Extract from The Guardian
The Australian budget of 2015 is a contradictory document – its
rhetoric about small government and paying down debt is out of kilter
with its real purpose
Joe Hockey’s second budget feels confused and contradictory because
it is. Its rhetoric is out of kilter with its real purpose – political
survival.
The Coalition still has to mouth the words about all the things it says it believes in – remember small government, reduced deficits and paying down debt so as not to steal the economic future of our kiddies?
But really, all that is on hold. What it really wants to do with budget 2015 is erase the memory of last year’s budget and inject some confidence into the sluggish economy and a little jolt of optimism into disillusioned voters’ minds.
And so Hockey stands before the parliament and insists the budget delivers a “$40bn improvement in the bottom line” and a “credible path” back to surplus, when in fact deficits in each of the next four years are bigger than predicted just last December and a surplus is somewhere well over the horizon – 2019-20 (perhaps). Who was that treasurer who was never going to deliver a surplus, Joe?
(Hockey’s comparison is with the economic statement he brought down soon after coming to office – which inflated the deficit the government actually inherited from Labor by things like a decision to give the Reserve Bank an extra $8.8bn.)
Some of the changes are fairer than last year’s regressive (and rejected) plans. The new pension policy, for example, is almost Robin-Hood like in its execution, taking part-pensions from the wealthiest retirees and giving more to the poorer.
The new childcare policy offers more money for everyone who is working, allowing even the wealthiest families to claim an extra $2,500 in subsidies - up to $10,000, every year for each child, and offers much bigger additional benefits to poorer households.
It’s not clear how that sits with the old promises about “ending the age of entitlement”, and in any event, the government says it must be paid for by family tax benefit changes proposed last year which cut thousands of dollars from payments to a single income family once their children are at school. These remain unlikely to pass the Senate, leaving the government to promise other “offsetting” savings, as yet unidentified.
And it spends on a bunch of other things besides – how about $150,000 for every federal electorate, for something that passes as infrastructure.
The rolled gold “signature” paid parental leave scheme was already ditched, but now the government is removing benefits from women whose employers already pay – an about face so rapid it almost makes you dizzy.
All this giving and taking away is justified by the laudable aims of rewarding people who return to the workforce and imploring small business to go out and spend money and employ people, with $5.5bn in tax cuts and generous new deductions.
But the document forecasts slightly higher unemployment and slightly lower job creation over the next four years, as if the figures didn’t quite believe the words.
The weak economy means 2015 was not the year for big spending cuts, but explicit decisions made since last December have added $3.6bn to the budget bottom line.
And Hockey appears to have been overruled on even the most obvious ways to raise revenue. The government is now criticising any moves to pare back hugely generous superannuation tax concessions that offer benefits wildly skewed to the super wealthy – apparently to create a simplistic political attack line that only the Labor party favours increasing tax. It is an open question as to how the new commitment to “fairness” would fare, on a road to an actual surplus constructed only from cuts to spending.
But part of the answer has to be desperately hoping for a pick-up in economic growth. Which is where the tax break bonanza for small business comes in.
To the extent this budget has a “narrative”, that’s it. Everyone should go out and work and invest and prosper and then everything will be better – and government benefits should be channelled for only that purpose. It’s about how small business is the “engine room of the economy”, which would be reassuring given that the engine we’ve been relying on – the mining construction boom – is sputtering.
The budget is contradictory because it is not intended to be a long-term economic plan. It is designed as a short term political safety ramp, a diversion to try to halt the careening downhill disaster of last year’s budget (without veering too drastically off the originally intended course), a way to win a few seconds of breathing space and promote some confidence and give the impression that the Coalition has things back under control and it’ll all be OK.
It is about survival, for Tony Abbott and his government, about rebuilding trust before setting course for the big policy changes the Coalition had – somewhat presumptuously – always planned for a second term. In fact it looks a lot like a pre-election budget. If the government really does intend to run a full term it leaves a big question mark over what next year’s budget is supposed to do.
Will it work? It almost certainly won’t suffer the same vehement, almost visceral, rejection from voters as budget 2014. It will be easier to sell to the Senate, because, heck, who gets upset about governments giving money away? Whether it restores trust and the government’s political fortunes depends on how quickly the electorate forgets last year’s wild ride, how clearly it remembers all the previous warnings about “debt and deficit disasters” and how puzzled it is by the glaring contradictions.
