A Maggie Thatcher needed to sort out the mess

The Government has flagged that today's budget will provide further economic stimulus still. Even ignoring that, I estimate the 2008-09 and 2009-10 deficits announced will exceed $32 billion and $55 billion respectively, and that net debt will exceed $250 billion by mid-2013. In the past half-century, the cash deficit has never exceeded 4.1 per cent of GDP - that was in 1993-94, when unemployment was running in double digits. Net debt has never exceeded 18.5 per cent of GDP - that was in 1995-96, the sixth straight year of deficits run to fight high unemployment.

Our unemployment rate is only half of what it was in the early 1990s. Most predictions have it peaking below 8 per cent in 2010 and then declining.

Yet the 2009-10 deficit will exceed 4.5 per cent of GDP - topping our 1993-94 record. And net debt will exceed 17.4 per cent of GDP by mid-2013, beating the 1995-96 record.

The Government cites nations like the US with bigger relative deficits and net debts than us. But that's irrelevant.

President Obama damned George Bush's "deep fiscal irresponsibility", in running large deficits during seven years of economic growth. And bank bailouts - unnecessary here - plus much deeper economic downturns have generated bigger deficits and more debt.

Despite forecasters (including the IMF and OECD) projecting a less severe downturn here, our fiscal response has been one of the biggest.

The OECD estimates that, of all member countries, discretionary fiscal stimulus clearly exceeds 1 per cent of GDP in both 2009 and 2010 only in the US and Australia; this compares to an OECD average of 0.5 per cent each year. And if only the Government had used a "meat-axe" in its first budget, it could have avoided much of the debt it is locking us into.

Many have urged cutting the obvious fat: "middle-class welfare". Last year's budget projected "personal benefit payments" rising to $94.7 billion in 2009-10, a whopping 33.8 per cent of outlays.

The ABS estimates that in 2003-04, the top 60 per cent of Australian households by equivalised income (adjusted for household size and composition) received 35.9 per cent of all social assistance. This percentage would be higher now, as subsequent Howard government initiatives were more readily available to higher income households.

Substantial tax concessions also go to high-income households. Treasury expects 2009-10 tax concessions to total $68.3 billion. The biggest will cover superannuation, GST on food and personal income breaks. All are skewed towards higher-income households.

While we should certainly support those in genuine need, it is difficult to argue that the top 60 per cent of households need help.

Eliminating the (at least) 35.9 per cent of the combined $184.5 billion personal benefit payments and tax concessions going to these households would save $66.2 billion in 2009-10 alone, and $270 billion over four years.