May 20, 2013

Sudden outbreak of responsibility from both parties on budget

The Coalition's sudden enthusiasm for spending cuts is rather hypocritical -- but a welcome embrace of fiscal responsibility. Both major parties are lifting their game, improving the dire standards in political debate.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Unexpectedly, Australia’s politicians have been infected with policy courage. And an opposition that was probably the most cynical and negative in Australian history has decided it can take a risk and not merely endorse some politically unpalatable spending cuts but even break the hitherto unbreakable rule of 21st century politics -- never mention the GST. The change from 2012, which was dominated by personal smear and an absurd opposition campaign against the carbon price, couldn't be more striking. In previous years, a bold decision like dumping the baby bonus and replacing it with a much smaller family tax benefit payment would have seen the Coalition and News Limited launching a coordinated campaign on Labor's "class warfare", notwithstanding Treasury spokesman Joe Hockey’s views on the age of entitlement. This year, News Ltd has been all revved up and raring to go, but Opposition Leader Abbott has declined to play along, saying the "budget emergency" (which isn’t an emergency at all, judging by the Liberals’ plans for handouts) meant he might have to support it. Indeed, The Australian Financial Review reported this morning the Coalition was considering opposing any baby bonus-style payments at all, and had begun walking away from its reflexive support for the iniquitous and hideously expensive private health insurance rebate. There are plenty of dud savings in the Coalition’s list: slashing the humanitarian visa intake, punishing low-income earners on superannuation, delaying the 12% compulsory super levy. And don't forget the $4 billion in unjustified handouts to forestall a Labor campaign on carbon price compensation. But it’s hard to go wrong with hacking into middle-class welfare.
"For a decade the GST has been a no-go area for both sides."
Most of all, the Liberals are staring down a Labor scare campaign about tax reform extending to the GST. For a decade the GST has been a no-go area for both sides. The slightest slip-up that suggested any willingness to consider any changes to the GST invariably prompted long bows to be drawn, huge leaps of speculation to be made and alarm bells sounded about a sinister agenda to lift the GST. Now Abbott, while dancing around the issue, has declined to exclude the GST from his promised tax review. Of course, without the GST, such a review is entirely unnecessary while the Henry review sits unloved on Treasury bookshelves. Fixing the damage done to the GST by ex-Democrat head Meg Lees (while compensating low-income earners) would be a logical outcome from any serious tax review, and would go some distance toward relieving the pressure on state budgets across the country. There’s considerable hypocrisy from the Coalition in all this. It’s not hard to Google up a statement, even relatively recently, from Hockey or another shadow minister defending or deploring a measure they’re now dumping or backing. But the hypocrisy is in the welcome cause of fiscal credibility. It also demonstrates just how confident the Liberals are about victory, or more particularly about their capacity to resist a Labor attack on issues like the GST. Based on Labor’s form, the Liberal brains trust is probably right to believe Labor lacks the firepower to do them some real damage on budget issues, where voters trust the Coalition far more than Labor. That's in contrast to industrial relations, where voters still regard the parties as far more evenly matched, and which accounts for Abbott's enthusiasm for a moderate, step-by-step approach. The result is, unexpectedly for the pre-election period of a parliamentary term in which the quality of political debate has reached a nadir, a sudden outbreak of responsibility on both sides and the bizarre spectacle of a pre-election budget dominated by a debate over who can wield the razor more effectively. One of the virtues of the opposition’s belated fronting-up to fiscal responsibility is that it will get more practice articulating the case for complex or unpopular policy. One of the Labor's biggest problems has been a learned helplessness when it comes to explaining policy that isn’t obvious or easy. The more you do it, the better you get, and the Coalition will discover it's easier to do so in government if you've already done it in opposition, when the playing field is tilted against you.

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24 thoughts on “Sudden outbreak of responsibility from both parties on budget

  1. Gavin Moodie

    I agree with and think most important the last point that ‘The more you do it [‘articulating the case for complex or unpopular policy’], the better you get, and the Coalition will discover it’s easier to do so in government if you’ve already done it in opposition, when the playing field is tilted against you.’

