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Mar 7, 2012

Eventually reality will hit the opposition's fiscal frolic

The Coalition has serious budget problems and they won't escape the consequences forever. A series of fumbles makes them look totally at sea on fiscal strategy.

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The sporting cliché is you only play as well as your opponent allows you. The alternative is occasionally true, too: sometimes you play as badly as your dud opponents.

With the spotlight on the Labor leadership stoush and the Carr-for-Canberra reverse wedgie (© Andrew Probyn), the pressure, to the extent that they’ve been under any pressure since April 2010, should have been off the Coalition. Instead, there’s been a series of fumbles and unforced errors.

There was Abbott’s “I’ll be prime minister” line, the sort of thing not so much hated by voters as claimed by press to be hated by voters, and covered accordingly. Then there was the reaction to Bob Carr’s appointment, after the Coalition had spent last week basing its entire political attack on the government over his non-appointment; the indefatigable Christopher Pyne was sent onto Lateline on Friday night to perform the alarums and excursions necessary to cover the retreat on that front, only to be forensically dissected by Emma Alberici.

And then there’s the Coalition’s budget problems. The Coalition is in a deep, deep hole on its budget plans, but judging by the noises coming out of the darkness, they’re still digging.

As former Gillard adviser Stephen Koukoulas pointed out this week, Joe Hockey, in committing to have a lower tax:GDP ratio than Labor, casually signed up to finding an extra $80 billion-odd in savings over forward estimates. Even if it’s delayed until the first Hockey budget in May 2014, it’ll cost an extra $24 billion.

Yes, that’s on top of the current $50-70 billion they need to find. If you had some magical combination of Peter Walsh c.1987 as finance minister and Peter Costello c.1996 as treasurer, you’d still be struggling to achieve that level of savings.

Then there’s paid parental leave, Abbott’s totem for his conversion from a 12th to late 20th century view of women. It’s hard to avoid the impression that Andrew Robb, despite subsequent backtracking, let the cat out of the bag on the scheme this week when he said nothing had been finalised. At the very least, it’s a preview of the stoush likely to happen in ERC and budget cabinet in the lead-up to May 2014.

The problem for the Coalition scheme isn’t just its huge cost compared to Labor’s scheme, which is based on the national minimum wage: the minimum wage will be the baseline of the Coalition scheme, but anyone earning above that will receive up to $75,000. It’s that the scheme will grow much faster than Labor’s.

That’s because the national minimum wage grows more slowly than average weekly earnings for women. The minimum wage has grown on average 2.7% per annum since 2008 — although it wasn’t increased at all that year. Full-time adult female earnings grew on average 4.7% per annum over the past five years. In 2007, it grew at 5.4%. The Coalition, correctly indexed the scheme cost at 4.7% on its 2010 costings. On that basis, the scheme will cost $4.7 billion in it first year and total about $20 billion over forward estimates and keep growing rapidly. In years with high jobs growth, faster wages growth will accelerate that growth.

That $20 billion figure is a lot of money to fix Tony Abbott’s problem with women voters. There are image consultants who’d charge a lot less and, judging by Abbott’s current unpopularity with women voters, do a better job.

There remains, too, the problem of the Coalition’s costing of its direct action policies on climate change. This is grossly underfunded in terms of the price per tonne of abatement, if we assume the Coalition is at all serious about achieving a 5% reduction target by 2020, let alone any more ambitious targets. The fact that few in the media other than Lenore Taylor have focused on the profound problems of this policy doesn’t mean a Coalition government won’t have a serious funding problem with the policy. For the moment, however, the opposition’s stance on this revolves sticking its collective fingers in ears and chanting “not listening.”

Joe Hockey is giving an economic speech early this afternoon intended as The Australian Financial Review declared today, to be a “spine stiffener” for the opposition. The real job the Coalition’s economic team needs to do is start giving comfort it’s not totally at sea on its fiscal strategy. Sooner or later reality will hit.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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188 thoughts on “Eventually reality will hit the opposition’s fiscal frolic

  1. B.C.

    [ GeeWizz Posted Wednesday, 7 March 2012 at 5:59 pm

    Those “facts” are complete wanks.

    For example why does it ask this:
    What has been the lowest cash rate ever recorded under either the Howard or Fraser governments*?
    * Prior to 1990, using 90 day bank bill.

