The latest budget is an amalgam of incompetence and greed, where the right thing is done belatedly and poorly
If,
as the polls predict, the latest budget will be the final one delivered
by this LNP government, then it will be a perfectly apt way to go out.
It was a document that reflected the full personality of the
Abbott-Turnbull-Morrison government – an amalgam of incompetence and
greed, where the right thing is done belatedly and poorly, and
underlying it all is a desire to deliver the largest benefits to the
wealthy.
The budget writing process is generally a tedious series of briefings and meetings and meetings and briefings where the budgetary costs and political worth of measures are weighed and evaluated and then decided upon. The numbers are crunched and fudged, the speech is written and revised (and in the case this year, revised so as to remove any semblance of a memorable phrase). And then it is delivered. Done.
Except this year, the government had second thoughts and decided the
day after (the precise time is rather contested) to suddenly include
Newstart recipients among those who would receive the one off “energy
supplement”, despite having previously argued they should not.The budget writing process is generally a tedious series of briefings and meetings and meetings and briefings where the budgetary costs and political worth of measures are weighed and evaluated and then decided upon. The numbers are crunched and fudged, the speech is written and revised (and in the case this year, revised so as to remove any semblance of a memorable phrase). And then it is delivered. Done.
Sometimes in government a junior minister or backbencher is left out of the loop and thus makes a fool of him or herself arguing for a position that is later that day reversed. This time round it seems the treasurer left himself out of the loop.
Before the budget, the treasurer argued they didn’t need to give those on Newstart the energy supplement because the “majority of people on Newstart move into a job and off that plan in 12 months”. The day after the budget, which had excluded people on Newstart receiving the energy supplement, the treasurer argued that the “majority of people on Newstart move into a job and off that plan in 12 months” and so they will get the energy supplement anyway.
"Whenever the government has reached a semi-decent outcome, it invariably has chosen to take the worst path to get there"
It meant the government argued against doing the right thing and then ended up doing it, but only after it had first copped flak for not doing it – and only once it had ensured it ended up doing it in the most politically damaging manner.
Whether it is spending measures or tax cuts for low income earners or even a position on One Nation, whenever the government has reached a semi-decent outcome, it invariably has chosen to take the worst path to get there.
The big ticket item in the budget was the decision to double the low-and-middle income tax offset. It was pure politics, but at least it also has the fortunate aspect of serving as a good stimulus for the economy. But yet again it came too late (it really was needed last year) and was done only after much arguing that it did not need to be done.
The tax cuts in last year’s budget were so baldly targeted at the wealthy that the government and its friends in the media were reduced to reclassifying what it means to be middle income.
The former prime minister Malcolm Turnbull took to listing school principals as being an example of middle Australians who would benefit, seemingly unaware that such a position has one earning nearly double the median income.
At least now the low-to-middle income tax offset does deliver decent cuts for those earning below $80,000 – even if they only served to match the cuts promised by the ALP last year, and which have now been increased in Shorten’s budget in reply speech.
So you might be forgiven for thinking the government has seen the light and with this budget is now focused on those earning actual low and middle incomes. But no, the desire to help the wealthiest remains firmly entrenched.
Last year the government included in the budget tax cuts that were set to occur in 2024-25 – beyond the actual period of the budget figures – that would greatly flatten the income tax system and deliver the biggest benefit to those earning over $180,000.
This time round, included in its package to boost tax cuts for low and middle income earners was another proposal to further flatten the income tax system and deliver an even larger cut to those on high incomes by proposing to replace the 37% tax bracket not with the current 32.7% rate, but a new 30% rate – to apply to everyone earning from $45,000 to $200,000.
Under last year’s plan those on $200,000 were set to get a 3.6% tax cut in 2024-25 compared to that of 0.9% for someone on $60,000.
Under the policy in this year’s budget a person on $60,000 will get a 2.3% tax cut but someone on $200,000 gets a whopping 5.8% cut. Even though those on middle income now would get a bigger tax cut, the gap between the two tax cuts has actually increased from 2.7%pts to 3.4%pts!
And because once again such a plan is outside the four budget years, it is un-costed and contains no explanation of what services will be cut to pay for it. The LNP however clearly does intend to cut something because the government’s own strategy set out in the budget says it will aim to “deliver sustainable budget surpluses building to at least 1 per cent of GDP as soon as possible.”
Such a strategy requires cutting spending by more than the cut in tax revenue.
As with last year, the question remains not just who benefits from the tax cuts, but who will suffer from the cuts to services to pay for them.
• Greg Jericho is an economics writer for Guardian Australia
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