Home > Economic policy, Oz Politics > Saving up the big stuff?

Saving up the big stuff?

May 9th, 2007

The Budget announced last night has widely been described (both favorably and otherwise) as “clever”. There are tax cuts across the board, with the biggest proportional benefits going to low-income earners. And there are lots of spending initiatives, particularly targeted at areas where the government is vulnerable because of past cuts. There’s a lot of money for universities (which, unsurprisingly, I welcome) partially reversing the cuts of the Vanstone-Kemp era. And the Commonwealth has resumed funding for dental services ten years afer this was abolished. Similarly, there’s a bit more money for alternative energy, an area that’s been cut in the past.

But (again as lots of people have pointed out) there’s no big idea here. Overall the tax cuts continue a pattern of returning real and nominal bracket creep, leaving the share of national income going to the Commonwealth effectively constant. And the new expenditure that’s been announced consists of lots of little things, some better than others, but none likely to make a fundamental difference to the way people perceive the government.

This Budget would make political sense if the government were cruising towards victory, and just needed to shore up its support. But it seems unlikely to do much to claw back the big lead Labor currently enjoys. Maybe the government is confident of winning on the IR front, and doesn’t think it needs any more than this. But that seems unlikely to me.

My guess is that the government is saving up something big for the election campaign. An obvious area would be climate change, where the Budget had only token measures. Alternatively, we might see a relaunch of the water plan. Finally, although the Budget had plenty of money for transport infrastructure, I was surprised that the Melbourne-Brisbane railway proposal, which was the subject of some pretty confident leaks, didn’t get a run. Maybe the government is planning to go the whole hog and announced support for the plan for an inland rail line from Melbourne to Darwin. This proposal has been kicking around for years, and Melbourne-Brisbane can be seen as the first leg.

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  1. May 9th, 2007 at 07:35 | #1

    Isn’t the big idea of this government, Big Government? The major philosophical shift in the last ten years is that we should have a greater proportion of GDP in public hands. Surely with many of the challenges to come the fact that conservatives now have embedded a philosophy of high aggregate public expenditure and taxation is useful.

  2. jquiggin
    May 9th, 2007 at 08:00 | #2

    That’s true, but the real shift on this was during the 2004 campaign (I’ll link to a piece I did on this when I get a moment).

  3. swio
    May 9th, 2007 at 08:05 | #3

    Major rail infrastructure projects would get people’s attention.

    There does not seem to be anything in the budget that was not already expected. As an example, my mum is on a pension and she is so used to getting special payments during a election year budgets that she had already planned how she was going to spend it in February, in the 2004 election. The higher education spending will be discounted as a reversal of previous cuts, not a new idea.

    The only way most of the items of this budget would have been news is if they did not happen. How the Liberal party expects to move poll numbers by doing what everyone knew they were going to do anyway is beyond me. Maybe they are saving up ideas for the election campaign, but that really seems like a mistake. Why waste the budget opportunity? They know they have to present themselves with a plan for the future to counter Rudd. Why have they run a budget that leaves everyone with the conclusion that they don’t have one?

    They must know that anything announced in the election will tend to get mentally discounted as just an election promise by the electorate. Whatever theme they want to present themselves with in the election must be demonstrated for a long time before the election for it to have maximum credibility.

    It almost feels like the Rudd has already beaten the government simply by making the election about the future.

  4. Jill Rush
    May 9th, 2007 at 08:30 | #4

    The major announcements will no doubt be kept for election promises as happened in 2004. A railway on the eastern seaboard would be painted as green, reducing traffic on highways and making them safer and investing in infrastructure. It would appeal to three key states as well.

    IR will continue to be a problem but no doubt the undermining of Julia Gillard on every front will continue with the hope that this will bite and that her credibility will be reduced. The PM has continued in this vein with a letter to the editor today.

  5. AnnaK
    May 9th, 2007 at 11:21 | #5

    So the budget wasn’t a huge surprise, nor did it have anything too controversial that would create an argument on which sides could be taken. It wasn’t overly visionary.

    Let’s not get too hopeful about this… remember that the Libs are incredible at playing last-minute politics. They can and do pull huge swings in the last months, if not last weeks, of a campaign.

    As a supporter of the opposition, I worry that Labor is not doing enough in response. The public needs to see a strong alternative vision, with solutions put forward instead of just complaints! Labor needs much stronger statements on where they want Australia’s economy to be directed… people just aren’t seeing it.

    Investments in large-scale, exportable alternative energies would be a great place to start – in the current global movement towards sustainability, it would be impossible not to profit from these sorts of technological developments. For example:
    - Did everyone see the Spanish Solar Thermal plant on the news?http://news.bbc.co.uk/1/hi/sci/tech/6616651.stm
    - Then there’s always China’s richest man, Shengrong Shi, owner of Suntech: http://www.forbes.com/free_forbes/2006/0327/062.html

    Among others. Let’s get real. As soon as an international climate deal is signed, demand for coal will start to decrease (over many decades, of course). We need to establish ourselves as the sustainability-industry standard now or we suffer in the long run.

    This is just one of many platforms on which an alternative budget can stand. They’ve talked about greater investment in education and broadband, loan schemes, supporting tax cuts etc, but we need a lot more positive PR from the opposition, and need to see some vision, or the Libs will turn the polls around again.

  6. MikeP
    May 9th, 2007 at 13:25 | #6

    I second the notion that rail would be a good vote winner across the spectrum. I can hear it as a counter-proposal to Labor’s broadband strategy already; “What’s the point of being able to order on eBay if you can’t get it delivered because of poor physical infrastructure?” And as always, you could rail (no pun intended) about the desperate need for more infrastructure without actually worrying about making the case for a desperate need for more infrastructure.

