Sweet Budget Time 2014
Budget time: a sweet time for some, much angst and bitterness for others. Rocco Fazzari and Denis Carnahan get us in tune for Tony and Joe's big night.PT2M3S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-37ysp 620 349 May 9, 2014
Is Tony Abbott mad? Or is he brave? Or crazy-brave? On the eve of the day that could permanently define or debilitate his authority as Prime Minister, these questions come to mind given the conflicting signals in the lead-up to his first budget.
Abbott would not be the first recent leader to have his clinical fitness questioned. Mark Latham was defined by anger-management issues. Malcolm Turnbull was described as a narcissist by his predecessor as leader. Kevin Rudd was described as “mad” even by former members of his own cabinet.
Illustration: Michael Howard.
A strong case can be made for Abbott’s political insanity, as distinct from any petulant speculation about his clinical sanity, a game which has already worn thin. A strong case can also be made for his political bravery.
First, insanity. Few leaders in modern Australian politics have more effectively refined and repeated the drum-beat of a simple message, hammered home, than Abbott as leader and Mark Textor as pollster. Their message: Julia Gillard misled the nation. Her carbon tax was a big new tax. It would damage the economy. Abbott, in contrast, would introduce no new taxes and no surprises (other than a tax imposed on large companies to pay for paid parental leave). There would be a return to steady, prudent, predictable government.
The latitude for hypocrisy contained in this simple moral message was zero. Now, nine months after the 2013 federal election campaign, the Abbott government, based on multiple clues, will introduce a tax increase on fuel, a new tax on every visit to the doctor, higher costs for university, an increase in the income tax for the 650,000 people earning in excess of $150,000 – or perhaps the threshold will be higher (the agony over this broken promise ebbed and flowed and wobbled, right to the end).
So there goes the no new taxes. There goes no unpleasant surprises. The other dishonesty from the Coalition was to pretend the increase in budget deficits was caused by profligate spending, not by a combination of stimulus spending and a fall in receipts from the resources boom and a hit to confidence caused by the global financial crisis in 2008-09.
Add to broken promises a big dash of political bravado: increasing the eligibility age for the pension to 70, phased in by 2035, plus increasing the cost of university, and the cost of health care, plus increasing the eligibility threshold for family benefits and disability support payments and the age pension. Plenty of potential for electoral blowback in all that.
To compound the broken promises, the regressive tax hits, the false economy on doctors visits (early detection being the cheapest form of health care), and the plethora of cuts to government agencies, the biggest luxury of all, Abbott’s paid parental leave scheme, is not sacrificed even as the prime minister calls for sacrifice.
Crazy. Little wonder the opinion polls are showing a sharp deterioration in support for the Coalition.
Or crazy brave? Whatever you may think of Abbott, he is willing to accept the arrows and opprobrium that will surely come his way, perhaps even at the cost of his job in due course. He will do so because he believes it will be for the greater good, a stronger economy, healthier growth in job creation, and raise the overall productivity, participation and prosperity of women via parental leave.
To buttress the case for bravery I turn to Tony Shepherd, who chaired the National Commission of Audit on federal expenditures and income. Last week he spoke at the Centre for Independent Studies and I also had the chance to talk to him after his talk.
Asked about the contrast between Abbott’s no-surprises campaign rhetoric and the reality of a structural budget deficit – with Commonwealth spending at 26 per cent of GDP while its receipts are 23.1 per cent of GDP, a gap that would see federal debt and deficit blow out to European proportions if sustained – Shepherd replied:
“They did make one iron-clad promise: to return the budget to a sustainable surplus. And in my view that trumps all.
“I think it is something the average Australian would like their government to do … The house is not on fire but if we have another decade of deficits … ” He let that sentence trail off. He believes the Abbott government is betting that the average household understands that life is more precarious when the cost of high debt weighs down on income, and this also applies to governments.
“There is no such thing as government money; it is our money,” Shepherd said. Previous generations of Australians, and most previous governments, have acted on an implicit social compact of generational fairness, and not pushed their cost of living onto future generations.
“On page two of our report we say that every vested interest will say that this is unfair,” he said. “My response is, ‘You want everyone else to suffer, not yourself’.”
He did not accept criticisms that the commission of audit – and by implication the likely federal budget – place too much responsibility on the poor to cut costs. “We certainly tried to protect the lowest 20 per cent. We’ve tried to look after them. Many of our recommendations hit high-income earners and business.”
Whether Abbott is the mad monk his critics portray, or the man who became Prime Minister because he had guts, will be borne out by the big bet he has made. Like all prime ministers who introduce an austerity budget he is betting that a majority of the electorate will see that hard decisions on the economy, with its ageing population, need to be made, and made now, and to act otherwise is the greater hypocrisy.