending as a percentage of GDP since the last federal election is at GFC levels is correct – if you define “GFC levels” as 2009-10. This is the year that GFC spending programs were at their largest.</p>
<p>However, it’s important to note that government spending in part reflects the policy commitments and borrowings of previous governments. <strong>– Anne Garnett</strong></p>
<hr>
<h2>Review</h2>
<p>The author’s arguments are correct. The statements around the economic context are very relevant here. If we adjust for the state of the business cycle (which is tricky to do) and for interest, then it could be argued that spending is down. But with <a href="https://theconversation.com/budget-explainer-debts-and-deficits-is-australia-really-the-worst-40086">debt up</a>, interest payments will be up for a while. So if we really want to tackle deficit and debts, then we need to get other spending under control or raise revenue. <strong>– Mark Crosby</strong></p>
<hr>
<p><div class="callout"> Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/55170/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anne Garnett has received funding from the ARC and NCVER in the past.
</span></em></p><p class="fine-print"><em><span>Mark Crosby does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shadow treasurer Chris Bowen told journalists that since the last federal election, the government has had spending as a percentage of GDP at GFC levels. Is that right?Anne Garnett, Senior Lecturer in Economics, Murdoch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/548342016-02-21T19:02:44Z2016-02-21T19:02:44ZBlood money: pathology cuts can reduce spending without compromising health<figure><img src="https://images.theconversation.com/files/112034/original/image-20160218-1264-hy6gi6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">More than three in every four Medicare-billed pathology tests are analysed by one of two big corporations: Sonic Healthcare and Primary Health Care.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-371602273/stock-photo-nurse-collecting-a-blood-from-a-patient.html?src=0TcOiQ0DCgrrETgH0IhSXw-7-9">Soda_O2/Shutterstock</a></span></figcaption></figure><p>The <a href="http://www.budget.gov.au/2015-16/content/myefo/html/index.htm">Mid-Year Economic and Fiscal Outlook</a> (MYEFO) set the cat among the pathology pigeons late last year. One of the government’s flagged changes, estimated to save around A$100 million a year, was <a href="https://theconversation.com/myefo-2015-at-a-glance-52298">to abolish</a> the bulk-billing incentive Labor introduced in 2009. </p>
<p>The industry mobilised, threatening to charge consumers significant out-of-pocket co-payments for pathology tests for blood, tissue and other bodily fluids. The threatened increases were well in excess of the A$1.40 to A$3.40 cut to the bulk-billing incentive, which companies received for not charging patients out-of-pocket charges. </p>
<p>A campaign was organised, focusing on the <a href="http://www.mamamia.com.au/medicare-pap-smears-not-free/">increased cost of pap smears</a>. It included a <a href="https://www.change.org/p/health-minister-susan-ley-keep-pap-smears-and-pathology-services-free">petition</a> supported by more than 200,000 people. </p>
<p>Health Minister Sussan Ley escalated her rhetoric, pointing out that Medicare was not <a href="http://www.health.gov.au/internet/ministers/publishing.nsf/Content/health-mediarel-yr2016-ley001.htm">designed</a> to be a guaranteed bankable revenue for corporations, nor a taxpayer-funded payment to cross-subsidise pathology companies for other costs of doing business. </p>
<p>The minister noted:</p>
<blockquote>
<p>… complaints from stock exchange-listed pathology companies about this MYEFO decision have revolved around impacts on ‘shareholders’ – not patients – exposing what is really motivating these criticisms.</p>
</blockquote>
<p>The MYEFO-induced furore about bulk billing provides context for a wider “root and branch” review of pathology payments. As the Grattan Institute’s report, <a href="http://grattan.edu.au/home/health/">Blood Money</a>, published today, shows, there is money to be saved in pathology. This can be done in ways that don’t affect patient access to needed tests.</p>
<h2>Industry profit</h2>
<p>The Blood Money report addresses several questions. First, why is bulk billing on the agenda for pathology tests at all? All out-of-hospital pathology tests should be bulk-billed. </p>
<p>There should be no “incentive” for pathology corporations to bulk-bill. Rather, bulk-billing should be a requirement to participate in this market. </p>
<p>The place of co-payments in health care is highly contested. Those who argue for co-payments say they help to reduce demand, particularly for frivolous use of health care. </p>
<p>But consumers almost never initiate pathology services. Professionals order tests to assist them to make a diagnosis or to track a patient’s condition. In those circumstances, there is no theoretical argument to use financial disincentives for consumers, in the form of co-payments, to limit demand. </p>
