On a day when the Reserve Bank has been sufficiently alarmed by the economy to cut interest rates to new lows, the government’s budget fails to address any challenge beyond getting re-elected on July 2.
There are, undoubtedly, some quality policies in the budget — although, bizarrely, most of them are taken from Labor. The Coalition has finally recognised that our retirement savings policy has become an unaffordable tax lurk, and sought to curb superannuation tax concessions. It has recognised growing community anger — and the growing drain on tax revenue — of multinational companies treating Australia’s tax laws with contempt. The increase in schools funding is inadequate but better than the severe cuts inflicted by the Abbott government.
But the government’s commitment to tax cuts at any cost is incomprehensible. In the current fiscal environment of deficits as far as the eye can see, there is no policy case for tax cuts for middle- and high-income earners, especially given the latter will enjoy a tax cut courtesy of the end of the deficit levy as well. There is no policy case for company tax cuts when there is no evidence from anywhere in the world that a lower company tax rate benefits growth, productivity or wages. Inflicting yet another efficiency dividend on the public service will only further degrade the capacity of that once-fine institution to advise and implement.
And despite Malcolm Turnbull’s professed commitment to urban infrastructure, there is virtually no new funding at a time when public sector infrastructure is well below the levels of the previous government.
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This budget is above all a failure of leadership, a triumph of electoral desperation over economic vision. It’s a plan for a July election, not the next decade.