    For this reason I have never been convinced by ‘small target’ lesson commonly drawn from Hewson losing the ‘unlosable’ election.

  2. JackAubrey

    While it is pleasing to see the Opposition talking about reviewing the GST, there’s still a bit of fog around whether they are talking about the rate and application to current non-GST items like food, or whether it is just the State-by-State distribution formula. Joe Hockey’s “challenge” to the States to lead the review on the basis that the GST is a “State tax” is cowardly blame-shifting before the event. But at least the issue is on the table. Hopefully the Liberals also have a shopping list of inefficient State taxes to target in whatever deal emerges.

  3. Jimmy

    It helps the Libs be hypocritical when their backflips are just glossed over by the nedia, if Gillard had done the same thing she would be damned.

    And for all this good decision making from the Libs they stil have a whole lot of unfunded spending to be accounted for and are clinging to the idea there is no problem with education funding.

  4. Mark from Melbourne

    I suspect its less about fiscal responsibility and more about cheap politics. They get to take the savings whilst hanging it on the Government as being “objectionable”. Cake, see, eat.

  5. mattsui

    That playing field might be slightly less tilted, once the media haters have gotten rid of Gillard.

  6. klewso

    Why wouldn’t the Coalition be considering opposing any baby bonus-style payments and suchlike – it doesn’t need this sort of electoral bribery like Howard did – first up (this election) anyway.

  7. klewso

    Labor didn’t get enough practice at selling and “explaining policy that isn’t obvious or easy”?

  8. Warren Joffe

    Ism glad to say that it has caught up with the group think in Canberra BK what has been obvious to me for over a year – as I have said on Crikey and to anyone that will listen. That is because it was clear it would be good electoral politics, safe electoral politics and a huge advantage for a new government which wanted to be able to be fiscally responsible without being accused of breaking promises to simply say “this election is about trust; we will tell you what we would like to do and will try to do, maybe not as soon as we would like, but we make no promises”. I still predict that, a short time before the election all policy projections which might be taken to be promises will be cancelled except for the promise to try and govern so as to be re-elected in 2016.

    I am disappointed however that you BK can’t see that some “middle class welfare” is acceptable. E.g. If one can’t afford to cut taxes so the government is taking (largely to transfer to other Australians) less than 46.5 per cent at the margin of a person’s income isn’t it reasonable to target the educated career woman who is already forced by mortgage payments, HECs, the requirement to buy health insurance and the perfectly reasonable desire to send her children to a private school (expecially if she has a high powered job which doesn’t allow her to keep a beady eye on the local state school) and give her and her husband/partner concessions on health and education. It is not in the interests of any of us that our best and brightest have one or two children in their mid 30s rather than three or four at average age 30.

    Correspondingly you seem to have gone quite goofy in your logic when you say “punishing low-income earners on superannuation”. I suppose you are critical too of tax concessions which allow high income earners, i.e. those who pay a lot of tax, to save for an OAP-free retirement without having to do it out of heavily taxed residue from income. There was a lot that Costello got wrong but is it not ridiculous to give people a taxpayer provided lump sum who will never earn or save enough not to be largely reliant on taxpayers – mostly other people’s children and corporations that other people have financed – to provide their income and health care in in retirement (assuming they were ever employed)?

  9. Mike Flanagan

    I don’t believe they wll get ‘rid of Ms Gillard’ It is not over until the big lady sings mate. Bernard’s dismissal of Ms Gillards chances of returning to government are built on a historic perspective through the polls and although many may say that history often repeats itself, I wouldn’t be relying on that prediction on that flimsy reasoning.

    It is marvelous to see Bernard concede that Labour are being prudent when the evidence of both their prudence and fiscal acumenn in both dealing with GFC and its’ aftermath, has been on display for the past two years or more.
    Neither Abbott or Hockey, or even Turnbull for that matter, have shown any inclination to adopt a long term vision and stratagy, apart from the Hayekian and Freedmonite failed theorems.
    Even when reality drags them to the table they still depend on revising and rebirthing of the accounting principles to balance their books.

  10. Damon Roberts

    Pity neither of the major parties has the intestinal fortitude to call an end to Negative Gearing.

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