Apr 19, 2013

Hockey, finally, sees the light on the road to Treasury

The Coalition's acceptance that it won't return immediately to surplus contradicts its silly rhetoric. But it's sensible and realistic, writes Bernard Keane and Glenn Dyer.

So Joe has seen the light on the budget. Amazing how the prospect of actually having to make real decisions rather than sound off from opposition can focus the mind. All sorts of Damascene conversions can happen. For years the Coalition has been insisting the only reason the budget wasn’t in surplus was Labor’s profligate spending. Only the Coalition could deliver surpluses, and it'd deliver one immediately upon returning to government. Coalition MPs rejected Labor’s argument that revenue was being continually written down through lower corporate tax receipts, reflecting the high dollar and mining companies reinvesting their profits in new capacity. They mocked Treasurer Wayne Swan’s claim that the financial crisis had dramatically undermined revenue. The financial crisis, they insisted, was over years ago. Now, five months out from an election they look odds on to win, well ... not so much. Shadow treasurer Joe Hockey now says "we’re not going to go down the path of austerity simply to bring the budget back to surplus because it would end up being a temporary surplus". It follows on from comments made by Hockey a few weeks back when he told ABC Brisbane’s Steve Austin he rejected austerity as a policy prescription. Opposition Leader Tony Abbott, for once on the same songsheet as his shadow treasurer, reinforced this by saying "all bets are off" on a surplus yesterday. He also indicated the Coalition was preparing to dump its 1.5% cut in corporate tax. This suddenly takes a big chunk out of what we know of the Coalition’s economic plans, which is not very much. Abbott spent much of his National Press Club address in January boasting of the Coalition’s hairy-chestedness on budgets and how important lower taxes were. But the Coalition will now go the election with a rolled-gold commitment to lift business taxes on large companies, in order to fund its rolled-gold paid parental leave scheme for high-income earners, but without a commitment to return to surplus. Age of entitlement indeed.
"Hockey has shown that, despite the verbiage, on fiscal policy he’s not as dumb as his rhetoric makes him look."
When Swan, in the face of constant revenue writedowns, abandoned his commitment to surplus in December, Hockey rightly and mercilessly bagged him for the literally hundreds of times Swan and the Prime Minister had insisted, often in the most colourful language, that they’d return to surplus. But just four months later, Hockey has ended up at the same point as his opponent, although the Coalition surplus rhetoric has been more pedestrian than Labor’s -- more about DNA than hell or high water. So much for the boasts about the surpluses delivered by the Howard governments and how that was going to be repeated by an Abbott government. Debt, of course, is now in vogue as well for Joe and Tony. What will opposition finance spokesman Andrew Robb now do for his basic song-and-dance routine? Will Nationals Senate leader Barnaby Joyce rail from the deputy prime ministership against his own government? Nonetheless, just as it was for Swan, it’s a sensible and realistic submission to fiscal realities. Not just the fiscal reality that revenue is being hammered by a dollar that more and more appears to be a sort of unkillable beast from a horror movie, but the fiscal reality that the last thing Australia needs right now is a surplus fetish. We need sensible moves to make the tax base more sustainable, and less pro-cyclical, in the long-term, rather than short-term slashing that will smash demand, undermine consumer confidence and, if the global environment continues to deteriorate, push us toward recession. It's also an acceptance that the budget is a means to an end, not an end in itself: the ALP has, despite the black holes in the budget, given the country solid growth, low unemployment and maintained its AAA credit rating (which is an enormous cross to bear for some parts of the economy because of its impact on the value of the dollar). The Coalition could do exactly the same in its first term. By explicitly rejecting austerity as a policy, Hockey is demonstrating his awareness that it hasn’t worked in Europe and there’s no need to contemplate it for Australia, especially in the current, precarious global environment. And by rowing back from his surplus commitment, he’s acknowledging the reality of the numbers he’s going to have to work with after September 14. Hockey and Abbott will continue to bluster about how it’s all Labor’s fault, and the only reason they won’t return to surplus is because of the sheer size of the mess Labor has left them. But Hockey has shown that, despite the verbiage, on fiscal policy he’s not as dumb as his rhetoric makes him look.

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43 thoughts on “Hockey, finally, sees the light on the road to Treasury

  1. mikehilliard

    What, they can’t provide a budget surplus! But..but they promised! I’m devastated, that would mean Tony lied. Please Bernard & Glenn, please tell me it can’t be true.

  2. drovers cat

    Hockey must have been reading today’s Guardian, which reports the IMF has told UK Chancellor Osborne not to comntinue his austerity program as it’s causing the recession.

  3. Achmed

    Abbott and Hockeys constant and regular claims that they would bring the budget into surplus in the first term were misleading rhetoric and no more “sensible” than Swan making the budget surplus claim.

    And look at how the MSM and Abbott/Hockey tore the Labor Govt to bits over it.

    All quiet about the back peddle by Hockey though.

  4. David Hand

    This is encouraging. We are going to get sensible economic leadership when the coalition takes power in September. No election promises are to be immediately broken by a future treasurer who actually understands that people remember what you have said.

    This is in sharp contrast to the incumbant.

  5. zut alors

    “…Hockey has shown that…he’s not as dumb as his rhetoric makes him look.”

    But there’s a sporting chance he could be even dumber.

    The surplus ghost has been stalking Abbott & Hockey for many months, it’s finally caught up and given them a well deserved fright.

  6. Achmed


    Explain this as good economic management-
    Repeal the CT. Keep the $4.4 billion a year in tax cuts. Introduce Direct Action at the cost of $3.2 billion.

    nearly $16 billion over 3 years

    Then add the promised tax cuts to business, another couple of billion

    Yet nothing to replace the “income” provided by the CT yet fund the other promises.

  7. klewso

    Sunset in Bernardi Valley?

  8. Achmed

    Promises to remove the super $500 contribution to lowest paid workers, but no promise to remove 15% tax on super earnings over $100,000. No promise to reinstate the cuts to the baby bonus. Looks like Labor are making the unpopular decisions, then condemed by Abbott who is deceptively not telling the people that he really agrees with the changes but….knows it would damage his chances of election to the top job. He is NOT about Australians – he is about Tony being PM

  9. Achmed

    Abbotts policy is to sell Medibank Private that adds over $300 million a year to Govt coffers. Better to sell and get a one off payment, just Like Howard did with Telstra, airports, gold bullion etc.

  10. zut alors

    mikehilliard, they’ve pulled the the pea and thimble trick – now promising there won’t be a surplus.

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