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May 16, 2008

Budget Reply: Nelson's economic cred on death row

Brendan Nelson’s deeply self-contradictory Budget Reply last night leaves Australia stuck without a credible Opposition, writes Bernard Keane.

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Brendan Nelson’s deeply self-contradictory Budget Reply last night leaves Australia stuck without a credible Opposition to keep pressure on the Rudd Government. Under Nelson, the Liberal Party has abandoned any claim to economic credibility, in favour of populist stunts and more of the handout mentality of the Howard years.

In fact, last night’s effort could’ve been the first Nelson Budget in a Costello Government. A defence of the Coalition’s economic record, more handouts and criticism of the socialist tendencies of Labor.

Nelson’s performance itself was solid. He kept the emotional stuff to a minimum, and played well to a gallery thoroughly stacked with Senators, staff and Young Libs trucked in for the occasion. He even cracked a half-decent joke.

And he correctly called the Government’s RTD tax rise as a tax grab and declared the Coalition would be opposing it. This was the one issue that Nelson declared he was angry about. The Bundy & Coke drinkers of Australia should be chuffed.

But, typical of Nelson, the internal inconsistencies came thick and fast, perhaps legacies of his and Turnbull’s confused pre- and post-Budget response. He maintained the Coalition line that this was an inflationary Budget, but proposed to pump billions of dollars in tax cuts and tax expenditures into the economy. He criticised the Government for holding summits, but proposed his own “national forum” on binge drinking.

And he criticised “clipboard-carrying bureaucrats from a centralised education department”, but then proposed a massive bureaucratic intervention in the education curricula of universities, to require them to lift their entry scores – which will presumably shrink the supply of teachers, but never mind that – and appoint Government-approved staff members, who will not include the dreaded “social engineers”.

The success or otherwise of the reply, though, will hang on how Nelson’s 5 cents a litre petrol excise cut – lifted from John McCain and Hillary Clinton’s “tax holiday” idea – goes down with the punters. It deserves to fail on both policy and political grounds. Anything that caters to the belief that we should be paying less, not more, for petrol will undermine the need to shift to an energy policy that doesn’t rely on carbon or handing substantial slabs of our income to some of the world’s vilest dictatorships and theocracies.

Moreover, in an age of peak oil, 5 cents will last about 5 minutes before being subsumed in the remorseless ascension of the bowser price. If the Liberals wanted something politically sellable, they should have aimed at 10 cents at least, big enough to make a difference for a few weeks.

And only pedants would bother pointing out that the Coalition could have done that while it was running the country for twelve years.

The Government won’t be losing any sleep over the Opposition’s threat to block the RTD increase and measures curbing welfare to rich seniors in the Senate. The arrival of the new Senate in July gives the Government options to negotiate, and in any event Rudd would like nothing better than to obtain a double dissolution trigger which could become available sometime in October.

At the end of his speech, a relieved Nelson pumped the hand of every single one of his colleagues while the galleries applauded him. He looked like a student delighted his oral exam hadn’t been the disaster he had feared. The Government sat in near-complete silence throughout his speech – when some chatter broke out, Bob McMullan turned and gestured for quiet. But you can bet they’ll be targeting Nelson’s tax handouts over the next few days and, in particular, on Monday week when Parliament resumes. The Coalition’s economic credibility is already severely weakened, and Rudd, Swan and Tanner will be looking to deal it a deathblow.

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