    Why exclude data after 1990? What is this idiot playing at? So he includes “Howard Government” in his question, but then rules out a Howard Government by saying prior to 1990. The Howard Government only got into power in 1996, is this bloke completely stupid? ]

    He isn’t excluding data after 1990. Prior to 1990 he’s using the 90 day bank bill rate as a proxy for interest rates. In 1990 the RBA introduced the cash rate – that’s the rate everyone now talks about when the RBA changes interest rates. See The Implementation of Monetary Policy: Domestic Market Operations:

    First, since 1990, the Reserve Bank has announced the desired stance of monetary policy in Australia in terms of a target for the interest rate on overnight funds borrowed and lent in the money market; this interest rate is known as the cash rate. It is the interest rate the Reserve Bank’s domestic market operations directly affect. When changing monetary policy, the Bank announces a new target level for the cash rate.

    Generally speaking the 90 bank bill rate tracks pretty closely to the cash rate. So it’s not a bad proxy for the cash rate and really the best figure to use when comparing current official interest rates to what we had prior to 1990.

    Note also that the only reason why mortgage rates weren’t higher when Howard was Treasurer was because bank mortgage rates were capped at 13.5%. Financial deregulation, an important and necessary reform of the Australian economy removed that cap.

  2. GeeWizz

    [“There are some very good reasons why some businesses are small. Mostly because they are piss-poor ideas, undercapitalised and lazy.”]

    Comrade Pete,

    It makes it easy for me to sleep at night to know I make a lot more money than you could dream of making in your lifetime.

    I don’t wish for a “big business” because that means more stress, more problems, more headaches. I like my low stress lifestyle… love it in fact. Why work a job if you don’t enjoy it? The reality is that I don’t want my business to get any larger, not yet anyway.

    The great thing about this country is that anyone can start their own business… even a communist like you Pete. You aren’t told what your job and destiny is in life, you get to choose your own. One thing I have noticed of this government we have in charge in the moment is that they hate successful people… they hate people who work hard… they hate people who took risks and their own money to get where they are. When was the last time you heard of this government doing something to help small business owners? NEVER. They hate us.They want everyone unionised, everyone in some government department and anyone else taxed to the eyeballs. Success must be shunned… and those who are successful punished.

    I will give you an example. Under Labor anyone who makes over $50K a year has to pay the carbon tax without getting any compensation. According to Labor anyone over $50K is “rich”.

    But what if that person is a concretor who starts work at 6am and finishes at 6pm every day in the hot sun, in a backbreaking job which they may only be able to do for 10-20 Years? Are these people “rich”? Should they continue to be punished by Labors class warfare for working too hard?

  3. GeeWizz

    [“You’re not trying to suggest that as well as working dawn to dusk down the mine you’re actually allowed to employ people in this “successful” small business of yours are you?”]

    Comrade Petes,

    I never claimed any of that, you are reading into what you want.

    What I said was that people who work hard jobs, long hours are hit with all Labors new taxes, just as much as some paper shuffler in Canberra getting paid some ridiculous amount to do very little in air conditioned comfort.

    When Labor talks about the “rich” they never mention a lot of these “rich” people work their ar5es off, put their own money on the line to get where they are and not all have james bond lifestyles. Heck some of them work jobs you couldn’t have nightmares about. Labor like you seem to be stuck in the 60’s… those big rich corporations own everything, the top management getting paid with wheelbarrows of money while the poor blighters down the bottom get peanuts.

    It’s just not reality anymore… this is the 21st Century, you don’t need a lifetime job by a big company throwing a few pennies your way, these days anyone can go out on their own and make their own fortune. Wealth has been decentralised like never before, even if those who are rich are richer than ever before, there are millions more rich people.

    Labor just doesn’t understand this. Australia’s “working class” are no longer an underclass. A lot of them are rich. A lot of them want to become rich. They do not look up with envy, they look up with asperations to achieve the same goals.

    I see a lot of “rich” trades people, small business owners, etc etc. Should I be angry at them for working hard, working long hours and putting everything at risk to get where they are?

  4. Peter Ormonde


    “Wealth has been decentralised like never before, even if those who are rich are richer than ever before, there are millions more rich people.”

    And all this while struggling under the yoke of the nanny Gillard state with its unfair industrial laws, taxes and the flood of “illegal” immigrants etc etc etc.

    You cannot even spell “aspirations” let alone would you know what they mean to real people.