    And maybe better rail to WA would push the mining industry/employees further towards the coalition?

    Any mining worker who was weighing up the pros and cons of both parties and felt that Labor was bad news for them given IR and environmental policy, but who also felt the environment was a problem, could see such investment as the best of both worlds!

  7. melanie
    May 9th, 2007 at 13:49 | #7

    There’s already a railway from Melbourne to Darwin. A connection from Sydney to that line might also make sense. If any line to Darwin makes sense at all, that is.

    A high speed railway from Melbourne to Brisbane would be a great idea though.

    Was it here that I was reading the other day about the appalling rate of investment in this country – halving of the public sector share and only 1% increase in the private sector, despite high growth rates? Costello’s idea about the Future Fund seems to be a sort of pension for the baby boomers, that must not be spent now on investing in major projects (viz his response to Rudd’s broadband proposal). Whatever happened to the idea that investment drives the level of income, not savings?

  8. Hal9000
    May 9th, 2007 at 15:58 | #8

    Watching the ABC Kerry&Tony interview with Costello last night I was struck by the way Costello is never challenged about his mantra about the situation he inherited in 1996. In particular, he points to the $8 billion interest bill on government borrowings in 1996 that he’s so proud of reducing to zero. Of course, this feat has largely been accomplished through the sale of assets that used to generate most of the $8 billion interest as profit. So the real achievement on the revenue front caused by retirement of borrowings is negligible, and is raised by Costello in order to camouflage the real source of the surpluses – taxes – and in particular pay as you go personal taxes. Every time he makes these statements and they go unchallenged, more Australians are misled.

  9. Andrew
    May 9th, 2007 at 16:37 | #9

    I actually thought the Higher Education Endowment Fund was a reasonably big idea… although I guess not a huge leap away from the concept of the future fund.

    Overall, I thought the budget was pretty cleverly done (that word again)… a nice balance between infrastructure spending and personal tax cuts but not too much to stir the inflation demons and RBA interest rate party-poopers.

    Howard and Costello need voters walking into the pooling booth in late October with only two things on their mind – 1) who is the best economic manager and 2) who can best be trusted on national security. These are the two areas where the Coalition overwhelms the ALP – and provided the punters aren’t being distracted by IR, healthcare, education or the environment then these are the two issues that usually decide Federal elections.

    Howard has tried to neutralise IR as an issue with his WorkChoices changes (ably assisted by Gillard’s clumsy policy and communication), this budget has neutered any ability for the ALP to attack on education… Howard just now needs to to insulate himself on healthcare and the
    environment.

    Watch for a big election environmental pledge – and probably a State government bashing exercise on healthcare.

    Then we can all breathe a sigh of relief and re-elect a Howard(Costello) government safe in the knowledge that the economy will keep ticking along, jobs will be safe, taxes will continue to come down, the refugee rabble will not flood the borders and the Islamic fanatics will remain focussed on the middle east rather than blow-up the Opera House.

  10. May 9th, 2007 at 16:39 | #10

    THe most surprising thing in last night’s budget was the total lack of anything surprising.

    People with disabilities must be feeling dirty at the government today – the CSTDA under renegotiation in an election year but not a new dollar coin anywhere in sight.

  11. Andrew
    May 9th, 2007 at 16:50 | #11

    * errrr.. that obviously should be polling booth! Although on current polls, a bath for the coalition is not out of the question!

  12. melanie
    May 9th, 2007 at 21:49 | #12

    National security, Andrew? Does anyone feel safer with Howard toadying to American war policy?

  13. May 9th, 2007 at 23:39 | #13

    It seems the per capita cost of government will be increased again this year. The quality won’t improve. Selfish bastards.

  14. observa
    May 10th, 2007 at 00:15 | #14

    Who do you trust to lock away YOUR future funds for the kiddies future, so those sticky pawed types can’t dip into it? The Vice Chancellors know who to trust. That sure keeps the middle class academic squealers quiet and that’s no mean feat at any election time. Every little bit helps with tax cuts, etc for families first. The Govt only has to decide shortly whether Telstra or the Gang of Nine get the nod for private broadband rollout and then the sticky paws will have even less excuse to get sticky. Splash a bit around for the environment and lock away some more surplus in the battlers’ super funds. All of a sudden good economic management and incumbency, or rather setting the agenda, has a lot going for it. You get the feeling those 16 seats have just grown that little bit larger.

  15. conrad
    May 10th, 2007 at 06:01 | #15

    I think a problem with asking the government to put in a high speed train line from Brisbane to Melbourne is that it isn’t hard to imagine yet another half-baked effort, and so we’ll end up with another slightly faster than slow train taking weird diversions for political purposes.

    Cynicism aside, the other problem is that, can they really do it? Surely this represents a huge government subsidy against businesses such as airlines — it would major disaster for airline passenger numbers on the Melbourne->Sydney and Brisbane->Sydney lines.

  16. jquiggin
    May 10th, 2007 at 09:43 | #16

    I think it will be a freight-only line, so the competition is with trucks and the coastal route. My cursory examination suggests the economics aren’t too bad, and that an extension to Gladstone or even Rockhampton might work.

    The extension to Darwin was always dubious, and would be a complete white elephant now that the Adelaide-Darwin is there, and I believe not doing well as far as freight volume is concerned. But that doesn’t mean it won’t happen, or at least get some sort of announcement.

  17. wilful
    May 11th, 2007 at 12:53 | #17

    The Adelaide Darwin route should always have come out of the defence budget!

    Melbourne to Brisbane (an “iron Mississippi”) would be a great idea, building on Parkes as a major distribution centre. Get the damn dangerous, polluting, amenity destroying trucks off the road.

    Maybe Labor should announce it first…

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