Treasurer Scott Morrison’s budget speech opened with the remark ‘What have you achieved?’ to which the chamber responded with howling laughter.
This was the fifth budget of the Coalition government and may very well prove the last before the Australian people hand power to Bill Shorten and Labor. This provides an opportune time to answer – what have they achieved?
More tax and more spending is the Abbott-Turnbull legacy. Since 2012-13, expenditure has grown by $117.4 billion, and revenue by $89.4 billion. As a proportion of GDP, spending is up 1.5 per cent to 25.4 per cent of GDP and taxation is up 2 per cent of GDP to 24.9 per cent, the highest in a decade.
If the Coalition loses the next election they will not only have failed to roll back the spending instigated by Labor, the situation will have been made actively worse under their watch.
The right of Australian politics will look back on this period as a time of lost opportunity. The closest historical comparison is the Fraser Government. Australia faces substantial challenges that are not being met while the Liberals take a Labor-lite approach to policymaking.
Morrison’s latest budget includes some positive elements. There is a small reduction in income taxes, a lower tax on craft beer, and a freezing of funding to the ABC. Morrison was correct to argue that a tax windfall should be given back to taxpayers – it’s not government’s money, it’s our money and we should be able to keep more of it. For the economy to grow, jobs to be created, and living standards to increase, government must get out of the way.
Nevertheless, the spending disease continues. The pre-election bonanza budget includes billions more spending on infrastructure, aged care, the environment, technology, and culture, and human services and security. The is a blatant effort to buy off particular constituencies with the hope of regaining political popularity.
The government is also bizarrely banning cash payments above $10,000 in the name of minimising the ‘black economy’. This is a creepy infringement on the basic liberty of free exchange. It sets a terrible precedent, foreshadowing a future in which you are only able to make purchases that the surveillance state can watch. Meanwhile, the further attack on multinationals tax arrangements, limiting the use of debt to reduce tax liabilities, is a guaranteed way to discourage foreign investment.
There is a tiny $2.2 billion projected surplus in 2019-20. The surplus, however, relies on increased taxes, bracket creep, and rosy projections of a growing economy. Under Morrison, the government has introduced the bank levy, reduced super concessional contributions and introduced the transfer cap, frozen the family tax benefit, and increased the tobacco excises.
The tiny size of the surplus, just 0.5 per cent of expenditure, is not reassuring. Australian politics is already suffering from a trust deficit. Bipartisan over promising and under delivering is toxic for our political culture.
In 2011, Wayne Swan promised a budget surplus by 2012-13. In 2012, Joe Hockey committed to a surplus in the first year of a Coalition government. In 2014, when Hockey delivered his first budget the surplus projection was pushed out till 2018-19. In the not unlikely event of a minor downturn in Australia’s economy the latest surplus will be just another broken promise.
Gross debt is now projected to reach a record $578 billion. It is a decade after the Global Financial Crisis which sunk the budget into deficit and Australia into debt. Even a Keynesian could admit that, with the economy growing, it is time to save, or at least stop borrowing, to have some slack for a rainy day. That slack is non-existent in fiscal policy, and monetary policy, with a cash rate of just 1.5 per cent, would be no more helpful in a crisis.
Cutting spending is the only way to put the budget on a sustainable footing and pay down this debt. If we cut spending by just 1 per cent there would be a $9.3 billion surplus in 2018-19. A further 1 per cent cut would deliver a $52.9 billion surplus in 2019-20. Sadly, the current government appears to have practically given up on reducing the size of government.
Australia has serious challenges in the years ahead. The latest intergenerational report predicted that Australia’s national debt will reach $2.8 trillion by 2055. The number of people in the workforce for each person in retirement is predicted to dramatically decline – from 4.5 workers per retiree today to 2.7 by 2055. This is a recipe for higher taxes on young Australians and a lower quality of services for retirees.
The latest budget will be shortly forgotten as both uninspiring and unremarkable in a long line of uncourageous disappointments.