<p>Industry consolidation and technological advances have completely reshaped the pathology industry over recent decades. But the way governments pay for pathology services hasn’t kept up. </p>
<p>Fee-for-service was originally a way for individual consumers to pay their medical practitioner for professional services. Health insurance then evolved to provide insurance for those costs. Medicare, when it was introduced, followed the same model. </p>
<p>But what was suitable for cottage-industry medical practice is not necessarily appropriate as a payment system for big corporations. More than three in every four Medicare-billed pathology tests are analysed by one of two big corporations: <a href="http://www.asx.com.au/asx/research/company.do#!/SHL">Sonic Healthcare</a> and <a href="http://www.asx.com.au/asx/research/company.do#!/PRy">Primary Health Care</a>. Both companies suffered a share price drop when the MYEFO cuts were announced.</p>
<p>Many parts of the pathology schedule are now highly automated. The large corporations benefit from economies of scale as the costs of an additional test to run through an analyser are trivial. But Medicare pays the same for the tests processed by the machine for the thousandth patient as it does for the first.</p>
<h2>Same service, lower costs</h2>
<p>A <a href="https://ama.com.au/sites/default/files/documents/Final_Discussion_Paper_Review_of_Pathology_Services_1_March_2011.pdf">2011 discussion paper</a> on pathology funding proposed that Medicare negotiate with providers to share the benefits of technological change by discounting the schedule for high volumes by, say, 5%. The Commonwealth Department of Health should dust off this paper and use it as a basis for proper commercial negotiations with the big pathology corporations. </p>
<p>The bulk-billing incentives should be in the mix as well. Serious negotiations of that kind would save taxpayers about A$175 million per year; A$100 million from bulk-billing incentives, the balance from a 5% trim.</p>
<p>The government should also consider going to tender for the right to bill Medicare for out-of-hospital pathology. In other words, companies would bid to be involved in the out-of-hospital pathology market by offering to provide tests at particular prices. </p>
<p>The tender specification might incorporate provisions that the price to be paid by government goes down after a particular number of tests is performed. </p>
<p>A pilot scheme of tendering should be established in Victoria for 2017, with the scheme allowing for multiple successful winning bids to ensure continued competition in the pathology marketplace. Tenders could be rolled out in other states after an evaluation of the Victorian experience.</p>
<p>Tendering should generate greater savings than the 5% trim. </p>
<p>Tendering introduces price competition into the pathology market. Rather than companies responding to a government-regulated price, they would have to specify the prices at which they think they can operate. If a company bids at too high a price, they may not be among the group of successful tenderers. </p>
<p>The <a href="https://ama.com.au/sites/default/files/documents/Final_Discussion_Paper_Review_of_Pathology_Services_1_March_2011.pdf">2011 pathology discussion paper notes</a> strong savings from other departments tendering pathology services: </p>
<ul>
<li><p>Victoria has tendered out most of its regional
public pathology services for more than 20 years. Negotiated prices are 65-75% of Medicare fees, equating to a 10-20% saving.</p></li>
<li><p>Defence tendered pathology services for military personnel. It settled at 80% of Medicare fees, without patient initiation fees. This was equivalent to a 5% discount. </p></li>
</ul>
<p>Neither paid the equivalent of a bulk-billing incentive. Further savings, on top of a negotiated trim, could therefore be achievable.</p>
<p>There are savings to be made in pathology payments and they should come from narrowing the margins of profitable corporations, not from cutting services to the ill and vulnerable. </p>
<p>In a time of increasing deficits, the government must prioritise reforms that reduce spending without compromising the health of Australians. Pathology payment reform provides an opportunity to do this – an opportunity that should not be missed.</p><img src="https://counter.theconversation.com/content/54834/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Industry consolidation and technological advances have completely reshaped the pathology industry over recent decades. But the way governments pay for pathology services hasn’t kept up.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/524392015-12-16T08:23:01Z2015-12-16T08:23:01ZScott Morrison’s budget car in desperate need of a petrol bowser<p>There was a very revealing moment in Scott Morrison’s interview on Tuesday’s ABC 7.30 program about this week’s budget update.</p>
<p>Presenter Leigh Sales was pressing Morrison about the gap between the Coalition’s budget “emergency” debt-and-deficit rhetoric of a couple of years ago and the current situation, when the numbers are worse.</p>
