The Red And The Blue

REACTIONS to the federal budget delivered last night by Wayne Swan have generally been savage this morning; I have been monitoring responses through the morning, and will continue to do so as the day progresses. Very Quickly, there is something from Joe Hockey I want to share with readers.

Despite the fact he wouldn’t allow Hockey to fully answer half the questions he asked before cutting Hockey off, Alan Jones had a lengthy interview with the shadow Treasurer this morning that I think is well worth a listen.

Readers can access the audio feed here.

Hockey actually answers the questions fairly directly here, and what he has to say to Jones (interruptions notwithstanding) is instructive in terms of the approach the likely new Liberal government will do on economics once elected in September.

Just a quick post; I will be back later today — perhaps on the budget issue, or perhaps on something else…

PALE-FACED, ashen and agitated, Treasurer Wayne Swan tonight delivered a budget that observers agree is mediocre at best, and a shambles at worst. This is a budget that will hit families and businesses hard, lower standards of healthcare, and fail to deliver its key premise to “support jobs and growth.”

First things first: can anyone tell me what is meant by this statement: “Revenues are at 25-year levels in the context of the past 25 years?”

This is one of the points Wayne Swan made in his post-budget interview with the ABC’s Leigh Sales; to be fair, it’s probably the sort of slip anyone under extreme strain could make in such a situation, and under the pressure of delivering a pre-election budget from a political position of diabolical  – if not terminal — weakness.

Yet that piece of verbal recursion is a metaphor for this budget; it makes little sense, and it leads nowhere that anyone might care to follow.

Indeed, the kindest thing I can find to say about Swan’s sixth — and, to be sure, final — budget is that at least he had the grace to finally admit a problem with the Commonwealth budget in terms of revenue and expenditure that needs to be addressed.

Suffice to say, this budget does not address that problem, and beyond that observation it is an unmitigated failure as an exercise in politics, policy, and through which to enhance the standing and standard of living of the citizens of this country.

At the outset — and this won’t be popular — but perhaps the Gonski reforms ought to be abandoned outright. For now at least. I’ll come back to this statement a little later.

The self-important Swan has announced an expected budget deficit for the current financial year of $19.4 billion: very close to the $20 billion I have repeatedly flagged in this column over the past month or so, but (thankfully) well short of  more extreme projections of $80 billion that have found their way into other sections of the media.

Even so, it’s a big turnaround from a surplus of $1.5 billion, predicted this time last year.

“The years of surplus are upon us!” Swan had foolishly proclaimed. The years of deficit, however — six to date and at least two more on Swan’s reckoning — still have another hole of at least $30 billion to blow in the national finances after the current year ends in June.

Tonight’s budget is predicated on a dangerous science indeed: Wayne Swan’s economic forecasting, which for six years has been shown to be as unreliable as the wind, but which underpins the assumptions Swan and his colleagues now ask Australians to accept anew.

Those assumptions see deficits of $18 billion and $11 billion for 2013-14 and 2014-15 respectively, followed by a “balanced” budget ($800 million in surplus) in 2015-16 and “surpluses in the years beyond.”

Such assumptions — combined with the usual Labor penchant for rampant, inefficient and unaccountable spending — are the reason the problem exists in the first place.

Someone is responsible for these — people can decide whether it’s Swan and the government, or the “professionals at Treasury,” as Julia Gillard calls them — but for mine, and especially as even Swan admits Treasury provided the same (unerringly accurate) advice to the Howard government as it does to Gillard’s, my finger points at the government, not the bureaucrats.

And why wouldn’t it?

To fill the hole, families and businesses bear the brunt of this budget; the ALP historically and this government especially have never made a secret of the fact it views both constituencies with contempt.

I posted earlier about the abolition of the Baby Bonus, and just to be clear: I never said it was a sound policy measure, but it is something that has provided relief from the increasing costs associated with childbirth for those starting or building a family.

Private obstetrics services had already been hacked at by Labor, with 10% reimbursable from Medicare rather than 80%, and the Baby Bonus didn’t even cover that gap.

With the bonus now removed altogether, the ridiculous effect will be that many couples with private health insurance will opt for childbirth in a public hospital, effectively placing Medicare and the public hospital system under even greater strain than it already is.

It needs to be remembered that subsidised as it may be, the cost of private health insurance is still overwhelmingly borne by the consumer, with the average family of four paying $3,000 per annum in premiums that are in addition to the Medicare levy, and are effectively a taxpayer subsidy of the costs of healthcare in Australia.

This government has pushed the ability of those consumers and families to continue that “subsidy” to breaking point, and this budget continues that.

But beyond the Baby Bonus, Swan’s budget makes further attacks on health; it freezes indexation of schedule Medicare fees for doctor visits at $36; this will lead to a decline in bulk billing rates, and to doctors passing on increased gap payments — irrespective of the government’s fanciful rhetoric to the contrary — to patients who, ultimately, will find it prohibitively expensive to seek health care except in a public hospital.

