Why Budgets are boring
Budgets used to be big news once, both in the leadup and in the aftermath. Now, they’re front page news for a day, and even that’s not secure. If the Beaconsfield mine rescue had been a day later, I suspect at least some editors would have pushed the Budget to the inside pages. Why the decline in interest?
For a start, Budgets usually contained increases in excise taxes, so the tabloids could keep “Beer, Cigs, Up” stored away in 60 point type, to be run every year. The excises were indexed to inflation back in the 1970s, so now they go up automatically, with no need for an announcement. The Fraser government briefly went the whole hog and indexed the income tax scales, which killed off the good news of regular tax cuts as well, but that idea only lasted a couple of years. Still, people are pretty much used to tax cuts that return bracket creep and not much more.
Nest, the fact that people could make money by anticipating changes in taxes also produced a cult of secrecy, which generated high drama around Budget leaks. Now the government either preannounces or comprehensively leaks most of the Budget measures in advance. The trick in media management (fresh when Keating pulled it back in the 80s, but tired now) is to have a rabbit or two left to pull from the hat on Budget night.
Third, active fiscal policy is no longer used to manage the economy. This is now done by monetary policy, that is, by changing interest rates. All the attention that used to be paid to the economic analysis in the Budget is now focused on the Reserve Bank. The only real concern expressed about fiscal policy is whether an expansionary setting for fiscal policy will produce an offsetting increase in interest rates.
Finally, the big debate over the size of government has settled down into a stalemate. As a share of GDP, both tax revenue and public spending have been pretty much constant (in the high 30s) for the last twenty years. The numbers for the Commonwealth government taken separately are much the same, though they’re complicated by the debate about how to treat the GST. If you divide it up proportionally to the taxes it replaced, you get the answer that the tax take for the Commonwealth and the States is also virtually unchanging.
So, although there is a lot of readjustment, some of it necessary and some dictated by the political demands of the day, nothing much changes on the larger scale.
Will Budgets continue to be boring, or do interesting times lie ahead? I’ll try to post more on this.