<p>After dodging around, talking about the big job, global headwinds, the need to be realistic about the challenges, Morrison finally became frustrated with Sales trying to get him to address the change in rhetoric:</p>
<blockquote>
<p>Well, you’re asking me about politics Leigh. You’re asking me about politics. What I’m talking about is what is actually happening with the budget.</p>
</blockquote>
<p>Morrison’s approach is the clean slate one or, in different language, when the past is inconvenient it is another country. Never mind what the Coalition said before. Just listen to what it is saying today.</p>
<p>Of course different rules are applied to Labor. The Coalition has a good memory for the former government’s economic faults – though currently it is a bit harder to sound convincing about them, given this government’s own failures.</p>
<p>If in 2013 we had a “budget emergency” when Tony Abbott in his budget reply was lamenting a “$20 billion deficit”, what do we have now, with the deficit revised in the update to A$37.4 billion for this financial year?</p>
<p>Certainly, the government would say, not an “emergency”. Not that we had one in 2013, according to many economists at the time.</p>
<p>What we have, in Morrison’s folksy language, is akin to a pleasant family car trip:</p>
<blockquote>
<p>It’s like going off on that summer holiday: you get in the car; you know where you’re going; you don’t put the passengers at risk; you get to your destination safely. Of course there will be people chiming in from the back seat like my kids always do, saying, ‘Are we there yet? Are we there yet?’ Well, we are going to get there and we’re going to get there with everybody on board.</p>
</blockquote>
<p>If Wayne Swan or Chris Bowen had had us carefully driving along toward the elusive surplus, kids in the back, they’d have been ridiculed. That surplus has retreated further from the Coalition than it did from Labor. Anyone spy a petrol station?</p>
<p>One alarming aspect of Morrison’s refusal to be responsible for the Coalition’s past rhetoric is that it implies that he won’t necessarily accept the government being held to account for what is said now, or in the future.</p>
<p>So if he and his colleagues make certain claims and predictions at election time, which then turn out to be wrong – well, that was then, wasn’t it? Morrison will have moved on to whatever might become the new reality.</p>
<p>Yet that makes a nonsense of an election campaign. We all accept that things change over time. But if politicians can wipe away what they previously said so unequivocally, taking no responsibility for it, they are once again trashing the trust that is needed for a well-functioning political system.</p>
<p>Another part of Tuesday’s comments was decidedly odd.</p>
<p>Growth forecasts this financial year and next have been downgraded, but in their joint statement Morrison and Finance Minister Mathias Cormann said:</p>
<blockquote>
<p>The inclusion of this more realistic outlook should be seen as a statement of confidence.</p>
</blockquote>
<p>“More realistic”? Was the outlook in the budget not realistic at the time, or did it become unrealistic?</p>
<p>To declare that including what is a more pessimistic outlook should be regarded as a statement of confidence is bizarre. Anyway, what was the alternative? Not to include it?</p>
<p>Morrison has an inflated view of his, and the government’s, ability to control debates. We’ve seen this in the tax debate, where he wanted initially to keep public attention on the problem of income tax rates and bracket creep without focusing too early on the (nasty) solutions, but inevitably the talk quickly centred on what might happen to the GST.</p>
<p>With the budget update, Morrison now finds he and his colleagues potentially facing new battles with the Senate over some of the cuts that have been announced. And this when he will be absorbed in getting a tax package together.</p>
<p>Morrison came to the treasurer’s job with his own side and commentators predicting he would be a great deal more effective than his predecessor Joe Hockey.</p>
<p>Many would judge he has not so far lived up to the high expectations of him, partly because he thinks he can sell over-simplified narratives. It is still early days. Next year the real pressure will be on.</p>
<iframe id="audio_iframe" src="https://www.podbean.com/media/player/3tvhb-5b018b?from=yiiadmin" data-link="http://www.podbean.com/media/player/3tvhb-5b018b?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/52439/count.gif" alt="The Conversation" width="1" height="1" />