And that, too, will place the creaking public health system under exponentially more pressure again.

And just to really screw the individual and the family on health, the Medicare Safety Net is to kick in at a much higher threshold, effective only after a household has incurred $2,000 in out-of-pocket medical expenses in a given year, up from $1,200.

The tax rebate for out-of-pocket medical expenses is to be abolished altogether.

So much for easing cost of living pressures; and so much for the ALP being the “party of health” when this budget does more to compromise the standard and availability of healthcare in Australia than any other measure in living memory.

The business community cops it in this budget, too; not simply content to allow union thugs untrammelled influence over labour costs and conditions, measures announced by Swan to tighten compliance, remove tax deductions and bring forward revenues will add to business costs, reducing profits and productivity, and ultimately, cost jobs.

On infrastructure, the $24 billion “committed” in this budget should be taken with a grain of salt; as discussed in this column this morning, the example of its partial funding of a project in Melbourne isn’t even the one the state government intends to build, and even if it was comes with so many strings and conditions attached to it that the State of Victoria would be well-saved the bother of taking the money.

Either way, it’s unlikely Swan’s $3 billion will ever be spent in Victoria. I daresay some of the other projects allocated “funds” in this budget fit a similar storyline.

The most degenerate aspect of this budget is its treatment of education and disability policy.

I’m always cynical of Labor governments — state or federal — offering to throw huge pots of money at schools; it pulls on understandable heart strings but, in the end, the money invariably ends up in teachers’ pay cheques or, more commonly, in the form of additional bureaucrats.

These “outcomes” do nothing to improve educational outcomes.

So when I follow the debates over education funding reform (“Gonski” for short, as most know) or the worthy and universally supported objective of establishing a National Disability Insurance Scheme, I get very suspicious.

Especially as both sets of reforms call for entire new bureaucracies to be established to administer them.

Especially as the majority of the money for each is decreed, by the Gillard Government, to have to come from (mostly conservative) state governments.

And especially because the Commonwealth component of them — roughly $100 billion over 10 years — is set to be legislated through this budget to prevent an incoming Abbott government from modifying or abolishing them to save money, and to redress the budget flaws Wayne Swan hasn’t, can’t, or won’t.

I have a big problem with a government that will be booted out of office in four months’ time, in a tidal wave, legislating a 10-year, $100 billion program — irrespective of the merits of the policy or policies in question.

And as we discussed at the outset, the structural problems with the nation’s finances are in no way remedied by this budget: to the extent they are, the fix is based on dodgy forecasts, and no more.

I say that if the country so desperately can’t afford the expenditure it currently incurs, it can’t afford another $100 billion over the next decade.

Given the ballooning ranks of senior public servants who weren’t there five years ago (but cost the government many billions of dollars each year to retain) are intact, and immune from Swan’s axe, I say very simply: the NDIS or the Gonski reforms, but not both; one might be sustainable, but not both.

The 0.5% rise in the Medicare levy, viewed this way, is simply a tax measure wrapped up in a bit of bleeding hearted spin, and does not in itself enable either of these policies at a monetary face value or anywhere remotely approaching it.

In sum, this is yet another bad budget by a bad government that will soon be thrown from office — and rightly so.

This budget doesn’t support jobs; it threatens to destroy them, placing businesses already operating in a hostile environment of governance and compliance under exponential additional strain to pull in a few billion extra dollars to help fix a problem the pious Treasurer and the incompetent Rudd-Gillard government should never have created.

And it doesn’t support growth; in a softening international economic climate, it removes money from the very consumers whose spending is crucial to drive it, whilst risking a huge surge in unemployment as the businesses that are the employers of Australia struggle, and downsize, and are forced to close.

For all the rhetoric in the Treasurer’s budget speech tonight about “sensible choices” and “intelligent investment,” this budget is little more than a lot of hot air designed to optimise Labor’s prospects at the September election, and to sabotage those of the Liberal Party when it attempts — as it will be entitled, upon its election, to do — to run a professional, competent and efficient government after six years of Labor chaos.

I wrote yesterday about the dangers of the Liberals moving a successful motion of no confidence in the Gillard government during the present session of Parliament: foremost of these was the real likelihood it would have to adopt Swan’s budget in those circumstances.

Ironically, Swan’s budget is so bad that it represents the single best pretext on which to move such a motion; and either way, far from delivering a responsible document, Labor’s final budget renders no useful service to this country whatsoever.

The Red And The Blue recommends, in the strongest possible terms, that readers take a similar view of the 2013 federal budget, and to spread the word: after six years of mistakes, it simply isn’t good enough.

Australia deserves better than this.