Tuesday, October 09, 2007

$20 billion... and it hasn't yet started

"Your wallet feeling light? You wander around the house looking for loose change?"

I am preparing a tally of election promises for the Canberra Times which I'll update daily.

Others are doing so, including this excellent summation from Jessica Irvine in this morning's Sydney Morning Herald.

In the West Australian, economics editor Shane Wright has a lighter take. Here it is:

Your wallet feeling a little light of late?

You wander around the house looking for loose change that you just know was there on the counter?

Welcome to a Federal election campaign that is spending so much money at such a rate of knots that it would knock the picture of John Flynn off the $20 note.

And the best thing about all this promised spending? It’s being done with our money.

John Howard has been on a spend-a-thon since the May budget the likes of which has never been seen in this country. Effectively, taxpayers’ money is being thrown around like confetti as the Prime Minister tries to hold on to the keys to the Lodge.

Have a look at what’s been announced in recent weeks.

Announced by the PM has been $190 million to help autistic children, $714 million in extra drought relief, $40 million to put seat belts on school buses in rural and regional areas, $170 million on nursing schools, $200 million on a new regional program, $330 million on veterans’ pensions, $110 million to respond to horse flu, $86 million on a new PBS listing, $71 million on new climate change plans, $740 million extra for the government’s Northern Territory indigenous intervention and up to $1 billion on Adelaide roads.

And then there are "smaller" announcements he’s made.

That includes $12.6 million to help celebrate the centenary of rugby league, $1 million for a Christmas parade in Sydney, $14 million to upgrade the Geelong football team’s home ground, $1.5 million on concessions for travellers on the Ghan railway and a host of others.

And guess what?

None of these new spending initiatives were in the May federal budget, and none of them have been offset by spending cuts.

The fact the government – which argues Labor is promising recklessly (and I’ll get to that in a second) – has not even sought to argue it is crimping money to pay for its new pledges says one of two things.

Either the government has given up caring about what it spends to keep power, and will deal with the consequences after the election, or that it has so much money that it doesn’t really matter.

I’m backing the second point. Last week, the final budget outcome for the 2006-07 financial year was announced, with the surplus finally coming in at $17.2 billion.

That’s $3.6 billion more than it predicted would be the result when the 2007-08 budget was announced in May. Incredibly, it’s $6.4 billion more than what Mr Costello forecast when he announced the 2006-07 budget last year.

Now it’s not just the government that has got a few quid in the pocket burning a hole.

Kevin Rudd has certainly been out there making promises, such as $300 million on a Brisbane road project, $455 million on upgrading the Pacific Motorway in south-east Queensland, $250 million to help people install rainwater tanks, $158 million on 2000 transition care beds for the aged, $200 million on 500 extra federal police, $500 million on housing affordability and $60 million to help farmers deal with climate change.

Like Mr Howard, there’s been plenty of low level spending projects as well announced by Labor, such as $5 million to upgrade the grandstand at the Penrith NRL team’s ground, $1.2 million to restore a flour mill in Tasmania and $8 million on an MRI machine at Cairns hospital.

To give some credit to the ALP, there has been some gesture towards spending restraint.

It has announced at least $3 billion in savings, but on closer inspection some of these look particularly rubbery. There’s $400 million to be saved in the WorkChoices area and $350 million to cut so-called government "propaganda" and advertising, but this may prove to be illusory.

You have to pinch yourself to remember that this has all been announced before the actual start of the election campaign. While money’s been running like a river in recent weeks, that will step-up to a torrent once both sides rush towards polling day.

A key element to all of this will be just how much money is in Canberra’s coffers.

We won’t know that figure until the pre-election economic and financial outlook is released, about a fortnight after Mr Howard announces the election date.

The ALP has been playing cat-and-mouse on its tax policy (and various other initiatives) until it knows just how much it can go and spend. The government is getting daily updates on what’s available, and so is getting its policies ready armed with that knowledge.

All of this is important because, no matter the merits of the spending (and much of it can be justified), there seems to be almost no interest in governments making tough decisions to keep a lid on their spending ways.

Indeed, Mr Howard has seemingly given up trying to argue he’s an economic conservative.

"One of the consequences of having a strong surplus and a strong economy is that when there is a real human need the government is in a financial position to help," he said when announcing the government’s drought package.

In other words, we are spending a lot of money, but it doesn’t matter because we can afford to. Doesn’t sound like any economic conservatives I’ve ever run into.

And there’s a bunch of people at the Reserve Bank who won’t be impressed with it at all.