There was a very revealing moment in Scott Morrison’s interview on Tuesday’s ABC 7.30 program about this week’s budget update. Presenter Leigh Sales was pressing Morrison about the gap between the Coalition’s…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/523822015-12-15T08:53:15Z2015-12-15T08:53:15ZShort shelf life: the Book Council of Australia is stuffed back on the rack<figure><img src="https://images.theconversation.com/files/105999/original/image-20151215-23166-18anpen.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The BCA was probably doomed the moment Tony Abbott announced its creation out of Australia Council funds.</span> <span class="attribution"><span class="source">Nastya Shershneva</span></span></figcaption></figure><p>In the 2006 throwaway romantic comedy <a href="http://www.imdb.com/title/tt0427229/">Failure to Launch</a>, Matthew McConaughey plays a funny, handsome, promising man who, deep into his thirties, just can’t leave home. Eventually, it turns out that he had suffered a calamitous loss many years before when his fiancée died. He was doomed from the outset; after the bad start, his pecker and promise are all gone. </p>
<p>So it is with the <a href="https://theconversation.com/the-book-council-of-australia-well-its-better-than-nothing-47549">Book Council of Australia</a> (BCA), which was long dreamed of – since 2010 in fact – by a kabal of publisher, bookseller, agent, and author organisations, and eventually endorsed by Labor, and then <a href="http://www.smh.com.au/entertainment/books/tony-abbott-announces-new-literary-body-the-book-council-of-australia-20141208-122vpd.html">announced by Tony Abbott</a> at last year’s Prime Minister’s Literary Awards. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/105997/original/image-20151215-23202-108741r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Caleb Roenigk</span></span>
</figcaption>
</figure>
<p>But the day after this year’s PM’s Awards, the A$6 million to fund the BCA for its first three years has slipped back into general revenue as part of the <a href="http://www.budget.gov.au/2015-16/content/myefo/html/11_appendix_a_expense.htm">MYEFO budget statement</a>. The BCA, rather than launching, has been sent back to hangar.</p>
<p>The Council’s fate was perhaps soured from the start when – against industry wishes – it was funded by <a href="https://www.attorneygeneral.gov.au/Mediareleases/Pages/2015/ThirdQuarter/11-September-2015-Book-Council-of-Australia.aspx">A$6 million</a> taken from the budget of the Australia Council. </p>
<p>It was dirty money, and it became dirtier still when it turned out that this was just a precursor to Senator George Brandis’s A$104.7 million attack on the Australia Council budget in May in order to establish a ministerial <a href="https://theconversation.com/au/topics/national-programme-for-excellence-in-the-arts">National Program for Excellence in the Arts</a>. </p>
<p>Eventually, in September, when Brandis, in one of his dying acts as arts minister, empanelled a Book Council Board, under the chairpersonship of Melbourne University Press’s director Louise Adler, further indignity was heaped upon the BCA. </p>
<p>Melbourne literary activist Sam Twyford-Moore <a href="http://www.theguardian.com/culture/2015/sep/18/nick-cave-among-360-australian-writers-to-call-for-george-brandis-to-be-replaced-as-arts-minister">engineered an industry campaign</a> against the Council’s provenance, structure, and board appointments. Louise Adler in particular was targeted. Twyford-Moore called out the big guns: John Coetzee and Nick Cave, alongside 350 others, signed a public letter of opposition.</p>
<p>Since then nothing official has been heard about the BCA until the one-line detail in the <a href="https://theconversation.com/myefo-2015-at-a-glance-52298">MYEFO papers</a> today. But few seem to be mourning its passing. </p>
<p>Former President of the Australian Publishers Association <a href="https://theconversation.com/profiles/peter-donoughue-128936">Peter Donoghue</a> seemed to sum up industry feeling in a Facebook post today:</p>
<blockquote>
<p>The now abolished Book Council of Australia was always a bullshit organisation of dubious “industry policy” Kim Carr provenance, funded with stolen money, and a play pen for your standard book trade enmities – big players versus small; established versus emerging; local versus global; authors versus everybody else, etc – so I for one rejoice in its demise. The pity is the money wasn’t returned to its rightful owner, the Australia Council.</p>
</blockquote>
<p>The demise of the BCA leaves government policy in the literary sector uncertain. Arts Minister <a href="http://www.smh.com.au/entertainment/art-and-design/book-council-of-australia-to-be-scrapped-as-525-million-cut-to-arts-revealed-in-myefo-20151215-glnwza.html">Mitch Fifield is promising</a> to “consult widely with the literary community about alternative sector-led mechanisms for representation and promotion”, but for now conservative governments are leaving behind them a trail of acts that some interpret as hostile to literature, including: </p>
<ul>
<li>the <a href="https://theconversation.com/queensland-announces-literary-award-winners-no-thanks-to-newman-9322">cutting of funding</a> for literary awards in Queensland <br></li>
<li>the removal of <a href="http://www.killyourdarlingsjournal.com/2015/12/apples-and-oranges-the-false-economy-of-the-parallel-importation-debate/">territorial copyright protections</a> <br></li>
