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May 20, 2013

Sudden outbreak of responsibility from both parties on budget

The Coalition's sudden enthusiasm for spending cuts is rather hypocritical -- but a welcome embrace of fiscal responsibility. Both major parties are lifting their game, improving the dire standards in political debate.

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Unexpectedly, Australia’s politicians have been infected with policy courage. And an opposition that was probably the most cynical and negative in Australian history has decided it can take a risk and not merely endorse some politically unpalatable spending cuts but even break the hitherto unbreakable rule of 21st century politics — never mention the GST.

The change from 2012, which was dominated by personal smear and an absurd opposition campaign against the carbon price, couldn’t be more striking.

In previous years, a bold decision like dumping the baby bonus and replacing it with a much smaller family tax benefit payment would have seen the Coalition and News Limited launching a coordinated campaign on Labor’s “class warfare”, notwithstanding Treasury spokesman Joe Hockey’s views on the age of entitlement.

This year, News Ltd has been all revved up and raring to go, but Opposition Leader Abbott has declined to play along, saying the “budget emergency” (which isn’t an emergency at all, judging by the Liberals’ plans for handouts) meant he might have to support it.

Indeed, The Australian Financial Review reported this morning the Coalition was considering opposing any baby bonus-style payments at all, and had begun walking away from its reflexive support for the iniquitous and hideously expensive private health insurance rebate.

There are plenty of dud savings in the Coalition’s list: slashing the humanitarian visa intake, punishing low-income earners on superannuation, delaying the 12% compulsory super levy. And don’t forget the $4 billion in unjustified handouts to forestall a Labor campaign on carbon price compensation. But it’s hard to go wrong with hacking into middle-class welfare.

“For a decade the GST has been a no-go area for both sides.”

Most of all, the Liberals are staring down a Labor scare campaign about tax reform extending to the GST.

For a decade the GST has been a no-go area for both sides. The slightest slip-up that suggested any willingness to consider any changes to the GST invariably prompted long bows to be drawn, huge leaps of speculation to be made and alarm bells sounded about a sinister agenda to lift the GST.

Now Abbott, while dancing around the issue, has declined to exclude the GST from his promised tax review. Of course, without the GST, such a review is entirely unnecessary while the Henry review sits unloved on Treasury bookshelves. Fixing the damage done to the GST by ex-Democrat head Meg Lees (while compensating low-income earners) would be a logical outcome from any serious tax review, and would go some distance toward relieving the pressure on state budgets across the country.

There’s considerable hypocrisy from the Coalition in all this. It’s not hard to Google up a statement, even relatively recently, from Hockey or another shadow minister defending or deploring a measure they’re now dumping or backing. But the hypocrisy is in the welcome cause of fiscal credibility.

It also demonstrates just how confident the Liberals are about victory, or more particularly about their capacity to resist a Labor attack on issues like the GST. Based on Labor’s form, the Liberal brains trust is probably right to believe Labor lacks the firepower to do them some real damage on budget issues, where voters trust the Coalition far more than Labor. That’s in contrast to industrial relations, where voters still regard the parties as far more evenly matched, and which accounts for Abbott’s enthusiasm for a moderate, step-by-step approach.

The result is, unexpectedly for the pre-election period of a parliamentary term in which the quality of political debate has reached a nadir, a sudden outbreak of responsibility on both sides and the bizarre spectacle of a pre-election budget dominated by a debate over who can wield the razor more effectively.

One of the virtues of the opposition’s belated fronting-up to fiscal responsibility is that it will get more practice articulating the case for complex or unpopular policy. One of the Labor’s biggest problems has been a learned helplessness when it comes to explaining policy that isn’t obvious or easy. The more you do it, the better you get, and the Coalition will discover it’s easier to do so in government if you’ve already done it in opposition, when the playing field is tilted against you.

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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24 thoughts on “Sudden outbreak of responsibility from both parties on budget

  1. Warren Joffe

    Ism glad to say that it has caught up with the group think in Canberra BK what has been obvious to me for over a year – as I have said on Crikey and to anyone that will listen. That is because it was clear it would be good electoral politics, safe electoral politics and a huge advantage for a new government which wanted to be able to be fiscally responsible without being accused of breaking promises to simply say “this election is about trust; we will tell you what we would like to do and will try to do, maybe not as soon as we would like, but we make no promises”. I still predict that, a short time before the election all policy projections which might be taken to be promises will be cancelled except for the promise to try and govern so as to be re-elected in 2016.

