Thursday, April 26, 2018

Today by Paddy Manning


A promising backflip
The federal budget appears to be back in shape … finally

Source

Treasurer Scott Morrison may not want to play Santa Claus, but today’s news that the government has abandoned an $8 billion increase to the Medicare levy suggests that the coming federal budget could be the one that brings home the bacon. Conventional political wisdom, it seems, is that budgets don’t provide a bounce for governments anymore, but a stinker of a budget can sink one, as former treasurer Joe Hockey’s disastrous 2014 budget did. In this case, the conventional wisdom may underestimate the potent politics of an end of austerity and a return to surplus, which could turn out to be a real vote winner for the Coalition.

A potted history. Then treasurer Peter Costello, flush with the proceeds of the mining boom, left the federal government with no net debt in 2007. That felt odd at the time, given Australia’s groaning infrastructure, but turned out to be a good thing when the financial crisis struck home in 2008. Labor had plenty of firepower and doubtless did the right thing to stimulate the economy, heeding then Treasury secretary Ken Henry’s famous advice to “go early, go hard, go households”, saving hundreds of thousands of jobs. There were plenty of grateful businesspeople at the time, notwithstanding reasonable reservations about the quantum of spending at $52 billion, and the merit of cash splashes, pink batts and the Orwellian “Building the Education Revolution” program. But the Rudd stimulus tipped the Commonwealth budget into structural deficit. Then austerity bit overseas, growth slowed, the mining investment boom ended, commodity prices slumped, Treasury serially botched its forecasts, Tony Abbott hyped our debt and deficit disaster, Hockey’s austerity budget of 2014 got mired in the Senate, and federal debt continued to mushroom. Somewhere along the way, the idea of a credible path to surplus fell casualty to our broken politics. Nobody had credibility. It was tune-out time: a pox on both your houses.

In short, we have had a decade of failed promises from the federal government to get its house in order. That may be about to change. Credit where it’s due: as treasurer, Scott Morrison has already cut through with good debt and bad debt, and his Thatcherite lines about no longer living off the credit card. If recurrent expenditure is now funded out of revenue, rather than debt, surely that’s a good thing. Suddenly the budget is awash with cash, as Peter Martin wrote in this timely piece a few weeks ago, and reinforced again in a Sunday report on Deloitte Access’ regular pre-budget assessment of the Australian economy. The Deloitte assessment found that the 2018–19 budget is “raining revenue” and would be the first since 2012 that improved on the previous year’s revenue forecast. A spokesperson for the treasurer told Martin that we are still on track to return to surplus in 2020–21. If the treasurer can better that next month, bring it closer within reach, there will be a national sigh of relief that someone, somewhere, seems to know what they are doing and is making steady progress. Tuesday’s Newspoll, which found [$] that 26 per cent of voters favoured budget repair, well above the 15 per cent who favoured tax cuts, just confirms that the public puts a huge premium on capable economic management. By abolishing the Medicare levy increase – a move Labor has quickly endorsed [$] – the government has confirmed that this will be a voter-friendly budget and has robbed the Opposition of a strong line of attack on tax hikes for ordinary working families.

None of which is an endorsement of the path Morrison has taken on budget repair, or to accept that there ever was a debt and deficit disaster. There wasn’t, and this government has hardly been a paragon of fiscal rectitude. Debt has continued to rise, and, in defiance of its own rhetoric, the government has wasted billions of dollars. Setting aside defence and immigration spending, a short list might include: lost revenue from unnecessary company tax cuts, the abolished carbon price and overly generous super concessions for the wealthy; outrageous windfalls for VET FEE-HELP rorters; continued overfunding for elite private schools; private health insurance rebates that go straight to the bottom line of insurers; diesel fuel rebates for tax-dodging mining companies; and on and on it goes. The budget is stuffed with corporate, middle- and upper-class welfare measures, but instead the Coalition has chosen to launch a war on the poor with fake robo-debts, income management and humiliating drug-testing.

Be all that as it may, if next month’s budget shows the deficit is finally under control after a decade of shemozzling, and we can finally turn the page on the financial crisis, it will pay off in spades.


RETURNING FOR A SECOND SEASON
Episode 12: Corporate tax cuts
Richard Denniss and Nobel laureate Professor Joseph Stiglitz discuss who wins when big businesses get
big tax cuts.

LISTEN NOW

since this morning


The Financial Planning Association asked the Hayne royal commission not to air details of a complaint against celebrity adviser Sam Henderson because it would “cause significant damage” to his reputation, the inquiry has heard [$] today.

The Australian’s Niki Savva writes [$] that, barring extraordinary events, Prime Minister Malcolm Turnbull will lead the Coalition into the next election, which might be held as late as May 25 next year, allowing Treasurer Scott Morrison to squeeze in another budget.

The Guardian’s Katharine Murphy writes that on 2GB this morning Sydney shock jock Alan Jones accused the energy minister, Josh Frydenberg, of selling his soul, “but then Frydenberg turned the tables”.


in case you missed it


The AFR’s Phillip Coorey reports [$] that personal income tax cuts to be unveiled in the May federal budget are set to start small and be phased in over a decade, so as not to obstruct the return to surplus.

The outgoing Productivity Commissioner, Peter Harris, has used his final review of government trade and industry assistance to lash out at the Senate’s “investment-skewing” decision to limit the Coalition’s company tax cuts to small firms. Harris also urged resistance to protectionism as global trade policy reaches a “dangerous crossroad” led by Donald Trump’s “America First” stance.

The Age’s Peter Martin writes that “The Coalition wasn’t merely asleep at the wheel when it came to the practices being exposed at the banking royal commission: it pulled out all stops to allow some of them to continue”.

The head of the Australian Energy Market Operator, Audrey Zibelman, says she is “truly concerned” that the rise of rooftop solar has helped drive down electricity costs for many Australians but punished those still on the grid with higher prices.

Shadow infrastructure minister Anthony Albanese says Melbourne is being “ripped off” by the Commonwealth, and that a Labor government would offer the city a new deal on urban infrastructure.


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Paddy Manning

Paddy Manning is a contributing editor (politics) at The Monthly. He is a writer and journalist who has worked for the ABC, Fairfax, Crikey and The Australian. He is also the author of three books, including Boganaire: The rise and fall of Nathan Tinkler.

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