Whatever the public response to the 2017 budget, it won't be a policy victory for the government. Surrender to the special interest groups – and the bleating of the revenue-istas that tax rises are the only "fair" answer – will have long-term ramifications. In fact, the 2017 budget resembles nothing so much as the Coalition reaching the final of Kübler-Ross's five stages of grief over Australia's parlous fiscal position.
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The main reason the budget is important is the discipline it imposes on government. The budget requires the government to commit the details of its proposals to paper; to come up with a cost and a bottom line. Whatever nonsense politicians belt on with for the rest of the year, at budget time we get to see what they really believe in and are actually going to do.
For some time, it's been clear that Australia has a structural deficit problem. The government correctly identified that it is not, and has never been, a revenue problem. The fall in revenue after the global financial crisis just exposed the truth that permanent increases in health, education and welfare spending had been financed by a temporary mining boom (and then by debt).
Increases in pensions, together with their automatic benchmarking to wages, surges in federal spending on hospitals and Medicare, the commitment to Gonski, the introduction of the national disability insurance scheme – all effectively unpaid for, all growing faster than the economy, and all locked in and wildly popular. This was the impossible challenge inherited by the Coalition government in 2013.
The 2014 budget was all about the first stage of dealing with this: denial of the scope of the problem. The government utterly failed to convince the public of the need for drastic change, not the least of which because it didn't accept this also meant abandoning some of their cherished spending plans (e.g. rolled-gold maternity leave).
The next stage was anger, and there was plenty of that. Not only at the budget and government itself but from the government towards the Senate, which refused to pass unpopular measures that might have lightened the fiscal load.
The 2015 and 2016 budgets showed the Coalition had reached the third stage: bargaining. The central message was: "If we do things slowly, push some of the pain off into the future a bit, can we make some changes?"
The malaise the government fell into after the 2016 election shows the answer to that question was "no". If the government seemed rudderless, it's because it had clearly been at a loss on how to deal with fundamental contradictions of an electorate that wants the budget restored to surplus, yet doesn't want any significant cuts to spending or broad-based tax increases. The government had reached stage four: depression.
The 2017 budget is the final stage: acceptance. The government appears to have conceded the debate over how to deal with the budget, and is now wearing the straitjacket fitted for it: that the purpose of a Liberal government is to pay for the promises of the last Labor government.
Look at how it dealt with the various problems. It reinstated medical-card benefits for pensioners who lost out in previous changes, together with an end-of-financial-year bonus. It capitulated to the Australian Medical Association on health, committing to extra money for the Pharmaceutical Benefits Scheme and public hospitals. Medicare and NDIS funding is now "guaranteed". While on schools funding, it seems both sides now give (or perhaps more accurately have) a Gonski.
The government abandoned savings measures. It raised income taxes. It imposed a levy on banks and on imported labour. Spending will stay at or near record highs while revenue rapidly climbs to match.
To be sure, the government has laid its own budget booby-traps: ensuring that if it loses the next election, Labor will find itself struggling to raise funds to pay for Coalition spending. However, the public has ceased to punish Labor for promising deficits and, after a bunch of massive deficits of its own, how much credibility does the Coalition really have left to attack Labor over budget repair?
The big thing missing from the budget is any sense of an alternative vision for society based on self-reliance, free markets and lower taxes. With both major parties effectively committed to a high-taxing and high-spending approach, it may now require a crisis to change course.
Simon Cowan is research manager at the Centre for Independent Studies. scowan@cis.org.au
