I would like to state upfront that I already had the word ‘trickery’ in this title before Bill Shorten used it in his Budget Reply speech. I could say he stole it from me but I suspect he thought of it himself. It is such an appropriate word for this budget.
One thing Bill Shorten didn’t mention was the blatant strategy adopted by Abbott and his minions in the lead-up to the budget. First there was the approach that the budget would be ‘dull’ and ‘boring’: the government basically trying to tell us ‘nothing to see here’, forget about it and just go about your normal business. They were initially telling us that, after last year, this year’s budget would be a do nothing budget that we could ignore.
Then there was an apparent change. They had three new words: that the budget would be ‘reasonable, measured and fair’, that it wasn’t quite something to ignore but nothing to worry about, something that would not raise our hackles. And after the reaction to the previous year’s budget, this one would be ‘fair’. (I will come back to that word.)
Then came the final stage in their three-part plan. (Why do they have a fixation on ‘three’?) As you are aware the government began making announcements about budget measures prior to budget night but they were the ‘positives’: such as the child-care package and the benefits of the changes to the pension, including dropping the previous idea of linking pension increases to CPI rather than growth of the average wage. At that time they weren’t saying very much about how the new measures would be paid for — although they occasionally mentioned, when pressed, that there would be off-setting savings, there wasn’t much in the way of detail regarding those savings.
They had learned the lesson from the previous year when their mantras of ‘debt and deficit disaster’ and ‘Labor’s mess’ had failed to convince people that the draconian cuts were necessary. This time they were trying to influence our mind-set going into the budget: rather than focusing on a negative, they wanted us to see the positives that would be announced and were making sure we noticed by announcing or leaking them in advance. We were being softened up and, to my mind, it was so obvious and contrived (partly because it was such a stark contrast to last year) that it was almost laughable. You could see that it was planned, that ministers were still being given their daily messages, the lines they needed to follow at ‘door stops’ and interviews: first, ignore the budget; then don’t worry about it, it will be measured; and finally, ‘gee whiz’, look at this, look at the offer we have for you. Do they really think the voters are so stupid as not to see through that?
After last year when their budget was widely lambasted as unfair, this year they decided to come out fighting and try to control the debate around that word ‘fair’. Now they were claiming that everything about this budget was ‘fair’. Again they were trying to shape our mind-set to their interpretation of the word and not let it be controlled by the Opposition and the media. Rather than being a word that could be used to attack their budget, this time they were trying to attach it in our thinking to what was to come on budget night.
While it may have been ‘fair’ to reduce the asset limit for the part-pension, they took fairness too far when they claimed that women receiving both government-paid and employer-provided parental leave were ‘rorting’ the system. Hockey even refused to rule out that it could be ‘fraud’ when Laurie Oakes used that word. At the very least, it was ‘double dipping’. The new proposal was that the stay-at-home parent (they seemed to have forgotten that men can also claim parental leave) could access only one form of parental leave and that this was ‘fair’ because we all know that double dipping is unfair (unless, of course, you are a board member of four or five companies and government authorities/inquiries/businesses). As
others have pointed out, when the current government system (based on the minimum wage) was introduced by Labor it was designed to operate
with employer-provided schemes to allow people to top up their income or to extend their period of leave: in other words, it was a compromise proposal to support parental leave without becoming too expensive for government (as Abbott’s gold-plated version would have been — which was one reason it was abandoned; the other being that he was asking big business to fund it with an extra 1.5% tax).
To further undermine their argument, it turned out that some Liberal ministers’ wives
had used both. They tried to justify it by saying that the current system allowed it — but was that ‘fair’? It was double dipping! They told us so. If they already knew it was double dipping, why didn’t they act on principle and refuse the additional support?
On budget night, they finally made clear that their new child care package would be funded by major changes to Family Tax Benefit Part B. This was something left over from the previous budget that had not passed the Senate but now it was being ‘sugar coated’. While people may like the new child-care package, they won’t get it unless the savings measure is passed by the Senate — in plain language, a bribe. Of course, it is also tied to the change to parental leave entitlements. People will be forced to accept the new child-care package because they will be forced back to work earlier if they can only receive the minimum wage for a maximum of 18 weeks.
These approaches are justified by the government (by Scott Morrison) in terms of being ‘workforce’ measures. They are not about supporting people (welfare) but only supporting people who are in work or seeking work. They are aimed solely at improving workforce participation.
That fits with the government’s philosophic approach that focuses on individuals and families and their role in the economy — ‘communities’ do not exist (it was the same under the Howard government). In Hockey’s budget speech the word ‘community’ (or communities) is used in only three contexts: ‘regional communities’ (probably The Nationals’ influence), assisting jobseekers where ‘community workers’ are mentioned, and in relation to terrorist threats to ‘our communities’. Families are mentioned 11 times. For the Liberals, a community cannot exist in its own right but only as an agglomeration of families and individuals. There is no such thing as ‘community spirit’ because that is counter to the spirit of ‘individual self-interest’ that is the basis of their philosophy and, they believe, of economic growth. You will rarely, if ever, see a Liberal government of recent ilk providing funding for ‘community’ services — only services for individuals and families (even if they are delivered by ‘community’ organisations).
Aside from the changes to Family Tax Benefit Part B, there are other measures in this budget that are left over from the previous budget. The government didn’t mention them but
Bill Shorten, state premiers and media commentators did. The big one is the reduction in funding ($80 billion) to the states for schools and hospitals over the next decade. Although the premiers will be meeting with Abbott at a ‘COAG retreat’ in July to discuss that, the savings from the measure are built into the forward estimates. That is one of a number of matters that make a mockery of Hockey’s claim that the government has established a ‘trajectory’ to a surplus. If the government has to find at least some of that money to meet state demands, surplus projections move ever further into the future.
