The problem with Scott Morrison’s insistence that Australia doesn’t have a revenue problem but a spending problem is that he is doing nothing about either.

The savings measures announced in yesterday’s Mid-Year Economic and Fiscal Outlook merely offset additional spending announced since the budget, meaning that the government is still on track to spend nearly 26% of GDP this year. In 2018-19, it will still be spending over 25% of GDP — well above the average since 2001 of around 24.6%.

Regardless of whether Morrison wants to accept the reality of the government’s revenue problem, that level of spending is unsustainable and will require hard, unpopular decisions to reduce it over the medium term. Announcing yet another welfare crackdown (governments have been announcing them since the Hawke years) or slashing arts funding won’t cut it, nor will keeping a lid on the growth of existing programs.

A key challenge for Malcolm Turnbull and Morrison will be to effectively make the case to the electorate for significant cuts over coming years, which means addressing concerns about fairness and not being seen to disproportionately target low-income earners, which undermined Joe Hockey’s 2014 budget. It also means Labor, which deserves credit for putting revenue measures on the table, must also accept greater responsibility for supporting politically contentious savings.

Labor in power, of course, got no such support from Tony Abbott or Joe Hockey. But they’re now gone. A responsible plan to significantly lower spending over the medium term deserves bipartisan support.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey