I've written before about how much I love budget day.
Regardless of the party in power, it's a small but important (and nerdy) example of transparent democracy in action.
And it really is the document that, more than any other, tells us about the country we're going to become (because, well, 'follow the money').
Now, the budget papers have gone to the printers. And the speeches are being given their final polish.
So it's too late to influence what's in either.
But, if I had Jim Chalmers' ear (you are reading this, right, Treasurer?), here's what I'd have liked to see in tonight's speech and the financial papers that go with it.
(I'll drift a little into social and other policy, below, but I'll keep my comments largely to financial matters. I'm sure there are other things that the country needs and should do!)
First, a commitment to, and policies that take us meaningfully towards, bringing the federal budget into structural balance.
No, not immediately.
And not balanced every single year.
The government should run a deficit to support demand when the economy is weak. And run a surplus to take heat out of the economy when it's strong.
It's smart economic policy.
But recently?
Well, our pollies are addicted to the spending that entices us to vote for them. And allergic to taxes that we might not like.
And so?
And so, we have a budget that is in 'structural deficit' – where the spending in the bad times isn't even close to offset by surpluses in the good times.
Boffins and pedants hate the credit card analogy… but it's useful here:
It's the equivalent of running up a big credit card debt when work is scarce, then paying it down a little when you get a bonus, only to spend up even more next time.
It's unsustainable – and it's unsustainable for the government, too.
The hole is too deep to fill in during one year, or even one term of government. But Treasurer Chalmers should announce and chart a course to returning the budget to sustainability.
Next, he should announce the formation of an expanded Future Fund, to become a fully-fledged Sovereign Wealth Fund.
A what?
Countries like Norway, Saudi Arabia and others have used natural resources windfalls to turn those one-time resource sales into ongoing national wealth.
They are monuments to long-term thinking in the national interest.
See, the oil, gas, iron and gold we're lucky enough to have around the country has been there for millions (billions?) of years.
And then, in an instant, some time in 2022, we let companies drill or dig it up, and flog it off. We collect a little in resource levies and company taxes, and use that for… today's political promises.
Billions of years in the making, and then sold for peanuts to pay for new swimming pools, tax cuts and carparks.
Don't you reckon that those natural assets we inherited should be converted into financial assets that will sustain us, our kids and their kids, instead?
Yep. Me too.
The Treasurer should announce it.
Next, we need some honest policy on housing. Yes, reports in this morning's media about 'one million new homes' sounds impressive. But, at the time of writing, I haven't seen a timeframe. And more high density housing or urban sprawl doesn't exactly fill me with joy.
Because housing construction is only part of the story. Where are the rest of the policies? You know, like how many homes our natural and built environments can support? How much green space will we lose? How will our energy grid, water supply and waste facilities cope? How many people can Australia support, and where?
I'm a fan of more affordable housing, and more housing, if people can't find a roof for over their heads. But I'm far from convinced 'ever more houses' is the answer, particularly if we haven't had the national conversation about the rest of those considerations.
(And the continual adding of first home owner's grants, boosts and shared equity programs do absolutely nothing for affordability. They're barely disguised fig leaves for governments to avoid actually having an honest, mature conversation about prices.)
Speaking of which, the next thing I'd like to see is the end of negative gearing (but have the existing program grandfathered) for the purchase of existing housing. For the reasons I annunciate, above. Residential housing should be shelter, first and foremost. Not a tax lurk that probably pushes prices up.
And we should reintroduce the indexing of capital gains, rather than an arbitrary 50% long term capital gains tax discount.
Why? Because it costs the budget a small fortune, and you can't convince me the tax treatment should be one rate after 364 days, but half of that rate two days later… just because we completed one trip around the sun. And indexing could actually be much better for truly long-term investors – doubly so in high(er) inflation environments. It's just better policy.
Next, I'd make early childhood education free and universally available. And spare me the class war rubbish. It's not about the parents… it's about the kids.
Every child has access to free and universal primary and secondary school education in Australia. We should recognise that early childhood education is just as – perhaps more – important, and we should remove every barrier to giving kids the best possible start in life.
(Former SA Premier Jay Wetherill is doing some wonderful work in an Andrew Forrest-funded program called Thrive by Five, if you're interested.)
Yes, that's primarily a social program, not a financial one. But if we want a smart, educated society that can make the most of the opportunity our country provides – financially and otherwise – this is a no-brainer (and will likely save the country money over the long term).
Back on finances, though, any business would make investments today, that would sufficiently reduce outgoings tomorrow. (So should households, by the way: if you haven't already, you really should see if solar panels are right for your place… they might be the smartest investment some people can make!)
Investing now, for savings later, comes under many headings: effectiveness, efficiency, and more. I'd love to see the government announce funding for a government department (or subset of another) to investigate the opportunity for big investments that make us more efficient, effective and competitive in the future, as a nation.
Put some business people in charge. Give them a minimum return-on-investment hurdle, then give them a large pot of money. Reduced administration? Check. Reduced recurring operating costs? Check. Faster, easier operations? Check.
Speaking of which, here's the last thing on my wishlist (Oh, there's more, but I'm trying to just focus on a few, for now): announce that every dollar of R&D or other support funding for business must come with an equity stake in that business.
Right now, governments make research grants and get nothing for it, in many cases. Or we give millions of dollars in support funding (hello Qantas Airways Limited (ASX: QAN)!), with nothing in return, when a company survives and then thrives. (Qantas shareholders are getting a buyback. The government, after tipping in a fortune? Nothing.)
Taxpayers should get a return for our money. If the organisation truly wants the capital, there should be a quid pro quo. And if that requirement means they decline the investment, then great – we keep the cash.
So, that's it.
Programs, policies and initiatives that probably won't be in tonight's budget.
But they should be.
Because they're responsible, sensible and in the national interest.
And Treasurer, if you're reading this, feel free to get in touch, if you want some help framing the next one.
Fool on!