<li>cuts to the <a href="https://theconversation.com/philosophy-vs-evidence-is-no-way-to-orchestrate-cultural-policy-42487">Australia Council</a><br></li>
<li>and industry reports of imminent cuts to small literary organisations in WA. </li>
</ul>
<p>At the very least the conservatives seem ambivalent about supporting literature’s potential to arm any of their opponents in the renewed culture wars.</p>
<p>The BCA was probably doomed the moment Tony Abbott announced its creation out of Australia Council funds. But whether government-funded or otherwise, the sector, after the demise of the <a href="https://overland.org.au/previous-issues/issue-218/when-they-come-to-save-books-what-will-they-save/">Literature Board</a> in 2014 and the BCA today, still badly needs a body to advocate for literature and to advise government on policy settings.</p><img src="https://counter.theconversation.com/content/52382/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stuart Glover has served as an advisor to the Australia Council.</span></em></p>The Book Council of Australia – announced by Tony Abbott just over a year ago – was today scrapped. But we still need a body to advocate for literature and to advise government on policy settings.Stuart Glover, Senior Lecturer, Creative Writing, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/523042015-12-15T05:22:20Z2015-12-15T05:22:20ZMYEFO 2015 – government adopts ‘more realistic’ economic outlook: experts react<p>The government has revised down its forecast for economic growth to 2.5% in what Federal Treasurer Scott Morrison says is a “more realistic outlook” for Australia’s transitioning economy. </p>
<p>Morrison’s first mid-year economic update forecasts the deficit will blow out to A$37.4 billion in 2015-16, before being bought back to A$14.2 billion in 2018-19. The government now says it is committed to returning the budget to surplus “as soon as possible”, with a surplus not projected until 2020-21, and cumulative deficits of $108 billion over the next four years.</p>
<p>Net government debt is expected to grow to a peak of 18.5% of GDP in 2017-18, with gross debt rising to A$647 billion by 2025.</p>
<p>Facing a revenue write-down of almost A$34 billion caused by falling commodity prices, the government has also revised down its iron ore price assumption from US$48 per tone to US$39 per tonne. The tumbling iron ore price is expected to wipe A$7 billion off the government’s tax receipts in the years to 2017.</p>
<p>The government has revised down its expectation for unemployment to rise, pegging it at 6% for 2016-17. “Recent jobs data suggests even these estimates may be too conservative,” Morrison said in a statement.</p>
<p>Health, welfare and aged care have been selectively targeted in a bid to make the savings necessary to reduce the deficit. The government will target welfare payments with better income data matching, reduce bulk billing incentives for pathology services and cut back the size of Tony Abbott’s Green Army.</p>
<p>Morrison said the 180 measures in the update would mean the overall impact of policy decisions since the budget would be an improvement of A$400 million.</p>
<p>Our experts respond below.</p>
<hr>
<h2>On the path back to surplus</h2>
<p><strong>Professor Remy Davison, Jean Monnet Chair in Politics and Economics, Monash University</strong></p>
<p>“Are we there yet?” Treasurer Scott Morrison asked in his media conference launching the MYEFO. </p>
<p>No. Not even close. No surplus in sight. $37.4 billion in deficit. Growth revised down.</p>
<p>Prime Minister Malcolm Turnbull and Treasurer Scott Morrison’s problem is they need to deliver innovation incentives, fiscal responsibility and generous election-year handouts simultaneously: an impossible trinity.</p>
<p>Deficits as far as the eye can see. Postpone any hint of surplus until 2020/21. Put simply, there is no clear path to surplus (or even minor deficits) in this MYEFO. </p>
<p>Driving the revenue shortfall is the dramatic fall in the terms of trade, driven by collapsing iron ore prices, which remain at less than $40 per tonne. The May 2015/16 Budget was built around price assumptions of $48. MYEFO revises this to a much-more-realistic $39 per tonne.</p>
<p>Around $7 billion in savings remain in the 2015/16 Budget that the government hopes will get through the Senate. So the numbers will be far worse if some, or all, of these savings are rejected.</p>
<p>The government is bullish on jobs, but has no reason to be, given flawed ABS data and a foundering mining sector, compounded by unimpressive demand from China.</p>
<p>The government’s Plan B is “innovation”. But leaving taxation system distortions entirely untouched (such as superannuation; trusts and negative gearing) means the cuts fall on the elderly, the health sector and welfare recipients). And not on those who are more likely to re-elect the government.</p>