    And fortunately most working people aspire to much more than accumulating more stuff… more money… more toys. That is what the Harvey Norman ads tell you, I know, but people lead much more complicated lives than that. They aspire to have happy, healthy kids who love them who work at school and will get a few opportunities that they might not have had themselves. They want to be happy and satisfied. They do not want to end up like Gina Rinehart – hated by her children, living a life overwhelmed by greed and an insatiable hunger for more.

    It’s not about envy Troofie … it’s about fairness and what we actually want out of life… about what is really important. You seem to think this is all about money. It’s not. We want much, much more than that.

    As for the “decentralisation” of wealth and the “millions of rich people” you see on Desperate Housewives, this is a serious delusion. Send us some numbers – the slightest bit of evidence at all for this fantasy. Not true – except maybe in China.

    How do you think Clive Palmer makes his money? Digging up rocks? A printing press? Or Gina? The sweat of a hard day’s labour? No, they get it from someone else. And so on down a long line. And at the bottom of that heap, the source of all that wealth are people who work, who sweat, who make things.

    You really need to read a bit Troofie … not just the newspapers or the Menzies House crib sheets …. books…. one’s without pictures.

    See Troofie, at the moment you are making all this stuff up. It is a fantasy world you are lioving in – part wishful thinking, part delusion. I suspect, given the nature of your views, that you never leave the house ‘cept to get more pills and foil. I reckon you have no friends (outside of us here on Crikey) and even your fleas hate you.

  5. Peter Ormonde


    The GINI index is a measure of inequality within a country rather than absolute wealth. It has some value but the statistical methods underlying it tend to obscure the actual living conditions (wealth if you like) between countries. It is also largely restricted to those countries for which statistics are actually available.

    A far more sophisticated analysis comes from the UN’s Human Poverty Index which takes living standards as the criteria for comparison.

    On this scale the following “league table” emerges:

    1 Sweden
    2 Norway
    3 Netherlands
    4 Finland
    5 Denmark
    6 Germany
    7 Switzerland
    8 Canada
    9 Luxemburg
    10 Austria
    11 France
    12 Japan
    13 Australia
    14 Belgium
    15 Spain
    16 UK
    17 USA
    18 Ireland
    19 Italy

    The interesting thing about this measure is that it also records the proportion of the population living below 50% of the median income. That ranges from 5.4% of the Finnish population to 17% of the population of the USA.

    The other measure you could look at is the Human Development Index. Adjusted for inequality, Australia comes at no 2 the USA at 23, once again following all the Scandinavian high-taxing, big government nanny state countries. China comes in at 22!!!

    Unfortunately longitudinal studies are not particularly reliable due to inconsistent data collections year on year.

    But on every available measure the bastions of free enterprise and small government produce far less desirable social and economic outcomes. Worth a google folks.

  6. Liz45

    I think this is funny. The Tory supporters have ‘lost their voices’? Convenient laryngitis of the ‘fingers’ so to speak!

    Lindsay Tanner’s speech at the National Press Club detailed the enormous increases to the Howard Govt – the biggest government in Australia’s history? As I’ve stated on another post, Boswell’s staff was increased by 9 people – just to help him get re-elected?

    @GEE WIZZ – Re Craig Tomson? The best way to ensure that he avoids a trial (that’s IF he’s charged?) is to speculate and find him guilty in the media. I think he’s already got enough evidence for a Barrister or QC to plead that he wouldn’t receive a fair trial. You’re just helping that cause along. Too stupid by half! You Tories have a collective IQ of definitely below 80!

    I think you should see a doctor about your condition? The inability to see any wrong in the Tories? And the second, thinking that we’re either brain dead or stupid!

    Such a shame that you can’t advocate for someone with ability and aptitude to be Opposition leader. If Abbott’s a Rhodes Scholar, than I’m a super intelligent whiz kid with a photographic mind. He’s petulant, childish and plain stupid – not to mention that he walks like a primate! ( my apologies to much loved primates). Wouldn’t you think someone would take him aside and suggest that he modify it somewhat? Very scary indeed!

    Rhodes Scholar indeed! Bob Hawke, yes, but Abbott? Disagreed with Bob on lots of things, but at least you knew that he was intelligent. He was articulate, well read and not a petulant brat, who does ‘dummy spits’ when found out to be lying! I still have that Lateline footage when Tony Jones made him admit to seeing/conferring/taking ‘orders’ from Pell re funding for private schools. The look on Abbott’s face was a classic – Tony should’ve ‘dropped’ dead on the spot!

