The recent new budget announcement from the Australian government is an austerity measure. Below is a brief exchange between Ken Soong and one of his readers of Migrating to Australia Good Meh??? which took place on 20 May 2014 and shared publicly for the first time on KCLau.com …………………………………………………………………………………………………………………………………………………………………………………………… Reader: Will it be possible for you to comment on the latest Australian government budget?

Ken: Not sure if you have asked the right person.

Reader: It mentioned something about the huge cuts in education spending. So I thought you might have some views.

Ken: Overall, the budget is an austerity measure whose time has come. A belt-tightening one. Almost all sectors are affected. Foreign aid gets the biggest cut, income support payments (welfare) will take a cut, government jobs will take a cut, and yes, education will take a big cut.

The only winners are defence and infrastructure. I actually feel the government is going the ‘right’ thing from a long term economic perspective in that it should tighten their belt now.

Reader: In the future, local Australians will pay higher fees? As high as international students in Australia?

Ken: Yes, you are right, Sir. From a personal perspective, the education cut is a big blow. the government is taking away their subsidies on education. the student loan 2% interest rates will be taken away as well. Local students now enjoy a low interest student loan and fee that are three times lower than international students in Australian universities.

So I think it is by 2017 (please check the facts from time to time), local students will have to pay higher fees. When this whole thing (university fees) deregulates, local students will be very likely to pay the same fee as the international student ones. Otherwise, Australian universities will be more inclined to accept international students.

What incentives do they have in taking local students who pay lower fees? What I like most about this budget is the 16,000 job cuts in the public sector. In fact more should be cut. Personally 30,000 is not even an exaggeration.

The red-tape and bureaucracy is just ridiculous. Of course, if I work in the government, I will hope this will not happen. This kind of cuts will be the norm in all western and developed economies including japan. The long term trend is set in stone.

The irreversible tide of history, if you like. Clearly they are running out of money because there has been no productivity for a long time already. These are all consumption-driven economies. Not like the productivity-driven economies in Asia.

And the only way consumption is going to continue to drive their economies is that they get into debts like what is happening now. Digging deeper into a hole will never get us out of it. In the system of western style democracy, no governments will have the political will to say ok, let’s stop digging our hole. let’s fill it up for however long is necessary to eventually get us all out of it.

Why?

The PM and his gang cannot afford to be concerned about the long term future of their country, they can only be concerned about not even short term but the NEXT term, if they can still cling on to dear life – their power.

So, if their policies are too unpopular (even though they are meant to help the economy over the long term), they will not live pass their present term. This government is finally ‘coming to its senses’.

That is why I say this latest budget is good.

But if you think politically, they are no different from the other politicians who only care about the next term also right? So, why do it ? Is it really true they are coming to their senses??? It seems to me the only plausible explanation is they are now tightening the belt first, do it BIG TIME, to fix things up a little both for the economy and also (and mainly) for themselves (to store up their bullets OR strengthen their balance sheet first).

After all this is only their first term. When the next election comes, they can then be the good guys. The more severe the cuts are now, the more leeway they will have in their next election campaign, so that the opposition will have a harder time toppling them.

Imagine, cutting thousands of jobs in the government every budgetary year and three years later when say they have the next election, they will then say they will increase government jobs by just 20,000, people will be like ‘this government is so good, create so many jobs for us! so we better not change the government first’ I think this is how their political minds operate.

But back to the long term macro trend – the irreversible tide of history – things are definitely getting tougher in the developed western economies, belts tightens and loosens, but it is definitely getting shorter.. so that one day when a government has to loosen their belt, it will still be tight by any measureable standard… The world before World War Two or the 1950s and the world after the 1980s (or the Cold War) are two very different worlds.

The lavish lifestyles in the west were only possible when the rest of the world were living in jungles and villages and serving their Western colonial masters with their natural resources and hard labour in the plantations, quarries … Think Harrods – a classic epitome of the glory of their industrial revolution.

It took one to two generations for the West to fully industrialise. Now, some Asian countries are industrialising in less than one generation! So, stiff competition has made lives difficult for all.

Reader: Really enlightening views, Ken. Many thanks for sharing.

I will share your views with some of my friends. Thanks.

Ken: My great pleasure, just some of my modest views. Thanks for wanting to share them with your friends. It is always good to have multiple views on things, I guess.

Reader: You are right, Ken. Thank you.

Ken: Thank you.

Just in case you wondering.

How Does This Budget Can Affect You?

According to Ken Soong, the co-writer of Migrating to Australia Good Meh??? , this new budget will have great impact on Malaysians who want to migrate to Australia for their kids’ education.Will this deregulation comes into force, local students will pay fee that are three times higher than now – equalling international students’ fees in Australia. 

Also, they will no longer enjoy the currently low interest student loans of less than 2%. Market rate will be the order of the day, around 6 % right now. This article is of great interest to Malaysian who have plans to migrate for education.


KCLau
KCLau

Personal finance author and trainer

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