Conventional wisdom holds that an elected government’s first budget should be its bravest. Albeit with a micro-majority, Malcolm Turnbull is an elected prime minister, rather than merely a coup leader. So next week’s budget should be an opportunity to place his economic stamp on the country.
It’s becoming clearer what the budget is likely to contain: there’ll be ‘good’ borrowing to fund more infrastructure, especially railways; there’ll be some superannuation concessions for seniors who downsize the family home; there’ll be some savings that will annoy the hell out of the impacted sectors but won’t make much of a dent in the deficit; there will be some closing of so-called tax loopholes for big companies and rich individuals; and there’ll be some modest additional benefits for smaller business. That’s my reading of the annual pre-budget dance of the veils, coupled with my judgment of the Turnbull government’s risk-averse, Labor-lite character.
What there won’t be is an attempt to rein in the deficit by removing any direct benefits from people already receiving them. Ronald Reagan once joked that the deficit is big and ugly enough to take care of itself and Turnbull, it’s clear, is adopting the same insouciance!
Treasurer Scott Morrison is likely to outline a path back to a small surplus, just beyond the forward estimates. This will be based, not on cuts to spending, but on optimistic assumptions about economic growth, commodity prices and future spending restraint.
As usual with Turnbull government set-pieces, strong expectations of more dramatic change were created and messily debated, only to be dashed.
There will be no scheme to allow young people to use their super towards a deposit on their first home. After encouraging young conservatives like Assistant Minister Michael Sukkar to run with it – as with the GST, state income taxes, and penalty rates – the Prime Minister then got cold feet.
That’s a pity. Why shouldn’t tax-advantaged compulsory savings be used, first, for housing when people are young and need it; and, only then once they have had a go at home ownership, for retirement when they are older?
Yes, it would mean slightly higher pension dependence in a few decades; but, even as it stands, notwithstanding compulsory super, 80 per cent of elderly Australians are still expected to receive a pension.
And making people’s compulsory savings more available to them rather than to industry super-fund managers would have brought on a massive fight where the government was on the people’s side and Labor on the unions’. This is so typical of Turnbull: let your own people down in order to avoid a fight with Labor.
Tony Abbott’s attitude was different. He wasn’t averse to a fight with his own people if he thought it necessary. But he never shirked a fight with Labor.
I expect a stark contrast between Turnbull’s post-election budget next week and Abbott’s in 2014. Strong objections could be raised (and were) to each of the main measures in that budget but it was a clear attempt to generate long-term budget repair by serious structural reform. It was politically risky (riskier, it turned out, than Abbott had anticipated) but the 2014 budget remains by far the most economically responsible one since Peter Costello’s first, way back in 1996. It wasn’t nearly as draconian as critics claimed, but it certainly didn’t assume that there was a painless way back to strong and sustainable surplus.
Abbott has been caricatured as a disciple of B.A. Santamaria with no interest in economics. In fact, as the 2014 budget showed, he’d thought long and hard about how to combine good economics with good values.
Paying the price of two cups of coffee to visit the GP; making young people work or study rather than go on the dole; having the same rate of indexation for pensions as for other benefits; making the states take more financial responsibility for the schools and hospitals they run; and removing benefits from better-off stay-at-home mums once their kids were at school were all measures to encourage a more self-reliant citizenry.
If they’d succeeded in the Senate, there would have been scope for the kind of ‘jobs and growth’ tax cuts that Malcolm Turnbull talks about but can’t and won’t deliver.
In fact, the changes that Tony Abbott is currently canvassing – freezing the renewable energy target, and Senate reform to allow a joint sitting to pass twice rejected bills without the need for a double dissolution election – would galvanise the conservative side of politics and generate a massive contrast with Labor. It’s true that Abbott is a divisive figure. But he polarises the conservative side of politics against their political opponents. Turnbull is equally divisive, but in a different way. He polarises his own side of politics between those who feel obliged to support the leader come what may; and those who think he’s a carpet-bagger with no real commitment to conservative values.
A mistake that naïve commentators often make is deploring ‘divisive’ politics. Consensus is never achieved by papering over real differences. Consensus is only achieved by winning an argument, and that normally means demonstrating that a particular approach works far better in practice than its alternative. For instance, there is now a consensus of sorts on border protection policy. It wasn’t achieved by meeting Labor half way. It was achieved by putting into practice a policy that even some in the Coalition felt squeamish about. And by making it actually work to stop the boats.
Abbott was crystal clear that we have a budget deficit because spending is too high. Labor thinks we have a budget deficit because taxes are too low. And Turnbull, typically, falls somewhere in the middle: reining in a bit of spending here and removing a tax concession or two there. It’s why people think he doesn’t stand for anything and has no economic narrative.
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