Economy

Aug 25, 2014

Budget sales bungle was built in from the start

Fairness, infrastructure, or emergency management? The problems with the government's explanation of its budget were consolidated even before budget night.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

The government’s hopelessly confused rhetoric over its budget didn’t start on budget night. By that stage, its lines were already hopelessly muddled. The post-budget sales process merely created more opportunities for the government to fluff its lines, and it has seized them with both hands. Central to the government’s fiscal positioning, of course, was the “budget crisis” narrative. In fact the government rarely, if ever, used words like "crisis" or "emergency" -- although the Prime Minister in December referred to the “fiscal emergency we face”. Instead it spoke about the need for budget repair and, to try to personalise the narrative, explain how much debt each Australian “man, woman and child” was accumulating. As we’ve previously noted, the government even confused this particular message, using multiple numbers about how much each of us apparently owed; recently, it appears to have settled on “$25,000 for every Australian man, woman and child” as its phrase of choice (google the line and see how often it comes up). But prior to the budget, the government also decided that it couldn’t merely sell the budget as a set of tough decisions with a long-term pay-off. It took the first step toward mixing its messages by deciding that the return to fuel excise indexation -- a courageous and correct decision -- would be sold not as a tough decision, but as an infrastructure funding measure, even though not a single extra dollar was guaranteed to go to roads-building (something the Greens never worked out). And the Medicare co-payment would be sold as providing a vast medical research fund, even as the government declared (incorrectly) that health spending growth was unsustainable. So, two of its most controversial “tough decisions” were to be sold not as tough decisions at all, but as providing a payback to voters. To be fair to the government, and especially the Treasurer, this was partly because Joe Hockey understood that the fiscal task was one of consolidation, not of urgent return to surplus, because the economy wasn’t in a condition to withstand a significantly faster fiscal tightening than that already planned by Labor. The economy had softened in 2013, partly in response to Wayne Swan’s 2012 budget, which for the first time in over forty years actually reduced spending in nominal terms, albeit partly via some fiscal smoke and mirrors. As Swan, who had to halt a savage program of spending cuts in the lead-up to the 2008 budget out of concern for the looming financial crisis, could have told Hockey, mixing austerity and growth narratives can be a tricky business. But in the end, the bell and whistles of roads-building and medical research were political judgements that would only confuse the message. It was the first misstep in what would become a sequence of errors. Then there was the Commission of Audit report, which started life as a proud Coalition boast about its willingness to aggressively interrogate the entire role of government, and ended up a policy polecat that no one wanted around as the budget drew nearer and the government came to worry that it would be interpreted as a Coalition wishlist, not that of an old white businessman. The Commission of Audit challenge became not to how to sell it effectively, but how to dispose of it thoughtfully. All of this came together in Joe Hockey’s speech to a Spectator gathering in April. Hockey’s speech had the lot: extensive detail about the fiscal mess the government had inherited and the need to ensure future generations were relieved of debt; the Commission of Audit report that “has provided an important perspective for the framing of the May Budget” and which Hockey drew on for many of the numbers in the speech; and, almost as an after-thought, a mention of increased infrastructure spending. Jobs were barely mentioned in the speech -- except, of course, for the “budget repair job”. Central to Hockey’s explanation of the budget situation was that “Australia has a serious spending problem”. What he failed to mention was that he was in the process of substantially increasing spending. In Chris Bowen’s Economic Statement before the election, Labor had forecast $396 billion in spending for 2013-14, or 5.7% real growth from Swan's ferocious 2012-13 effort. In May, Hockey announced he’d lifted spending in 2013-14 to $410.7 billion, or 8.9% real growth. Hockey also lifted spending this year by over a billion dollars, and left spending forecasts for the subsequent two years intact. For anyone bothering to check the figures, Hockey was lamenting a “serious spending problem” while worsening it. Immediately after the budget was delivered, however, this sort of arcane debate was replaced with fairness, an issue the government appeared to have done no preparation for, as if it simply didn’t foresee that measures primarily targeting low and middle income earners would be interpreted as unfair. Hockey even encouraged the perception of divisiveness by ending his budget speech referring to “lifters” and “leaners”. In response to the "fairness" complaints, the Prime Minister insisted vociferously that the budget was indeed fair. Hockey even attacked the criticism as “class warfare” –- as we know, the claim of “class warfare” is one to which the Coalition tends to default. You’d have thought a key part of the response to the “fairness” issue, rather than demonising those raising it, would have been to emphasise that the budget was aimed at infrastructure spending that would drive jobs growth -- the best form of welfare is a job, etc etc. But infrastructure disappeared, almost completely, from the budget debate. Or, more correctly, it only appeared in a way that, amazingly, harmed the government. Hockey’s ingenious asset recycling proposal became bogged down in arguments about privatisation -- something so loathed by voters that it unites Australians right across the political spectrum. Only belatedly did jobs reappear in the government’s rhetoric, once unemployment had risen to 6.4%, prompting the government to claim that the passage of a budget that it had argued was all about “tough decisions” and spending cuts would create jobs. By that time Hockey had taken to warning he would find savings elsewhere if the budget wasn’t passed in full, a line he was immediately criticised for from within his own ranks -- although that line has now returned, presumably in authorised form, with Education Minister Christopher Pyne and Finance Minister Mathias Cormann saying on the weekend that spending cuts and tax rises elsewhere would have to go ahead if the budget measures weren’t passed. Confusion also plagued the government's attitude toward the process of getting budget measures through the Senate. The Prime Minister seems to regularly declare that all the measures would be passed no matter what. Hockey, who would go on to successive misadventures over the revelation he wanted a tougher budget and that he thought poor people didn't drive, also called incoming crossbench senators “the coalition of the irrelevant”, the sort of language presumably intended to endear him to them. Soon after, Senate leader Eric Abetz was charged with undertaking a “charm offensive” with the new arrivals -- Abetz being the sort of person one immediately thinks of when charm is required. And belatedly, the government realised that its own narrative of urgent budget repair was adding to its political difficulties, not helping them, with a noticeable switch in rhetoric elegantly symbolised by Cormann claiming the budget would be a marathon, not a sprint (the Terminator is, of course, capable of both). If nothing else, Cormann's comment suggests the government’s budget-inspired pain won’t be ending anytime soon.

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