The figures in yesterday’s Budget are
so impressive and the scale so vast that picking holes in Peter
Costello’s pitch for the Lodge seems a forlorn task. At first glance
the losers are Tony Abbott (Medicare safety net cut back, IVF reforms
in limbo), welfare recipients facing tougher activity tests, and
stay-at-home single mums. Everyone else gets tax cuts, and we all get a
spanking new $16 billion Future Fund.

But it’s what this Budget
doesn’t do that matters. For some context, remember the factors Peter
Costello blamed for the worrying slump in export growth: capacity
constraints, too much spending and inefficient work practices. And what
does this stimulatory Budget do? It gives consumers money to spend; big
tax cuts for the rich, modest cuts for the battlers, and tiny cuts for
the poor, giving the Reserve Bank an itchy interest rate trigger

Of course, Costello is hoping everyone saves, rather
than spends their tax cuts. And saving is the name of the Future Fund
which, powered by the mooted $30+ billion Telstra sale, will grow to an
investment pot large enough to move markets.

The Future Fund
will be one to watch closely. While Costello was at pains to stress it
would be administered independently by a statutory authority, its
structure and staffing will be of the Government’s choice, unfettered
by Senate oversight after 1 July. The Future Fund will not put the
Government quite in the league of Singapore Inc, but it will be a
tempting vehicle to drive policy, a cash cow of unprecedented scale.

what of the nation’s infamous capacity constraints? What does this
Budget do to attack the bottlenecks strangling export growth? Well,
very little. The Prime Minister has set up a committee, headed by his
former public service chief Max Moore-Wilton, to suggest solutions.
Meanwhile, the Budget allocates $120 million for training apprentices,
especially in the building industry (see the ABC report here).

an interesting time to tackle skill shortages in the building industry.
The shortage of skilled workers first showed up before the Sydney
Olympics, where many tilers and bricklayers had to be hired from
abroad. With many of the temporary workers now long gone, a shortage is
again apparent. However, we are now at the tail end of the building

While the economy hums away, the immediate dangers of
government cutting spending on infrastructure to puff up the budget
bottom line seem far away over the horizon. But with global economic
uncertainty prevailing, the implications for our economy if the US goes
into recession, or China goes wonky, do not bear thinking about.

Which is why they should have been thought about, and explicitly addressed, in this Budget.