A future surplus is now almost entirely dependent on real GDP growth and the commentators have suggested that the estimates contained in the budget are optimistic: they are higher than the current estimates of GDP growth by the Reserve Bank. There is nothing inherently wrong with allowing for GDP growth except when it is optimistic and future revenue does not match the forecasts based on that optimism (see my piece ‘
Are budgets worth the paper they’re written on?’).
The other aspect that will contribute to better future revenue for the government is ‘bracket creep’, when pay-as-you-go wage earners move into higher tax brackets as their wages rise. Talk of reducing taxes to overcome the effect of bracket creep has disappeared for now in favour of achieving a surplus.
Neither of those was spoken about by the government and yet they underlie its future projections. They could possibly have gotten away with that if they hadn’t made such a hue and cry about the ‘debt and deficit disaster’ the previous year. Last year the government had to fix ‘Labor’s mess’ — which, they said, comprised high spending and growing debt. This year that doesn’t seem to matter. No wonder people are left wondering which is true — one budget must be based on a lie but which one? Or are they both based on lies, just different lies!
Associated with that, they again rolled out, when interviewed after the budget, that they had inherited a
$48 billion deficit (as I recall, it was $46 billion — I am not sure where the extra $2 billion has come from, other than the rubbery figures of Hockey-nomics). That figure has been disproven previously. The actual deficit at the time was $30 billion: the additional $18 billion (or a major 60% increase in the deficit) came from decisions made by the Abbott government after it came to office and before it issued the 2013 MYEFO. Their decisions also added to future deficits and debt by abandoning Labor’s revenue measures (see ‘
Abbott continues to tell porkies’).
I will concede that on the ‘plus’ side, the government realised at last that the economy was faltering badly (that it wasn’t just Wayne Swan’s fault) and it needed to do something to stimulate it — hence the tax reduction and accelerated depreciation for small business. Unless the economy grows, and business invests and wages rise, the government’s revenue will remain in the doldrums. So on this side of the equation they have their new catch-cry: ‘have a go’. It should be noted, however, that one of the measures it had previously removed was Labor’s accelerated depreciation scheme: it wasn’t quite as generous as the current proposal but it was built into the system whereas Abbott and Hockey’s proposal is
only for two years — what happens after that we don’t yet know. Might I suggest, however, that the $5 billion now for small business will become the same $5 billion for the child care package when it is introduced in
two years’ time — that’s a neat trick if they can pull it off!
Now just a few figures (after all we are talking about a budget). First it is interesting that the main income figures are ‘cash accounting’ but the main spending figures are ‘accrual accounting’: there are tables that allow one to match the systems but why the main figures are done in two different ways I don’t know. (A clue to the two accounting methods in the budget documents is contained in the words: if it refers to ‘revenue’ and ‘expenses’, then it is accrual accounting, but if it refers to ‘receipts’ and ‘spending’ or ‘payments’, it is cash accounting.) Following my piece, ‘Are budgets worth the paper they’re written on?’, I will, for consistency, stick with accrual accounting figures.
For 2015-16 they are estimating revenue of $405.4 billion which is more than $21 billion above the estimate for this year: this year’s estimate has come down from $411.6 estimated in 2013-14, to $391.3 billion estimated in the original budget, to 385.9 billion in the MYEFO and now $384.1 billion. Revenue has come in below the budget night estimate every year since 2010-11, so why should revenue now jump by 5.5%? There is no apparent answer other than the government
hoping it will based on a few ‘
green shoots’ as Hockey called them. This positive approach seems to be a result of the government finally coming to the realisation that continued negativity, although perhaps good politics, was having an adverse impact on business and consumer confidence and thus also impacting the economy — so from a false sense of doom and gloom they have moved to a false sense of optimism after successfully creating doom and gloom.
Government expenditure for 2014-15 has also increased above the original budget night estimate: from $414.8 billion to $420.3 billion. No doubt that can be blamed on the Senate not passing all of their ‘savings’! Expenditure for 2015-16 increases to $434.5 billion, an increase greater than just the concessions for small business but in the budget they claim:
… new spending measures will be more than offset by reductions in spending elsewhere within the budget …
The final expenditure figure does not seem to justify that claim.
Their continued claim to be a low taxing government is also undermined by the fact that taxation revenue in 2013-14 was 21.4% of GDP but has risen to 21.9% in 2014-15, rises to 22.3% in 2015-16 and rises each year to reach 23.4% in 2018-19 (that is only taxation revenue). Total revenue rises from 23.5% of GDP in 2014-15 to 25.2% in 2018-19.
Overall, as
Jonathon Green wrote:
There is a purity about the play of politics in this budget week. Nothing is, but what I say it is. I can be a big spending, big taxing government — verifiably so — and yet claim that the opposite qualities are in my very marrow.
It is very much a Humpty Dumpty budget because it does things that they say they do not do and it is tricky because even when they are doing something it is not what it appears.
What do you think?
Following the budget, the Fairfax-Ipsos poll put voting intention at 50‒50 although both Newspoll and Galaxy suggested the budget had not made any difference to the government vote. Do you think people have seen through the budget? Should the budget have done more to boost the economy? Or, as many commentators have suggested, was it just a ‘political’ budget?
Come back next week when 2353 considers the NAPLAN test run in our schools and asks whether it provides a guide to help teachers and schools or creates a competition between schools.
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