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MAKE POLLIES PAY FOR FISCAL EXCESS
Federal politicians should face pay cuts for fiscal irresponsibility as part of a radical overhaul of the Charter of Budget Honesty, according to a new paper from the Centre for Independent Studies, Fiscal Rules for Limited Government: Reforming Australia’s Fiscal Responsibility Legislation.
CIS researchers Robert Carling and Stephen Kirchner propose a new federal Fiscal Responsibility Act to replace the existing Charter of Budget Honesty.
“Australia’s existing fiscal responsibility legislation has not led to a significant improvement in fiscal policy outcomes, because the Howard government’s 1998 Charter of Budget Honesty lacks teeth,” Carling and Kirchner said.
“The new Act should include well-defined and enforceable rules in relation to the budget balance, Commonwealth net debt and the revenue and expenditure shares of GDP.”
“The budget balance should be kept within a range of minus 2% to plus 2% of GDP, while Commonwealth net debt should be capped at 10% of GDP.”
“The federal revenue and expenditure shares of GDP should also be limited to 25% of GDP.”
“The Act would define the circumstances in which the fiscal policy rules could be breached.”
The authors propose the establishment of an independent Fiscal Commission, to monitor and enforce the fiscal policy rules.
“For every one percentage point breach of the fiscal policy rules, the remuneration of all members of federal parliament should be reduced by 1% relative to a baseline determination from the Remuneration Tribunal.”
“These fiscal speeding tickets would give politicians an additional incentive to deliver sustainable fiscal policy outcomes,” Carling and Kirchner said.
The Fiscal Commission would be responsible for preparing the key budget and economic forecasts. The government would then formulate its tax and spending decisions within the parameters defined by the Commission.
“This would improve the independence and transparency of the budget process, eliminate pointless partisan conflict over the budget economic forecasts and ensure that political debate focused on the substance of spending and tax decisions,” Carling and Kirchner said.
Robert Carling and Stephen Kirchner are available for comment.
