Tuesday, May 05, 2015

Expect a do-nothing budget that will cost us time

The Coalition's biggest mistake was not to tackle super in its first budget.

If it had, it could have argued it was inflicting pain all around. As it was, with the honourable exception of the (temporary) deficit repair levy, just about all the measures in the budget took money from the least well-off and left it with those on high incomes.

Which means the budget took money from women.

A gender analysis of its retirement income> measures finds that women are almost 80 per cent more likely than men to be on the age pension (which the budget wound back). Men are twice as likely as women to be in the income bracket that benefits the most from super tax breaks (which the budget left untouched).

Siobhan Austen from Curtin University told a conference in Canberra last week that by tackling pensions and not super, the budget further widened the income gap between women and men. Many of us wouldn't have consciously realised this (I didn't) but it left us with the unconscious impression that something about the budget wasn't quite right – that the decisions in it weren't legitimate, which made it easy for the Senate to frustrate it.

Joe Hockey and Tony Abbott defend their decision not to touch super by saying they promised to make no adverse changes to it in their first term, but they also promised that about pensions, a commitment they were able to skirt by saying that the new lower rate of indexation wouldn't cut in until after the next election.

In one way they have learnt their lesson. A week out from this year's budget, they are saying it will be "fair", which is an improvement. But in another way they have learnt the wrong lesson. Their definition of fairness seems to be to not offend anyone...

A collapse in revenue means this year's budget deficit will be more like $46 billion than the $30 billion forecast last budget night. Next year's will be more like $45 billion than the forecast $17 billion. There's not a surplus in sight. The longer the deficits continue and the longer the interest costs of running the deficits compound, the less likely it is there will ever be a surplus.

But rather than raise money in ways that might cut the deficit (however fair), Hockey and Abbott are ducking for cover. Budget cabinet has reportedly knocked back a plan to impose the goods-and-services tax on books and other low-value items that flood into the country in packages, in competition with those sold through shops. It would be fair, but what if someone took offence?

Until Sunday the government looked set to knock back a proposal actually supported by welfare organisations to cap the presently uncapped value of meals and entertainment expenses their employees can claim through the fringe benefits tax system. Even though welfare sector knows it's a rort and offered it up, the budget cabinet was nervous. The latest signs are that it will look again and might well agree to accept what the industry is offering it.

After Hockey mused about imposing a sort of limit on negative gearing (his mate, Sunrise presenter David Koch, once said that while he didn't want to lose negative gearing altogether, "there's got to be a limit"), Abbott and his social services minister Scott Morrison shut discussion down.

Meantime Abbott and his colleagues are spending money as if there is little need for restraint. Bypassing the usual channels, they are giving $4 million to the University of Western Australia to set up a "consensus centre" run by the Danish climate change contrarian Bjorn Lomborg.

They are spending $11 million on a series of largely incomprehensible advertisements promoting the idea of their intergenerational report. And an extra $35.5 million on a continuing festival of Anzac commemorations throughout the next financial year.

The message we are set to get next Tuesday is that there's no budget crisis (even though it's got worse) and that no one needs to get hurt (even though someone will have to be). It's the opposite of what we pay our leaders to do. As unlikely as it seems, it's not too late for them to improve things. One week out, the budget still hasn't been put to bed. That's expected on Thursday.

But big measures that offend large numbers of people are effectively off the table. Abbott promised to consult before any further major changes like the ones to Medicare, higher education and government benefits in his first budget. He hasn't consulted (at least not publicly), and that leaves him able to do very little. One week to go, the government looks like a rabbit in a spotlight, unable to do what's needed, and taking its time.

In The Age and Sydney Morning Herald