Home > Economic policy > My budget instant reax for Crikey

My budget instant reax for Crikey

May 11th, 2011

I didn’t do the Budget lockup for Crikey this year, and given the Canberra cold and the slim pickings, probably a good thing. Some thoughts I gave Crikey, over the fold

The budget has been fairly successful as a political exercise in expectations management. A lot of cuts were foreshadowed but didn’t eventuate. That gave a sense of relief, and gave the government some cover to kill off a range of programs and tax expenditures which no one would seriously defend as good policy.

There was the dependent spouse offset, a relic of the days when respectable women didn’t go out to work, and was replaced years ago by Family Tax Benefit B for those with children. Showing its customary caution, the offset is being killed only for those born after 1971, so the number of people immediately affected must be tiny.

Then there’s the tax break for entrepreneurs, a Howard government initiative from which I benefited in my capacity as a columnist. I only claimed it after getting a series of letters and even (if I recall correctly) phone calls pointing out that I was eligible. I can’t imagine that those eligible for social welfare benefits are similarly encouraged to claim their full entitlements. Various other aspects of middle-class welfare (such as the Family Tax Benefit and rorts of the Low Income Tax Offset) have also been tightened.

And there’s been an attempt to rein in the long-standing rort of favourable Fringe Benefits Tax treatment for cars, partly offset by a giveway encouraging small businesses to buy new vehicles. This is targeted at the “ute owner” who seems to have displaced the “working family” in the governments affections.

The other aspect of expectations management is that we expected nothing positive and, with a handful of exceptions, that’s what we got. There’s a reasonable initiative on mental health and some modestly positive initiatives for the long-term unemployed, wrapped up in a bunch of focus-group-driven tough rhetoric.

But the Education Revolution championed by Julia Gillard before her rise to the prime ministership has been forgotten. The idea that the global financial crisis might imply a need for substantial restructuring of the economy along social democratic lines is similarly a distant memory. Overall, this is a budget that Peter Costello would have been happy to bring down.

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  1. James Haughton
    May 12th, 2011 at 11:21 | #1

    “My Ute is a Working Family” – I can see the bumper sticker now.

  2. Marginal Notes
    May 12th, 2011 at 12:08 | #2

    In an atmosphere of budget cuts and focus-group driven tough rhetoric, the increase of 500m in the aid budget, and in well-targeted areas – education, maternal and child health, water and hygiene, women affected by violence – must be considered a small sign of commitment to social justice, in an area not considered to be a big vote-catcher. (Didn’t make the Oz’s front-page table of “winners” and “losers”!). And the Indonesian schools program remains, contra Abbott’s populist push to defer it.

  3. Jeepers Creepers
    May 12th, 2011 at 12:59 | #3

    I am staggered that Sinclair Davidson is attempting to say the budget is expansionary.

    The budget shows it isn’t.

    The structural deficit is getting smaller and is more affected by the economy anyway if you read
    the IMF.

    Real increases in spending is the lowest for a generation and the fiscal consolidation the quickest possibly ever seen.

    Is Davidson really this ignorant of modern macro-economics or simply playing to the ignorance of his gallery.

  4. Alice
    May 12th, 2011 at 20:14 | #4

    Im not even going to comment on the budget given they have again put the boot into single parents.

  5. Jeepers Creepers
    May 13th, 2011 at 15:38 | #5

    I am a little perplexed at comments that the budget is dependent on high commodity prices such as this one from
    <a href= "http://catallaxyfiles.com/2011/05/11/tough-as-tofu-or-swans-real-courage/&quot;.Catallaxy's blonde bombshell who is typical of not reading
    Budget papers at all.

    If Treasury had a megaphone they couldn’t make it any more louder why the strong commodity prices are not having a lot of impact on government revenues this time round compared to commodity boom mark1.

  6. adit
    May 13th, 2011 at 23:22 | #6

    Nothing on the national disability insurance scheme (NDIS).

    To me this was a no brainer. Help is need for nearly 800 000 Australians with a severe disability, and their carers.

    Also all this focus on delivering a “tough budget” and getting it back into surplus is infuriating.
    ratio of government debt to gdp is less than 10%. one of the lowest in the oecd (or is it THE lowest? can anyone check this?)
    Yet,
    ratio of private debt to gdp is 150%. Mortgage debt making up over half of that (higher than the US during the GFC). Yet nothing re: paring back first home buyers grant or negative gearing tax subsidy.

    Perplexed does not even begin to describe it.

  7. john
    May 14th, 2011 at 10:31 | #7

    There are two aspects to the car FBT concession:
    1. The sliding scale used to calculate liability by the formula method encourages excess driving to reach one of the thresholds where you get a lower tax.
    2. The rate is generally concessionary. This is the more important problem.

    The new rule (a single tax rate replaces the sliding scale) solves the first problem but not the second. It will save less than a quarter of the current tax expenditure of about $1 billion per year.

    Car industry comments on this issue in the last few years have focussed on point 1, presumably in the hope that this will make people forget about point 2.

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