    Incidentally, has Abbott written any of his ‘policies’ down? Has he written down his parental leave policy for the rich? He was the one who said he’d say or do anything to get elected! Not me! Unless it’s written down …………..

  7. Suzanne Blake

    This is the Independants Contractors view on Gillards ‘small business’ initiatives. Hardly a ringing endorsement….again

    After last week’s small business media blitz by the Gillard government, most people in small business must feel they have a sign painted across their forehead screaming ‘come in sucker!’ Am I being excessively politically one-sided? Probably yes! But the assessment is based on facts.

    Two weeks ago Prime Minister Julia Gillard placed the small business minister, Brendan O’Connor in cabinet. That’s potentially a good thing. But it’s only good if the minister then has the grunt and inclination to fearlessly defend the small business space.

    I explained the politics behind this cabinet move at the time of the appointment (Carving out O’Connor’s small business task, March 5). Labor must secure a sizable chunk of the small business vote if they have any chance of winning the next election. That’s their motivation. However in the space of two weeks they’ve blown out of the water any small business credibility they may have created.

    Last week Gillard proudly announced the setting up of a federal Small Business Commissioner, something small business has been calling on for some time. Tony Abbott has long had a policy to do this.

    Following the morning announcement, Gillard rushed into parliament crowing about how brilliant the government is for small business. They had a successful couple of media days doing this. They now have plenty of small business friendly sound bites and images to push into future election advertisements.

    But on the same day they were announcing the commissioner they were, behind the scenes, attacking thousands of small business people. With the help of the Greens they rammed two bills through the senate.

    One bill literally declared any self-employed independent contractor working in the clothing industry to be an employee subject to industrial relations laws. This means that anyone (mostly mums working from home) who wants to earn extra money running a small sewing business, is forced to be an employee by decree of Julia Gillard. It’s the death of the right to be self-employed in the clothing industry.

    The second bill has a similar outcome in the transport sector for owner-drivers. That bill established a new tribunal that will take away the right of owner-drivers to control the prices they charge for their services. It’s institutionalised price fixing of commercial contracts and will result in huge market distortions in the trucking industry.

    It may potentially breach competition laws and effectively outlaw self-employed small business in trucking. If any businessperson cannot control his or her own prices they are not effectively in business.
    These small business destruction bills are part of the extensive roll out of a union anti-self-employed/small business campaign launched in November last year. I debated this with the union boss Ged Kearney when they started the campaign.

    What the Gillard government and the broad Labor movement don’t ‘get’ is that when they seek to kill off self-employment they strike at the heart of entrepreneurship. This damages everyone in Australia. Labor consistently proves that it acts within a ‘corporatist’ framework. It’s big business, big government and big unions doing deals. But if anyone in big business bucks Labor’s deal-making, Labor attacks them too.

    Now enter the Small Business Commissioner undertaking! It’s federal Labor conning again.

    The first Small Business Commissioner was introduced in Victoria in 2003 under the Bracks Labor government. It’s primary task is to assist small business dispute resolution with large business and government departments. It’s been hugely successful but needs some small strengthening of powers.

    Last year Small Business Commissioners were introduced in Western Australia, New South Wales and South Australia. South Australia has given their commissioner slightly stronger dispute resolution powers than the Victorian model.

    But Gillard’s Small Business Commissioner seems to have no powers, according to the information released. The Commissioner will simply be a flapping mouth, able to talk to government about small business, and give opinions but do nothing of substance. Labor’s undertaking to small business people is lots of talk about pretending to do something but doing nothing.

    If the position of a federal Small Business Commissioner is to have any meaning it must include powers to resolve disputes between federal government agencies and small business people. We’ve covered several cases where the behaviours of departments is appalling. One case involved the Department of Employment and Workplace Relations and another involved a high profile agency (unnamed due to legal action occurring).

    The Abbott opposition has made a firm commitment to a real federal Small Business Commissioner/Ombudsman with dispute resolution powers for small business people in dispute with government departments. The Gillard government has stolen the media pitch but is doing nothing of any real value. Worse, they are engaged in a consistent stealth campaign against small business people.

    Ken Phillips is executive director of Independent Contractors Australia and author of Independence and the Death of Employment.

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