The Coalition still has to mouth the words about all the things it says it believes in – remember small government, reduced deficits and paying down debt so as not to steal the economic future of our kiddies?
But really, all that is on hold. What it really wants to do with budget 2015 is erase the memory of last year’s budget and inject some confidence into the sluggish economy and a little jolt of optimism into disillusioned voters’ minds.
And so Hockey stands before the parliament and insists the budget delivers a “$40bn improvement in the bottom line” and a “credible path” back to surplus, when in fact deficits in each of the next four years are bigger than predicted just last December and a surplus is somewhere well over the horizon – 2019-20 (perhaps). Who was that treasurer who was never going to deliver a surplus, Joe?
(Hockey’s comparison is with the economic statement he brought down soon after coming to office – which inflated the deficit the government actually inherited from Labor by things like a decision to give the Reserve Bank an extra $8.8bn.)
Some of the changes are fairer than last year’s regressive (and rejected) plans. The new pension policy, for example, is almost Robin-Hood like in its execution, taking part-pensions from the wealthiest retirees and giving more to the poorer.
The new childcare policy offers more money for everyone who is working, allowing even the wealthiest families to claim an extra $2,500 in subsidies - up to $10,000, every year for each child, and offers much bigger additional benefits to poorer households.
It’s not clear how that sits with the old promises about “ending the age of entitlement”, and in any event, the government says it must be paid for by family tax benefit changes proposed last year which cut thousands of dollars from payments to a single income family once their children are at school. These remain unlikely to pass the Senate, leaving the government to promise other “offsetting” savings, as yet unidentified.
And it spends on a bunch of other things besides – how about $150,000 for every federal electorate, for something that passes as infrastructure.
The rolled gold “signature” paid parental leave scheme was already ditched, but now the government is removing benefits from women whose employers already pay – an about face so rapid it almost makes you dizzy.
All this giving and taking away is justified by the laudable aims of rewarding people who return to the workforce and imploring small business to go out and spend money and employ people, with $5.5bn in tax cuts and generous new deductions.
But the document forecasts slightly higher unemployment and slightly lower job creation over the next four years, as if the figures didn’t quite believe the words.
The weak economy means 2015 was not the year for big spending cuts, but explicit decisions made since last December have added $3.6bn to the budget bottom line.
And Hockey appears to have been overruled on even the most obvious ways to raise revenue. The government is now criticising any moves to pare back hugely generous superannuation tax concessions that offer benefits wildly skewed to the super wealthy – apparently to create a simplistic political attack line that only the Labor party favours increasing tax. It is an open question as to how the new commitment to “fairness” would fare, on a road to an actual surplus constructed only from cuts to spending.
But part of the answer has to be desperately hoping for a pick-up in economic growth. Which is where the tax break bonanza for small business comes in.
To the extent this budget has a “narrative”, that’s it. Everyone should go out and work and invest and prosper and then everything will be better – and government benefits should be channelled for only that purpose. It’s about how small business is the “engine room of the economy”, which would be reassuring given that the engine we’ve been relying on – the mining construction boom – is sputtering.
The budget is contradictory because it is not intended to be a long-term economic plan. It is designed as a short term political safety ramp, a diversion to try to halt the careening downhill disaster of last year’s budget (without veering too drastically off the originally intended course), a way to win a few seconds of breathing space and promote some confidence and give the impression that the Coalition has things back under control and it’ll all be OK.
It is about survival, for Tony Abbott and his government, about rebuilding trust before setting course for the big policy changes the Coalition had – somewhat presumptuously – always planned for a second term. In fact it looks a lot like a pre-election budget. If the government really does intend to run a full term it leaves a big question mark over what next year’s budget is supposed to do.
Will it work? It almost certainly won’t suffer the same vehement, almost visceral, rejection from voters as budget 2014. It will be easier to sell to the Senate, because, heck, who gets upset about governments giving money away? Whether it restores trust and the government’s political fortunes depends on how quickly the electorate forgets last year’s wild ride, how clearly it remembers all the previous warnings about “debt and deficit disasters” and how puzzled it is by the glaring contradictions.
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