    I am disappointed however that you BK can’t see that some “middle class welfare” is acceptable. E.g. If one can’t afford to cut taxes so the government is taking (largely to transfer to other Australians) less than 46.5 per cent at the margin of a person’s income isn’t it reasonable to target the educated career woman who is already forced by mortgage payments, HECs, the requirement to buy health insurance and the perfectly reasonable desire to send her children to a private school (expecially if she has a high powered job which doesn’t allow her to keep a beady eye on the local state school) and give her and her husband/partner concessions on health and education. It is not in the interests of any of us that our best and brightest have one or two children in their mid 30s rather than three or four at average age 30.

    Correspondingly you seem to have gone quite goofy in your logic when you say “punishing low-income earners on superannuation”. I suppose you are critical too of tax concessions which allow high income earners, i.e. those who pay a lot of tax, to save for an OAP-free retirement without having to do it out of heavily taxed residue from income. There was a lot that Costello got wrong but is it not ridiculous to give people a taxpayer provided lump sum who will never earn or save enough not to be largely reliant on taxpayers – mostly other people’s children and corporations that other people have financed – to provide their income and health care in in retirement (assuming they were ever employed)?

  2. Warren Joffe

    @Mike Flanagan

    You go too far in calling the Labour [sic] government “prudent”. And why you say that has become evident in the last two years just puzzles me. What evidence has emerged since about May 2011 to demonstrate the government’s prudence? Apart from the scandalously mismanaged and wasteful response to the GFC after the very sound propping up of the banks and the first $10 billiion stimulus on which one might quibble over details but was pretty well designed to put a bit of a floor under dropping confidence, apart from all that which you may well not be referring to, was it not the greatest imprudence to keep on promising return to surpluses which was always unlikely to anyone with half a financial brain and was so imprudent that it contributed much to the government’s loss of credibility in the electorate?

    A fortiori, to attribute “acumen” is a joke. Acumen wouldn’t have engaged in a bit of highly selective cherry picking from the Henry Report and completely ruled consideraion of the GST off limits. Acumen would have ensured that the (as it turned out) unnecessary second stimulus package, as to most of it, could be phased down as soon as it was apparent that China was looking after us and confidence domestically had not collapsed us into recession. Acumen would have used the borrowed funds on economically productive infrastructure instead of school halls which are arguably more of an ongoing cost than a benefit economically speaking. No, acumen is shrewd which is the opposite of this government (and Rudd didn’t add shrewdness when you remember him going off to Copenhagen with a mammoth entourage boasting about Australia leading the world by word, policy and example only to find that the Chinese wouldn’t have him in the same room when they were meeting with the seriously important players).

    And how can one forget the NBN, most notably in how it came about as an overnight replacement for modest but failed policies on which Rudd was elected. Conroy took the package to Rudd and got his decision in the course of flight from Sydney to Brisbane. No messing round with real figures or cross-examining the experts. That shows “acumen”. Please don’t let them invest my granny’s money.

  3. Mike Flanagan

    Hi Warren; Thanks for your response.
    Prudence is in the Keynesian $200b expansion of Government outlays in a $1.5T economy. Thus preventing this nation from following the rest of the western world into a recession, that is now showing classical signs of morphing into a depression.
    German and UK growth is now measured in fractions of a percent. France is entering a recession and southern European countries are mired in a depression that is devel0oping a lost generations for years to come from double digit unemployment, with over 50% of their youth being discarded from any employment opportunities for years to come.
    Acumen is in realising that 70%, or more, of the economy is built on internal consumption, and thus realising that China represent only 20% of our exports and probably equates to less than 10% of our economy.
    Currently most of China’s impact is in highly capitalised products like mining that are relatively low users of labour who form the bulk of the nation’s consumption and GDP.
    Acumen is also apparent when you see a government gradually withdrawing their stimulus while maintaining a progressive refocusing of the nation, and its’ resources, to attend to the challenges we face in the future.
    The progressive refocusing of the nation by Ms Gillard’s government is exemplified by the coherent approach to nation’s school policy in the BER, Naplan , Standardisation curricula and Gonski.
    And as for the NBN, it had been ALP policy long before they acquired government and will lift this nation to the forefront of the world in innovation, expression and world stage presence.
    Need I say more?

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