Tag Archives: defence spending

Tax Junkie Wayne Can’t Find A Vein For His $60m Hit

23 Nov

Yes dear reader. There really are impossibly boring folk out there like your humble blogger, who are actually looking forward to Treasurer Wayne’s Mid Year Economic and Fiscal Outlook (MYEFO) statement.

Not happily mind, but with a kind of morbid fascination.

As we saw recently, Wayne’s Budget Is Already Shot To Hell. Even though he only presented it 6 months ago.

Unsurprisingly, the “truly extraordinary” growth forecasts underpinning the predicted budget surplus in 2012-13, have already proven to be about as accurate as a spirit level minus its bubble.

The company tax growth prediction – shot.

The income tax growth prediction – shot

The superannuation tax growth prediction – shot.

The jobs growth prediction – shot.

But wait … there’s more!

China slowing.

EU collapsing.

USA drowning.

Iron ore and coal prices plummeting.

House prices leaking.

Now the chills and sweats are breaking out. And the panic is on for a quick fix.

No doubt the pushers from Treasury are with Wayne right now, desperately trying to keep the fantasy going, by massaging the numbers back up.

Like a junkie who’s shot so full of holes, he can’t find a sound vein anywhere.

And the MYEFO massaging will be only the more frantic, now that Wayne’s just scored another $60m hit:

A carbon price will add about $60million to the cost of the Federal Government’s operations, and agencies are unlikely to be compensated for it.

The Canberra Times analysed emissions from the bureaucracy and the military to estimate the budget hit they will face in 2012-13, when the price and its related fuel tax increases take effect.

The Government, which is Australia’s biggest energy user, has not yet prepared its own calculations.

The cost will grow each year as the carbon price rises and as fuel tax credits fall, unless government agencies cut their energy use significantly.

The Climate Change Department confirmed the military and the public service would ”incur a financial effect as a result of the changes”, but neither it nor Treasury could say what that effect would be.

The military will shoulder most of the burden, as it accounts for about two-thirds of government energy consumption.

Opposition environment spokesman Greg Hunt said yesterday the $60million estimate showed the ”real cost” of the carbon price remained hidden.

”Either the Government provides more taxpayer money to cover the carbon tax cost of these departments, or services will have to be cut. Or we see another budget blow-out as the Government fails to think through the consequences of the carbon tax on its own departments,” he said.

However, Greens deputy leader Christine Milne said there was no need to compensate the public service, which should instead focus on using less energy.

The estimated extra costs represented just 0.1 per cent of agency spending, she said, ”and will be dwarfed by fluctuations in the value of the dollar or the price of oil”.

Which comment only goes to prove what total and utter economic imbeciles the Greens are (or, they think we are). Consider: If it’s true that an extra $60m in govt costs for energy “will be dwarfed by fluctuations in the value of the dollar or the price of oil” … then how screwed will we be, when their “fixed” CO2 price is floated and thus exposed to the wild fluctuations of international carbon and currency markets?!  Indeed, how screwed will we be from Day 1, when our highest-in-the-world CO2 price is “fixed” in AUD for 3 years, and the backside inevitably falls out of a debt-swamped (take your pick) European / USA / Chinese economy, taking the FX rate of our speculator-preferred “risk on” Australian currency with it, a la 2008?!

”I hope that, just like companies and businesses across Australia, government agencies and the defence forces will be stimulated by the price on pollution to look for savings they can make through energy and fuel efficiency and improving their buildings and practices.”

Ms Milne added, ”Defence, in particular, should look to the Pentagon and note that the US military is one of the leaders in investing in alternative fuels and technologies.”

Treasurer Wayne Swan would not say if he would compensate agencies. ”Government departments will be, as always, adequately resourced in accordance with the Government’s commitment to strict fiscal discipline,” his spokesman said.

I would like to see the Government’s achievement of strict fiscal discipline, rather than merely a “commitment” to it.  On past and present form, Wayne’s “commitment” to strict discipline is about as believable as that of a heroin addict who’s been given charge of the keys to the methadone cabinet.

But I digress…

The federal bureaucracy is struggling to find savings after Labor’s decision earlier this year to increase the efficiency dividend, a 1.5 per cent annual cut to agencies’ administrative budgets. The Government initially planned to relieve agencies by reducing the dividend to 1 per cent, but the increase will instead cut their budgets by an extra $238.5million in 2012-13.

The fuel used in military operations was responsible for half of the Government’s total energy consumption in 2008-09, the latest year for which data is available.

However, the cost of electricity for light, air-conditioning and power to the bureaucracy’s offices will be most affected by a carbon price, with the Government’s power bills expected to jump $39.4 million next financial year. The second-largest increase will be due to higher aviation kerosene bills, with a reduced tax credit likely to cost the Government $9.9million.

Labor’s carbon-reduction plan involves taxing big polluters, such as electricity companies, $23 for each tonne of carbon dioxide they emit.

Businesses using heavy vehicles, such as trucks, are exempt from the carbon price until 2014, but the Government will gradually increase fuel taxes from July next year.

The Canberra Times’ cost estimate only includes air travel in planes that the Government owns or leases directly, as data on fuel used by public servants on commercial flights is unavailable.

Your humble blogger will be closely examining between the fingers and toes, under the arms and feet, and in the nether regions of Wayne’s MYEFO mini-budget.

Looking for track marks.

The telltale signs of where all the budget “hits” have been hidden from public view.

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