It’s Budget time.

Actually, to be strictly correct, it’s been Budget time for a couple of months. Ministers have already provided the PM with their proposals and they’ve been ticked or flicked by senior ministers, forming the initial basis of new spending. Lindsay Tanner, whose department worked assiduously through 2008 to find savings, also asked Ministers late in December to come up with further savings initiatives.

That may not be as difficult as it sounds. The incoming Government went hard on savings proposals in preparing the 2008 Budget, demanding that Departments look at anything that wasn’t an election commitment, but backed off once it found enough savings to meet its commitments but produce a reasonable surplus. Savings ideas left over from 2008 might therefore get a reheat in the next couple of months. Then it will be up to ERC.

This will be the toughest budget to frame since, probably, the recession budgets of the early 1990s. 1996 and 1997 were slash-and-burn efforts, but the policy issue was straightforward — cut the deficit. This year, the task will be to minimise the deficit — and there’ll certainly be a deficit, the only question is whether it will be more than $10b — but maximise the stimulus effect.

The point of savings isn’t fiscal hairy-chestedness but to be redirected toward better-targeted spending. Striking the balance between savings and targeted spending will be the key.

That’s just for starters. Overlaying all that are specific policy issues: pension reform; maternity leave; infrastructure spending, defence spending. This is a triennial funding year for the ABC and SBS as well. And, given the Government has opted for an emissions trading scheme that rewards polluters, there’s the need to provide incentives for reducing greenhouse emissions. Plus little issues like the clear need for more staff for both ministers and shadow ministers.

And all that while welfare spending through unemployment and pension payments rises inexorably.

Rather a change from the later Howard years, when the only problems were running out of dumb ideas to waste surging company tax receipts on and not having enough public servants to shovel the money out the door. Judging by a lot of commentary emerging from the Opposition, there are a few Liberals who still seem to think that way.

At least the Government has an excellent Finance Minister. In comparison, the previous mob had Nick Minchin, who for all his right-wing tough guy act, rarely said no to anything.

Those seeking to influence the Government’s thinking will have already sent Budget submissions, or will be about to do so. Invariably, there’ll be a number of less-informed NGOs who release their submissions in late April, evidently under the impression the Government cobbles together the Budget at the last minute. They usually go straight in the bin.

The Australian Conservation Foundation has had a go at resolving the savings/expenditure dilemma. Late last year the ACF joined the ACTU, ACOSS and the Climate Institute to argue for a major green investment and jobs package. The ACF’s Budget submission focuses on identifying savings that can be redirected toward greener expenditure, such as energy efficiency retro-fitting programs that will yield long-term savings for households, curb greenhouse emissions and stimulate employment. The biggest savings the ACF calls for are Fringe Benefits Tax concessions for motor vehicles, and the Fuel Tax Credits program, which subsidises diesel fuel use by miners, road transport and farmers. Both neatly encapsulate the problems the government faces even in redirecting expenditure from one area to another.

This isn’t the first time the ACF has called for the FBT concession on company cars, which costs nearly $2b a year, to be amended. In fact green groups have been calling for this to be fixed for years. By subsidising vehicle use and rewarding higher usage, it remains a remarkable taxpayer-funded incentive structure for promoting greenhouse gas emissions. The ACF proposes amending it to promote use of more fuel-efficient vehicles which, as it points out, would complement the Government’s incessant rhetoric about greening the local car industry. It would also yield more than $180m in savings a year. Removing other concessions relating to car parking, air travel and taxis would yield another $80m-odd.

It would also induce howls of anguish from each of those industries, all of whom would predict dire job losses as a consequence — particularly vehicle manufacturers, who are already on life support dressed up as a transition to a green future. And therein lies the problem for a Government looking for savings. Losers always make more noise than winners.

That’s also the reason why the ACF’s proposal that road transport and mining lose their access to the Fuel Tax Credits program, which costs the best part of $5b a year, won’t garner any interest from the Government.

But this Budget, much more so than last year’s, will require some of those “tough decisions” that Kevin Rudd boasted about last year. There aren’t billions of dollars in efficiencies and savings to be found inside Government. Even cutting public servants’ salaries, which the IPA has suggested, won’t yield much, and simply make public service even less attractive than it is currently. Some people, some community groups, some industries, will have to receive less so that others can get more. And so far, this Government has shied away from upsetting anyone at all.

As part of its monitoring of preparations for the 2009 Budget, Crikey will be looking at major budget submissions from industry and NGOs. Send your 2009 Budget submission to [email protected] and let’s see who you think should win and lose.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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