The “budget crisis” created by the Senate is an invention: the government has walked away from billions in additional revenue itself.
While we’ve been focused on more important matters, what’s left of the government’s budget strategy has been receiving some belated support from the business community, with NAB and Woodside chairman Michael Chaney urging Labor to pass the government’s budget. “We have to make sure that our opposition understands the needs for reform and is prepared to support the government in sensible reforms,” the AFR reported Chaney as saying.
Another mining industry luminary, Sam Walsh of Rio Tinto, demanded the mining tax be repealed — something he might need to raise with mining magnate Clive Palmer, the dogged mining tax opponent who appears to have some influence in such things — and flagged that investment decisions were dependent on the repeal of the tax, despite mining industry analysts who recently declared Australia’s resources taxation system significantly improved.
The usual business suspects, AIG’s Innes Willox and the Business Council’s Jennifer Westacott, demanded certainty from the Senate on the budget a couple of weeks ago.
Meantime News Corporation, which desperately kept spruiking the budget in May and June even as the government’s own efforts visibly flagged, has begun talking of a budget “crisis”, with Paul Kelly, somehow transmitting from inside the black hole created by his own gravitas, claiming the “emerging crisis” would soon damage “Labor’s financial credibility”. Celebrity economist Chris “Never Wrong For Long” Richardson has also been weighing in, predicting the mining boom would soon end the consequences of the crisis could last a decade, based on a $300 billion figure carefully plucked from his arsenal of spreadsheets.
Problem is, the government itself appears in near-disarray about where to go from here. Treasurer Joe Hockey hasn’t helped matters, with his biographer revealing he thought the budget was too wimpy, and, perhaps with his brain still in vacation mode, last week threatening to replace cuts stymied in the Senate with some others of his own devising. Labor was happy to run with Hockey warning of other cuts for much of last week. It resembled nothing so much as a determined effort by Hockey to work out whether there was some further way he could bugger up an already disastrous budget.
“At the same time the government was lamenting how the Senate was seeking to shoot multibillion-dollar holes in the budget, it was celebrating the repeal of the carbon price, which would have delivered several billion dollars a year in revenue …”
If only the Coalition brains trust had had a couple of months to craft an alternative strategy in case they were unable to secure passage of many of their key budget measures. Oh, wait.
The result is now almost public infighting inside the government, with Dennis Shanahan delivering a stern rebuke to Hockey on the front page of the party organ today.
But the Treasurer is quite correct on the budget — it’s an awful lot of political pain for very little fiscal gain, the sort of equation you’d have thought the Coalition would be the last bunch of politicians to devise. For all the damage the government has accrued over the budget, it doesn’t even promise a return to surplus, although the hope was always that an improving economy would deliver windfall revenue increases. Then again, that criticism assumes the budget was put together by the Coalition and not, as some speculate, cobbled together from a bunch of bottom-drawer Treasury savings measures offered by Treasury secretary Martin Parkinson at the last minute, due to the government’s chaotic budget process.
But the earnest warnings from business and the claims of impending crisis should be taken with several truckloads of salt. Few commentators noted the peculiarity that, at the same time the government was lamenting how the Senate was irresponsibly seeking to shoot multibillion-dollar holes in the budget last week, it was celebrating the repeal of the carbon price, which would have delivered several billion dollars a year in revenue to tax coffers even after the switch to the European floating price next year.
Indeed, since the budget we’ve had the peculiar situation in which the government has been pushing hard to remove one carbon price while complaining that the Senate was opposing the imposition of another carbon price in the form of higher fuel excise indexation (on the flipside, Labor and the Greens are equally hypocritical in opposing the indexation).
It’s also hard to take the “crisis” claim seriously when the government walked away from $2.4 billion in revenue over four years from curbing one of the more absurd superannuation tax concessions last November — the same time it formalised its abandonment of Labor’s crackdown on the fringe benefits tax novated lease rort, worth several hundred million a year in revenue. And don’t forget the lazy quarter-billion the government allocated to school chaplains — presumably one of the “sensible reforms” Michael Chaney had in mind — or the government’s proposed tax cut for small and medium businesses. Or, for that matter, the projected blow-out in tax revenue lost to super tax concessions of $20 billion over the next four years.
There’s thus no budget crisis: if there’s a crisis, it’s of budget priorities, with the Senate reluctant to embrace the government’s mostly incoherent and inequitable switch of revenue raising and spending cuts away from companies and high-income earners toward low- and middle-income earners (who are, Kelly declared, presumably from a position of expertise, in “denial”).
The urgings of the business community are thus more likely to illustrate how partisanship and blind ideology lead the Willoxes, Chaneys and Westacotts of the world than prompt any serious self-reflection by Labor. Business leaders were nowhere to be seen when Labor’s cuts to family tax benefits were being lashed by the Coalition as “class warfare”; they were even silent when the Coalition combined with the Greens to prevent Labor from cutting the corporate tax rate, although they spoke up to bag Labor when Wayne Swan gave up on the cut in the face of Senate intransigence.
Business might be better off urging the government to consider an alternative budget strategy to desperately praying Clive Palmer performs another of his backflips and lets a few budget measures through.