Budget 2016: Cautious, Constrained, Responsible Without Sass

SHORT OF BORROWING billions to bankroll reprehensible recurrent spending — as Labor spent six years doing in office — the 2016 budget is probably the nimblest item that could have been fashioned from almost non-existent means; hemmed in by high deficits and an opposition that has flatly blocked all attempts by the Coalition to fix them, Treasurer Scott Morrison has offered the government a bauble when there is literally nothing better to sell.

If you expected very little from Scott Morrison’s first budget as Treasurer, then this morning you are probably not disappointed; that’s not to say the budget was bad, but that it represented the product of the best fist that could be made of the task in difficult economic circumstances and walled in by oceans of budgetary red ink.

The Labor Party is crowing today about mythical unfunded tax cuts and other programs — and we will come back to them — but on face value, Morrison has done all that could be asked of him in delivering a budget that charted a middle course between the increasingly urgent need to put a scythe through unfunded and wasteful Labor spending programs on the one hand, and to provide the government with a benign (and even modestly generous) document that would allow it to fight an imminent election as a responsible manager on the other.

And in fact, with an eye to deteriorating opinion polls and the very real danger of election defeat, the budget appears as oriented toward neutralising ALP advantage as with any concern for the implementation of any orthodox program of Coalition initiatives.

The truth is that there is very little for most people to get either excited or angry about here, although there are exceptions; smokers (and I’m one) are just about ready to tell governments of all stripes to insert their taxes where the sun doesn’t shine: nobody denies smoking is bad for you, but the fatties who are eating their way into an obesity-initiated diabetes epidemic that will soon dwarf the impost of smoking-related illness on the health system, or boozing types who cause so much social damage in addition to the costs of treating alcohol-related illnesses, have been left alone once again, and any righteous prat who thinks rising tobacco taxes are clever in that context ought to recognise that this is no health measure in any way, shape, or form.*

Similarly, families — waiting on the government’s much-hyped childcare revamp in the face of ballooning costs — have been made to wait another year; some decry this assistance as “middle class welfare” and perhaps it is, but the hard truth is that no childcare usually equals no second income in most lower and middle class families: the costs were compounded under Julia Gillard by Labor’s carer ratios, as accredited centres are required to have one qualified professional for every five kids in attendance, and it’s parents who pay for this in rocketing day fees.

And some high income earners will surrender several billion dollars in cuts to superannuation concessions that I would suggest most will barely notice, or miss.

But for the most part, the initiatives in the budget — whilst mostly welcome — are unexceptional, and are largely a shuffle of relatively small amounts of money.

Abolishing the high income surcharge for those earning more than $180,000 per annum is welcome, and should be applauded; this impost — not supported by this column in any way when announced in 2014 — was “sold” as a temporary measure and as such, the government deserves acknowledgement for keeping its promise in the face of calls from Labor and the Communist Party Greens for it to be retained permanently.

The modest tax cut for average wage earners, lifting the threshold for the 37c tax bracket from $80,000 to $87,000 has merit, removing a bar to incentive for this cohort to work harder without incurring higher levels of taxation; it should be emphasised that both the value of the tax cut and its cost to the budget are modest, whatever Labor “leader” Bill Shorten and his shadow Treasurer, Chris Bowen, have to say about it.

And just on that point, Bowen’s lament that there is nothing in the budget for the lowest income earners should be ignored: if you earn less than $20,000 you pay no tax as it stands, and with the various offsets, subsidies and other income support measures provided for low income earners, those on $35-$40k pay no net tax. If you don’t pay tax it’s an oxymoron to suggest you deserve a tax cut. What Labor really wants to give to low income earners is a handout to purchase their allegiance, and with the budget still in the state Labor left it in, there’s no money for that even if Morrison wanted to oblige (which I doubt).

I do think — as we’ve discussed over the past month or so — that the government has taken a calculated risk in straying onto Labor’s preferred turf with this budget: tobacco tax hikes, superannuation changes and a “crackdown” on multinational tax avoidance are all issues the ALP has rabbited on about since it lost office in 2013, having failed to solve in six years the very problems it immediately began to insist were so urgent.

And the small amounts of extra money earmarked for Health and Education will buy the Coalition little favour among the lobbies who fret over raw dollar amounts as symbols of adequacy in these portfolios, however well targeted they are, and will fuel Labor’s attempts to trump the government in these areas.

But the tax relief for small businesses — cutting the applicable rate from 28.5% to 27.5%, and on a scaled basis eventually to 25% for all businesses within a decade, is to be lauded: business taxes in this country are among the highest in the developed world, and any relief that can be delivered is an investment in future jobs and opportunities for growth.

Similarly, tightly targeted measures for low income workers — including mothers returning to the workforce after childbirth — offers the government tools with which to appeal to the “battler” constituency often identified with the Howard government, and which the Turnbull regime desperately needs to keep onside if it is to have any hope of retaining office.

And the “jobs plan” announced by Morrison to target youth unemployment — PaTH — appears, whilst cumbersome at first glance, to represent a new (or new-ish) strategy to package more meaningful vocational training with incentives to employers to trail young people before deciding whether to hire them permanently, with additional incentives wherever they do.

There are some heroic assumptions in the budget: the price of iron ore, for one thing, remaining at or near $55/ton; if that collapses further (as it did last year) then Morrison’s revenue predictions are going to have a huge hole punched into them.

And predictions of GDP growth of 2.5% in the coming year, rising to 3% for the remainder of the forward estimates period, seem hopeful against the backdrop of a softening economy and the threat of a second global financial crisis just as world markets have barely recovered from the first.

In this context, the prediction of a $39 billion deficit this year, falling to $6 billion in four years’ time, may prove heroic indeed.

Do I think this is a good budget? It’s OK, but as I said at the outset, Morrison has fashioned this document from virtually non-existent means: it isn’t quite a case of making a silk purse from a sow’s ear, but it is cautious, responsible without being flashy or sassy, innocent of the multi-billion dollar pork barrels that too often get wheeled out this close to an election, and gives the government an inoffensive blueprint to take to the people when yesterday it had nothing substantial to offer.

Do I think the electorate will buy it? It should, if Morrison and Malcolm Turnbull are the astute salespeople we were promised they were back in September last year, when Turnbull rolled Tony Abbott out of the Prime Ministership, but the precedent of their efforts on tax “reform” earlier this year hardly inspires confidence.

For if they aren’t — and this is a certain bet — when the full fury of Labor’s outrage and fear campaign cranks up to top gear today and tomorrow, the government will sustain enormous damage; already trailing in the polls, Turnbull and Morrison are going to need to be on their game if this budget really is the spearhead of the Coalition’s electoral positioning for a win on 2 July.

As for the ALP, it has no right to talk of unfunded policies — it was the greatest practitioner of this contemptible political art under Kevin Rudd and Julia Gillard — and it has no right to try to blame the Coalition for continued high deficits, given the problem was created on its own watch, and it has gone out of its way ever since through marshalling opposition in the Senate to ensure any attempt to fix those deficits has proven impossible.

At the end of the day, voters’ judgement of this budget may come down to a contest between the sales skills of the Prime Minister and his Treasurer, and the capacity for Labor to make its latest barrage of bullshit convincing to enough swinging voters to get it across the line.

For now at least, the government has something to sell that has some merit. What kind of shape it’s in after a day, a week, or two months of the coming ALP onslaught will determine the Coalition’s fate — and the political future of Scott Morrison with it.

 

*Comments about the positive aspects of more tobacco tax will be deleted. Not today, thanks.

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