As more than a few commentators have noted in the last 12 hours, yesterday’s budget looks a lot like a Labor budget — or, more correctly, a kind of conservative fever dream of a Labor budget. Tax receipts are going up — half a percentage point of GDP this year, up another 0.4 of a point next year, 0.3 the following year, then another 0.4, to levels unseen since the Howard years. But spending is going up too: despite Joe Hockey’s efforts to front-load spending into a year when he could blame it on Labor, spending rose from 25.7% of GDP in 2013-14 to 25.9% of GDP this year and it will be 25.9% of GDP next year as well (up from what was forecast in December in MYEFO). In 2018-19, spending will still be 25.3% of GDP, higher than spending in four of the six Labor years.
Big-taxing, big-spending government, of the kind the Liberals insist only Labor is ever guilty of.
Indeed, the budget it most resembles is that of 2009, when the Rudd government was firing money at Australians with a cannon and urging them to spend, spend, spend. That year the government spent 26% of GDP to save Australia from recession — growth had been expected to be -0.5% across the year as a result of the financial crisis and the US and European recession, but the stimulus package managed to produce 2.3% growth and keep the unemployment rate below 6%.
The Rudd government’s stimulus package was broad in nature — the first iteration, at the end of 2008, was a cash splash, but then came the school building programs, social housing and new home grants, more cash, half-arsed programs like pink batts. The Abbott government’s stimulus is being channelled through small business, with the hope of sparking both small business spending and hiring and in turn generating more confidence in the economy.
Oddly enough, though, the budget figures don’t reflect a lot of confidence that the package will work quickly. Growth for the coming year is forecast to be just 2.75%. Growth will only pick up to at trend or above in 2016-17, so the budget papers say, but unemployment will remain above 6% both in 2015-16 and the following year. That is, whatever stimulatory effects will flow from the package either won’t flow until 2016-17 or will be offset over the next 14 months by other economic factors.
Moreover, despite Joe Hockey’s “have a go” rhetoric, the government isn’t talking about the need for economic stimulus. Hockey insisted last night that, despite the budget blowout, the rise in unemployment, the slump in growth, the government’s economic plan was working. “We are successfully navigating the difficult transition from a mining investment boom, to one of broader-based growth across our economy,” he claimed. “We have overseen a strengthening of growth in employment, housing construction, retail trade and exports.” None of Wayne Swan and Kevin Rudd’s “here’s some cash, go spend it for the sake of the economy” language from 2009. The government insists all is well and that everything remains on track, despite its own figures and those of the Reserve Bank showing that consumer and business sentiment remains shellshocked.
It’s as if the Coalition wants to ape the stimulatory effect Labor achieved in 2009, but is so bedevilled by its own ideological obsessions and unwillingness to admit fault that it can only mutter the lines halfheartedly, not understanding the important role that national leaders play in shaping voters’ economic mindset.
If it can’t successfully mimic Labor, the government isn’t displaying the fiscal discipline and enthusiasm for small government that it claims is in the Liberal DNA. However wrong this claim might be — the Howard government was the highest-taxing government in modern Australian history — it is part of the Liberal mindset that they are the party of low taxes, limited spending and budget surplus. The 2015 budget contradicts this belief in every way. If this budget had outlined a series of aggressive spending cuts that would have hurt the economy in the short term but got the deficit down close to balance, it might have been politically disastrous but it would have been consistent with the Liberals’ self-conception, their own rhetoric, and voters’ regard for them as economic managers. Instead, the path back to surplus — still beyond forward estimates — is based on optimistic projections of economic growth starting later next year, rather than hard decisions like reigning in the tax concessions associated with superannuation, now forecast to top $50 billion in 2018-19 (reducing those is “class warfare” according to Mathias Cormann).
Neither fish nor fowl, neither Labor nor Liberal, neither economic stimulator nor stern fiscal taskmaster, what exactly is this government? What purpose does it serve, beyond keeping Labor out of power? If the budget’s goal was to ensure Tony Abbott and Joe Hockey kept their jobs, it prompts the question of why exactly they want their jobs and what they want to achieve in doing them. What is the point of an Abbott government, if the best it can do is just a fiscal parody of its opponents?