The recent Federal budget has caused significant controversy over the government’s proposed strategies to wind back the growing deficit and debt accumulation and return to a budget surplus in just a couple of years. The drastic measures involving cuts to welfare payments, reduction of public service employment and increases in taxation bite hard in some areas that affect everyday Australians. The scenario reflects the same “bitter choices” decision-making faced by households and companies as well as agencies at other levels of government.
The current challenge for our nation is that the extent of perceived needs to be funded from the public purse is far greater than the source of revenue available to fund them. The gap is funded by borrowing. Rapidly increasing debt whether for individuals or governments is a warning sign that should be heeded and acted upon to prevent in Macauber’s famous words, future misery. As with most things in life, debt is beneficial when approached in moderation and used wisely with a full understanding of the consequences of its mismanagement.
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The term “sustainable debt” is used a great deal in this sense meaning that the level of income expected over the term of the debt is not only sufficient to meet the debt repayment but provides an adequate buffer to meet any unexpected financial shock from other adverse influences or circumstances. It is when the buffer becomes dangerously narrow that swift and sometimes drastic action needs to be taken to preserve the overall security of the organisation, the government or family unit.
For most private sector organisations and families, regular monitoring of the debt situation and a little self-discipline in spending usually is enough to maintain a sustainable position. Nevertheless an unexpected situation like sudden loss of employment or serious injury affecting income earning capacity can create debt servicing problems with resultant misery caused by bankruptcy or mortgage foreclosure.
Hard decisions and strong action by the management of private corporations to address their budget blues can often result in termination of employees and curtailment of services to customers, but rarely do the shareholders protest on behalf of those affected because their first allegiance is to securing the value of the company.
Governments on the other hand can encounter the curious circumstances where the affected employees and customers are also the shareholders who may be prepared to remove the board of management because of the impact on them.
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So it is important for governments to be able to successfully explain their position to and win the acceptance of the majority of the community in relation to both the objective they need to pursue and any action they propose to achieve that objective.
In the current Federal scenario the government is facing a situation common to all public sector decision-makers – one of selecting priorities. In our world of limited resources and unlimited demand appetites the need to allocate priorities for spending is fast becoming an ideological battleground. The self-interest of the general electorate is also a constant factor as human nature will always agree that the deficit should be addressed – but not if “I personally” am affected.
It is difficult to decide the question of competing priorities especially when it involves competing shopping baskets outlining needs for defence, welfare housing, parental leave payments, national broadband network, international aid, national disability support, education, health and hospitals.
As the balance of the National economic profile shifts toward having more dependents on the national purse than taxpayers to fill it, choosing priorities becomes increasingly difficult. So does the task of explaining those choices to the community.
Some rules that should be observed in delivering bad news on any kind, might include:
•Don’t assume everyone else sees the positives that you see in the drastic actions.
•Don’t try to deceive people with complex and technical language.
•Don’t treat others with contempt because they are powerless, as one day they may have the power over you.
•If you must change direction and do things you said you wouldn’t do, or do not do things you said you would do, give detailed and reasoned explanations.
•Prepare the way for people to receive bad news in a non-prejudicial frame of mind.
•Timing is everything.
•Deliver the bad news in a planned, considered and strategic way.
•Understand the objectives of the message and frame it accordingly.
•Ensure the message is clear and concise and delivered in moderate language.
•Try to find some offsetting positives – “A spoonful of sugar helps the medicine go down”
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The Treasurer of any organisation has a difficult task in presenting bad fiscal news to their board or management committee. TheFederal Treasurer of whatever political persuasion has an even more unenviable task in selling unpalatable budgets to the nation.