<p>What they are not addressing is stark reality: the failure to transition from the automotive industry shutdown to smart, advanced manufacturing and investment in green jobs. The free trade agreements (FTAs) with Japan, China, South Korea, together with the TPP, will deliver variegated, minor, supply-side shocks to the economy, but will ultimately drive a further deterioration of the terms of trade, rather than addressing the fundamental imbalance. FTA effects are measured over years, not between Christmas and the May 2016 Budget.</p>
<p>The Turnbull government should pray that Janet Yellen and the US Federal Reserve board don’t abandon zero interest-rate policy on 17 December. If US interest rates rise, all bets are off. If Yellen tightens monetary policy, you can bin all these MYEFO assumptions.</p>
<hr>
<p><strong>Ben Phillips, Principal Research Fellow, NATSEM</strong></p>
<p>The Federal Budget is set to produce a deficit in 2015-16 of $37.4 billion which will be the eighth straight deficit following a long stream of surpluses in the late nineties and last decade.</p>
<p>The deficit can be explained largely by the economic cycle and a number of important policy decisions. Prior to the GFC in 2008 the Australian economy grew in nominal GDP at an astounding 7% to 10% per annum. Wages growth, business income were all pushed along by a very strong domestic and international economy (particularly China) and a terms of trade bonanza. </p>
<p>With the exception of some pump priming by the Rudd Government in the years just after the GFC nominal GDP slipped well below those rates to around 2% per annum. In real, per capita terms Australia’s net income has not increased since 2008. </p>
<p>Australia has experienced an income recession but since this has not translated across to a major recession in terms of job losses or the volume of economic activity (real GDP) this recession has been less painful than past recessions. Income recessions lead to budget deficits via lower tax receipts (as company profits and wages slow or fall) and spending increases through welfare payments.</p>
<p>Beyond the major economic drivers there are a number of policy issues that are not helping the situation - particularly on the revenue side. During the boom of last decade significant personal income tax cuts removed $20 billion from revenue annually (even after taking into account bracket creep). Generous superannuation concessions, capital gains tax cuts, the removal of the carbon price (but continuation of the compensation), and the petrol excise freeze added to the revenue losses.</p>
<p>On the expenditure side we have an ageing population and this will become an increasing issue as the cost of pensions, aged care, disability, health and caring all increase. While there may be some room for cuts in these areas the vast majority of expenditure is unavoidable.</p>
<p>Tax revenue as a share of the economy has fallen away badly since the income recession and expenditure has increased. However, the budget pressures remain broadly consistent with the ups and downs of the economic cycle with current deficits similar to the early 1990s relative to GDP. </p>
<p>Australia’s fiscal challenges remain as much about the future as they do about today. An ageing population and a shrinking taxation base will collide over the coming decades and structural policy change will be required to balance the budget to overcome our already significant structural deficit. </p>
<p>Reducing spending in a significant way (tens of billions of dollars each year) or increasing tax via a higher GST or reducing various tax concessions and breaks will not be politically easy. The trick will be to find solutions that are both politically palatable and do the least harm to the economy and society more broadly. </p>
<hr>
<h2>Pathology and radiology take a hit</h2>
<p><strong>Stephen Duckett, Director of the Health Program, Grattan Institute</strong></p>
<p>There are swings and roundabouts in the health portfolio in MYEFO. </p>
<p>Spending on the rollout of the National Disability Insurance Scheme and new listings on the Pharmaceutical Benefits Scheme are the big winners, pathology and diagnostic imaging providers – mostly big corporates – are losers. </p>
<p>Workforce programs, which help to position the health and aged care industries, including rural providers, have also been sliced.</p>
<p>Both changes are important.</p>
<p><strong>Pathology and radiology:</strong></p>
<p>The changes to pathology and diagnostic imaging will reduce government spending by more than $200 million per year from July 1, 2016. This will either reduce the revenue of the big corporate providers by a similar amount, or increase the cost to patients of those diagnostic services, or a mix of both. </p>
<p>The government spending reduction is achieved by:</p>
<ul>
<li>removing the current bulk-billing incentive of A$6 (A$9.10 in Tasmania and rural areas) for each pathology service;</li>
<li>reducing the bulk-billing incentive for diagnostic imaging (including magnetic resonance imaging) services.</li>
</ul>
<p>There is no word in the MYEFO papers about what the government plans to do to protect consumers from being adversely impacted by these changes. Consumers generally have no knowledge of whether a pathology test or an x-ray is necessary and so follow the advice of their general practitioner or specialist on what is needed. Consumers have little power to bargain or price-shop for these tests.</p>
