The Budget process is significantly behind schedule, according to sources in the Canberra bureaucracy, delayed by the continuing collapse in revenue projections and the need to find all possible savings.
There’s only five weeks until Budget night, meaning only four weeks until the critical Budget Cabinet meeting that will sign off on the work of the Expenditure Review Committee. It will be pedal to the metal from here on. Senior bureaucrats probably haven’t planned on going away for Easter – certainly not in Finance, where, the story goes, Ian Watt once called one of his senior staff at home on Good Friday to politely inquire why he wasn’t in the office.
The process went a lot more smoothly last year. The Government was sworn in and immediately commenced the Budget process, with Finance officials leading the way in identifying savings they had longed to have a crack at during the Howard years. With high levels of revenue thought to be guaranteed, once a satisfactorily large surplus figure was obtained that struck the balance between supporting the Government’s claims to fiscal discipline and Wayne Swan’s desire to avoid “slamming the economy into the wall”, the Budget was bedded down and further cuts left for the “rolling ERC” Tanner put in place to go through the entire Commonwealth budget.
Now there’s no low-hanging fruit to pick. The sort of tough decision that the Prime Minister speciously claimed to have made last year are now unavoidable. The goal is to strip out any unnecessary padding and inefficient programs and shift expenditure to where it will be most effective, most stimulatory, and most politically rewarding.
The increase in pension and carer incomes ticks the second and third boxes. It is a problem of the Government’s own making, when it failed to manage pensioner expectations about last year’s Budget and let the view get around that they had received nothing – rather than a sizeable handout. Ken Henry’s tax review was rapidly amended to include retirement incomes, with Jeff Harmer preparing a separate report that had to be finished in time to feed into this year’s budget process, rather than Henry’s end-of-year timing. Harmer obliged, although what he told the Government remains a mystery beyond the certainty of a sizeable ongoing increase in the pension. Jenny Macklin has refused to release Harmer’s report, or a version of it. Last week her office declined to say whether it would be released at all.
Thus, one of the most significant changes in retirement incomes in the last decade or more will be undertaken with minimal debate about its merits, including whether the retirement age should be increased, and how best to support single pensioners, particularly women who have minimal financial resources to fall back on.
The interaction between the immense and amazing work undertaken by carers and Australia’s health system, which was missing from the Health and Hospitals Reform Commission interim report, may also continue to be neglected.
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And let’s not forget the scheduled tax cuts, another political decision made in the heat of combat in the 2007 election campaign.
This will be the ugliest budget in decades. Howard and Costello had a mess to clean up in 1996-97, but they had a growing economy to work with and made the bold call to ditch a lot of promises. Wayne Swan and Lindsay Tanner have neither.
Later this week, Crikey will begin its lead-up to the 2009 Budget looking at each portfolio and where the axe will fall – or should fall.