Now that the dust has basically settled on the government’s budget, the opposition’s reply, and the media assessment and scrutiny of both, it’s time to sit back and wonder what it all means?
If we attempt to cut through all the inflationary rhetoric, the spin, and the political point scoring on each other, just what has it achieved?
Budget repair? ‘NO’. Not really, as they have again used quite unrealistic forecasts about the restoration of growth and employment across our economy and, in particular, a boom in wages (and therefore in tax revenues) to assume a budget surplus in 2020/21, one that they will not deliver.
This week’s wages data again recorded a mere 1.9 percent increase over the last year, driven by the public sector, the lowest on record, and representing a fall in real wages when we allow for increases in the cost of living. Yet the budget predicts that wages will increase by 3.75 percent in a couple of year’s time, an increase the likes of which we haven’t seen since the resources boom when many skills were in short supply.
However, it was important that they didn’t cut spending very much at all, but relied on three new taxes – the bank and Medicare levies, and the tax on foreign workers. Indeed, $6 of every $7 of claimed budget repair comes from tax increases, rather than expenditure cuts.
But, even with these new taxes total tax revenues will fall well short of funding the estimated expenditure. It is instructive that the Treasury has significantly overestimated tax revenues in each of the last seven years – and they’ve done it again.
This budget blowout will be further compounded by a serious blowout in spending on the NDIS. Even though the budget predicts that spending on the NDIS will increase by some 600 percent to $21.3 billion in 20/21, bringing total assistance to the disabled to some $51 billion in that year (the second largest component of the welfare bill after assistance to the aged) I believe it will increase even further as they settle the eligibility and coverage, especially if they include mental disabilities.
So, not only does this budget simply ‘kick the budget surplus further down the road’, I fear it kicks it even further into the long grass.
Well, does the budget make us better off? Will it substantially reduce our costs of living? Will it really stimulate economic growth and create jobs? Or improve business and consumer confidence, and increase job security?
Unfortunately, it’s again essentially ‘NO’ to each of these. At least, polls and surveys released this week suggest mostly ‘No’. Most people seemed to believe that it wouldn’t make much difference to them, either way, although some groups, such as university students, have protested quite strongly.
Clearly, the government’s strategy with this very political – that is pragmatic, but not tricky – budget, hoped for a bounce in the polls over last weekend. They didn’t get one – and to be fair budgets usually don’t give much of a lift.
Although the government still trails the opposition by 53-47, on a two-part preferred basis, they did neutralize much of the opposition’s criticism about school funding and Gonski, with a Medicare guarantee, and with the prospects of various infrastructure projects, although mostly not to take effect for several years.
Where to from here? I am not aware of any Plan B! So, I guess they will still muddle on!