<p>Given the corporatisation of pathology and diagnostic imaging services, it may now be time to move away from an open-ended fee-for-service reimbursement system that was developed for the old era of professional, rather than corporate, practice. A tender arrangement might generate more savings for government at the same time as protecting consumers.</p>
<p><strong>Workforce changes:</strong></p>
<p>Net savings of more than A$175 million this year, with smaller amounts in later years (declining to around A$130 million per year in 2017-18) are to be achieved by cutting some workforce programs and expanding others. </p>
<p>The MYEFO statement does not provide details but it appears aged care workforce programs may be particularly hit. This would be unfortunate, as the number of older people who need care (at home or in an aged care facility) is increasing. </p>
<p>The relatively low wages paid in this sector compared to those in acute hospitals means there are chronic workforce shortages in this area, which may be exacerbated by these cuts.</p>
<hr>
<h2>Debt and revenue</h2>
<p><strong>Ross Guest, Professor of Economics, Griffith University</strong></p>
<p>MYEFO has confirmed that we’ll never, yes never, stop borrowing from our kids and grandkids unless we substantially raise taxes, cut spending or both, as a share of national income. Sitting back and relying on economic growth along with bracket creep will simply not do it - the deficit is too far gone.</p>
<p>The projected 2016-17 deficit has increased by 30% from $25.8bn to $33.7bn since the projection in May this year. Such a huge revision in the space of 7 months, due largely to errors in predicting commodity prices which flows through to the deficit bottom line, just shows how unpredictable is our federal budget deficit. Not only are we beholden to the internal business cycle that affects all economies, we are also at the mercy of volatile commodity prices. </p>
<p>Given this extreme uncertainty, it is reckless to adopt Keynesian debt-financed government spending in the face of a weak economy in the hope that the economic cycle will correct itself and allow the borrowing to be repaid. If there is any such thing as an economic cycle for Australia we have no idea how deep or how long it is. The Federal Treasury certainly has no idea.</p>
<p>Given such an unpredictably volatile budget outcome, it is prudent for the Australian to run a more conservative budget than larger more diversified economies such as the United States.</p>
<p>We all need to understand that the government budget is just an outsourced version of our own budgets. And we cannot outsource our problem of declining commodity prices and a debt hangover from the crisis - we must pay and pay we will, either today or tomorrow.</p><img src="https://counter.theconversation.com/content/52304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest has previously received funding from the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Remy Davison's Chair is funded by the EU Commission. </span></em></p><p class="fine-print"><em><span>Ben Phillips and Stephen Duckett do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The experts’ take on Scott Morrison’s first mid-year economic update.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityBen Phillips, Principal Research Fellow, National Centre for Social and Economic Modelling (NATSEM), University of CanberraRemy Davison, Jean Monnet Chair in Politics and Economics, Monash UniversityStephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/522982015-12-15T03:55:33Z2015-12-15T03:55:33ZMYEFO 2015 at a glance<figure><img src="https://images.theconversation.com/files/105957/original/image-20151215-23186-18cy0sv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Scott Morrison and Mathias Cormann unveil the Mid Year Economic and Fiscal Outlook for 2015-2016.</span> </figcaption></figure><figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=3472&fit=crop&dpr=1 600w, https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=3472&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=3472&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=4363&fit=crop&dpr=1 754w, https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=4363&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/105958/original/image-20151215-23179-1ytqt4q.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=4363&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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</figure><img src="https://counter.theconversation.com/content/52298/count.gif" alt="The Conversation" width="1" height="1" />
The government has revised down its forecast for economic growth to 2.5% and an expected deficit of $37.4 billion.Charis Palmer, Deputy Editor/Chief of StaffWes Mountain, Social Media + Visual Storytelling EditorLicensed as Creative Commons – attribution, no derivatives.