There are things to admire in Tony Abbott’s first budget, says Bernard Keane. And plenty, as Joe Hockey correctly stated, to criticise. Our crack team delivers their verdict: Keane, Paddy Manning, Cathy Alexander, Richard Denniss and Tom Burton …
There are some things to admire in the Abbott government’s first budget. The media routinely bags contemporary politicians for lacking the policy bravery of the political giants of the 1980s and ’90s. Well, Joe Hockey has brought back the petrol excise indexation abandoned by John Howard. The government has boldly — although it refuses to admit the obvious — broken an election promise about not raising taxes. It has even taken on its own base, at least a little, in curbing pension indexation. These are measures to be applauded.
Ultimately, however, this budget fails two keys tests. It refuses to really embrace the challenge of long-term fiscal sustainability. The restoration of fuel excise indexation is welcome, but at the same time as that measure is garnering hundreds of millions of dollars in years to come, superannuation tax concessions will be expanding by billions of dollars a year. The cost of encouraging superannuation saving will hit $50 billion in 2017-18. It is a figure that will by that point be far in excess of the cost of pension and Defence spending, and be beginning to rival health spending. It should give any government pause for thought. But not this one.
This budget also fails the equity test. It is difficult to cut government spending without harming low- and middle-income earners, who rely more on government spending than high-income earners or corporations (at least, healthy, viable corporations). But an air of malice hangs over this budget, in its targeting of the unemployed, its targeting of students, its targeting of people in developing countries, its targeting of the general community through petrol excise and Medicare co-payments. All these groups must contribute, while high-income earners, and particularly wealthy superannuants, make at best a token contribution. And most corporations get a tax cut.
Whatever the merits of such an inequitable distribution of the fiscal burden, it is bad politics: any economic or fiscal reform is much harder to sell to voters when it looks unequal.
And finally, Joe Hockey tonight presented us with “a budget that delivers a sustainable future for your children, and the generations beyond”. Yet his budget speech doesn’t mention climate change. Climate change is notable in the budget for its absence, with even the silly “Direct Action” figleaf capped at a mere $2.6 billion. However much this government refuses to accept it, there is no sustainable future for our children, and future generations, if we don’t address climate change. Ultimately, budgets like this may prove very costly indeed.