Budget night: when Australia's political class pretends it controls the economy
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Version 0 of 1. “Cut anything into tiny pieces,” said the Roman philosopher Seneca, “and it all becomes a mass of confusion.” The federal budget is a bit like that. Budgets are reported on and analysed exhaustively, with more commentary than an Ashes series and more statistics than Wisden. But it’s a thing cut into a confusing mass of tiny pieces, an event about naked politics and rubbery numbers. What to make of the 2015 edition? Well, the “budget emergency” is now apparently less urgent than previously advised, with the tax take and spending as proportion of GDP at record levels. Howard-era-style handouts on budget night are back, despite the absence of enormous boom-fed surpluses. The particular targets of largesse were also familiar: small business and families, with a comforting side of culture war for the loyalists. A new commitment to “fairness” didn’t extend as far as undoing many of the acts of vandalism and vengeance from 2014. Consider two of the bigger pieces in the mass of confusion. The measure allowing small businesses to immediately write off new assets up to $20,000 has received a lot of positive coverage. What hasn’t really been mentioned is that in September of last year the government axed a $6,500 instant-asset write off for small business, implemented by Labor. Months later the same scheme is back, but tripled. Why is it back? Because it’s political signalling to a core constituency. Why tripled? Who knows, but 20 grand is a nice round number. Accelerated depreciation for small business to get them spending wasn’t a bad idea when Labor did it and it still isn’t, although it’s possible to overstate the likely stimulus effect of the policy. The deductions will, of course, be claimed overwhelmingly on the purchase of imported manufactured goods. There may be a spike in sales of helpfully priced $19,000 Chinese-made utes and there will be plenty of basic electronics and tools. It’s probably more likely to change the timing on purchases than drive extra expenditure per se. All up, not exactly a game changer – either as economic stimulus or even for individual businesses. The point of this policy was less about what it will do in the economy than about sending a signal: this is who the government cares about. Despite the fact that attempts to pick your own nickname typically end badly, “Tony’s Tradies” was repeated endlessly in the reporting. This was a success for the government and perhaps was the basic point of the measure in the first place. Then there is the show bag of stuff for families. Seneca’s aphorism definitely applies to Australia’s bewilderingly complicated system of payments, thresholds and rebates for kids and child-care. If you understand how this system works, how it’s changing and can explain it, you’re well qualified for a job at the Parliamentary Budget Office, or possibly as treasurer. The point in the budget context was, again, political signalling about fairness and valuing families. A contention undermined somewhat by branding every mother with the temerity to have a workplace entitlement to paid maternity leave as a “rorter” or “fraudster” and actually cutting the cost of the cost to government of paid parental leave by nearly a billion dollars over four years. It’s also instructive to consider what the budget didn’t touch. Compare, for example, the ferocity of the attack on paid parental leave “double-dipping” and the budget “save” made there, with the government’s failure to take up the cudgels on tax avoidance by multi-nationals. This, despite the recent palpable sea-change in public opinion on the issue, an effective Senate inquiry process and bipartisan support. The stated net value of measures about multi-nationals tax in the budget was a pathetic $30m over four years, the sort of money that an MNE would lose down the back of the couch and not bother to go looking for. Similarly, on superannuation. As many have said (including sensible voices in the industry) the cost of superannuation tax concessions to the very well off is huge, growing rapidly and can’t be justified. They are turning a system of occupational pensions designed to help middle-income earners save into a tax-planning racket for the wealthy. The government refused to go near the issue in the budget, and has even ruled out change as part of the coming tax review. Any suggestion that support for the Coalition in big business and among wealthy self-funded retirees influenced these decisions is, of course, to be deprecated. That brings us to what the future holds. The numbers in the forward estimates, on which the government bases its implausible claim to be improving the underlying budget position, are underpinned by some absurdly optimistic estimates on economic growth, unemployment and wages – and therefore revenue. The day after the budget, new ABS wages data which showed record low growth in wages illustrated that point right on queue. Meanwhile, many of the big 2014 savings plans to which voters reacted badly – in areas like hospitals, prescriptions, schools, higher education and Newstart – live on as “zombie measures” in the forward estimates. Planned cuts to health and education of $80bn say more than a little about your real level of commitment to fairness. On top of that, the government is currently budgeting to keep 100% of the extra revenue it gets from bracket creep as wage and salary earners edge into higher tax brackets. But that’s the future. Today it’s all about the kids and tax-deductible utes and having a go. The budget is an event where the political class kids itself (and the country) about the limits of its power, by fetishising what is really a pretty confusing mess. This is a thoroughly bipartisan affliction. Budget night and the aftermath is when Australia’s politicians pretend that they fundamentally control the economy. They don’t. (Perhaps, given a majority of the Senate is deeply concerned about the grave threat posed by Halal Vegemite, this is a good thing.) That the federal government doesn’t control the economy is painfully clear for most of the rest of the year. By maintaining the conceit that they do, the political class feel the anger and resentment from voters when things turn out badly – or even just differently. Australia is an advanced, open, largely deregulated economy with a big dependence on export commodities subject to huge price fluctuations. Globalisation and financialisation continue apace. There are a lot of moving pieces. The budget is important, genuinely important, but not as determinative of the fate of the nation as the night and its associated hoopla suggest. GK Chesterton said that the problem with the world for technocrat types was that the world was “nearly reasonable, but not quite”, looking “just a little more mathematical and regular than it is … its inexactitude is hidden.” Reality is more complicated and inevitably more messy than budget night makes out – the very precise and carefully studied numbers in the forward estimates notwithstanding. |