The federal Liberals have long been the big spenders and big taxers of Australian politics. The Abbott government proved the worst of all — inheriting a tax:GDP ratio from Labor of just over 21%, Abbott increased tax to 21.8%; inheriting a payments:GDP ratio of less than 24%, he pumped that up to over 26% before his own party dumped him. Malcolm Turnbull and Scott Morrison lived up to the big-taxing traditions, with tax this year set to surge to over 23% of GDP. They have, however, managed to get payments back down to 24.6% at the end of 2017-18. That’s still higher than Labor, but much better than Tony Abbott.
That effort, however, seems about to be tossed aside as a government desperate to make up ground lost in its leadership mayhem seeks to buy votes.
One of the Liberals’ key budget repair rules is “the overall impact of shifts in receipts and payments due to changes in the economy will be banked as an improvement to the budget bottom line, if this impact is positive”. They stuck to that in 2017-18 — receipts totalled over $13 billion more than forecast in the 2017 budget, but the budget deficit came in at $10 billion, $19 billion less than forecast, because overall spending fell as well. So the extra revenue, and more, was banked.
But what will happen this (election) year? The government is forecasting another revenue bonanza: just last December, it expected to get $463 million in receipts. By the budget in May, that was revised to over $473 billion. But it also changed its spending forecasts to increase spending by over $3 billion between December and May. So the commitment to bank shifts in receipts won’t be maintained — some of it is needed to fund planned new spending.
Whether that turns out to be the case won’t be clear until this time next year. Spending could come in lower than expected, as it did this year, primarily because of lower-than-expected NDIS spending.
What we do know is that the week before last, Treasurer Josh Frydenberg abandoned another key rule: that “new spending measures will be more than offset by reductions in spending elsewhere within the budget”. He responded repeatedly to questions about where the government was getting the extra billions it was throwing at the Catholic Church by saying it would be funded by “growing our economy” and “we’re not making cuts.” On Sunday, Morrison confirmed that Frydenberg hadn’t been speaking out of turn, stating about the rules: “as with those rules in the past, where there are exceptions to those rules, the government reserves the right to exercise that discretion.”
That is, we’ll observe the rules until we decide not to. There’s an election in the offing, after all.
If a Labor government had walked away from its own fiscal discipline rules, it would have copped a belting from commentators. When Wayne Swan had to abandon the return to surplus in December 2012 in the face of constant revenue writedowns, he was never allowed to forget it, though even the Business Council endorsed the decision and said trying to achieve a surplus that year was the wrong idea.
This time around, only the Financial Review has complained about the government’s abandonment of its rules — though with the compulsory slap at Labor as well. The usual suspects are quiet. It seems that no matter what the Liberals do fiscally, they’ll always be given the benefit of the doubt.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.