Credit rating loss shows cuts not the answer

Western Australia lost it’s AAA credit rating at Moody’s today, the second agency to drop WA to the second highest credit standing Aa1.

This has primarily happened due to a structural budget deficit and growing debt under the Liberal Government here in WA.

The problem is less how we are spending tax, and more how we collect it.

Too many eggs in the one mining royalties basket was never a good idea, and nor are the many tax loop holes and subsidies for the ultra-rich. Our State Government is hamstrung in it’s revenue raising capacity because it gives up so much in subsidies.

For instances, Gina Rinehart receives over $4bn in tax breaks and subsidies per year.

Cutting funding to essential public services is not the answer to our governments budget woes, it’s short term thinking and bad economics.

Those services have multiplier effects, the people whose incomes they pay are working people, and spend their incomes quickly. This creates tax at point of sale then goes on to be spent by those it employs, with tax paid as income tax and business tax on profit too.

By the time this process is repeated a few times in the economy, each $1 of government spending in say schools or hospitals is likely to actually create tax income in the mid-term. The long term improvement of social outcomes also leads further tax generation.

If the Government are serious about balancing the budget, they need to start shovelling cash from the nearby truck that’s over-flowing with $100 bills, not shuffling budget papers and scraping out the last few coins from working peoples piggy banks.