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Last-minute economic policy post

November 24th, 2017

Both Labor and the LNP have released their economic policies just two days before the state election. This isn’t just a matter of “costings”. Essentially, all the new expenditure items and tax reductions were announced with some fanfare during the campaign, while the revenue measures and expenditure cuts needed to fund these goodies have been kept under wraps until now. This is a terrible way to run an election, but the “hardheads” on both sides obviously think it’s a good idea (the same hardheads who gave us compulsory preferential voting on the Labor side and the Commission of Audit for the LNP).

On the LNP side, my assessments here and here have been confirmed. The tax cuts and extra spending promised by the LNP have been financed by cuts to services (euphemistically referred to as “efficiency dividends”) and by the abandonment of the Cross-River rail project, which appears to be vital if we are going to handle a growing Brisbane population in the future. The efficiency dividend will necessarily involve reduced employment. If the promise to avoid compulsory redundancies is adhered to in spirit as well as letter, that will mean a semi-permanent hiring freeze in areas with low turnover, which is likely to have adverse effects on efficiency.

These are big cuts, but not enough to reach the target of a surplus on fiscal balance. That means the stage is set for yet another Commission of Audit and unannounced further cuts.

Labor is planning to finance promised improvements in services through a mixture of tax increases (targeted at the relatively wealthy) and unspecified reallocation of existing funds, yielding a modest net increase in expenditure as compared to the cuts proposed by the LNP.

We have a choice then between Labor offering improved services, which must ultimately be financed by tax revenue and the LNP offering cuts in taxes, services and jobs. It would have been helpful if this choice had been made explicit four weeks ago, but still it is clear enough. Unsurprisingly, I prefer Labor.

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  1. Newtownian
    November 24th, 2017 at 15:29 | #1

    It appears “Efficiency Dividend” is an Australian invention. If the OECD ever introduced a ‘Hot Air’ index between this, carbon emissions and the various oxymorons and euphemism documented by Don Watson we would probably lead the world.

    https://en.wikipedia.org/wiki/Efficiency_dividend

  2. Doug
    November 24th, 2017 at 16:33 | #2

    Reduced public service is desperately needed. The Queensland Audit Office stated the current public service levels present “significant financial risk” to the government. “Improved service levels” I take it is also a euphemism for more Labor voters.

  3. Neil Cotter
    November 24th, 2017 at 16:44 | #3

    Here and here links missing

  4. I am and will always be Not Trampis
    November 24th, 2017 at 16:55 | #4

    Neil is correct

  5. Stockingrate
    November 24th, 2017 at 19:22 | #5

    When in the economic cycle are we going to save?

  6. Ese
    November 24th, 2017 at 22:00 | #6

    @Doug
    In the US, they call it a sequester.

  7. rog
    November 25th, 2017 at 02:23 | #7

    In a similar vein Jacob Greber, in the AFR, laments Turnbull’s recent announcement of tax cuts (fiscal sabotage). He argues that it is now up to the RBA to guide economic policy.

  8. derrida derider
    November 25th, 2017 at 14:45 | #8

    Those of us who do not approve of politicians lying will be every bit as disappointed with Labor as the LNP here. Given the circumstances of those ‘costings’, there is absolutely no reason to believe that those “tax increases …targeted at the relatively wealthy” are going to raise their claimed revenue. And it is very hard to see how “unspecified reallocation of existing funds” does not involve unspecified cuts in some services – in fact it is worryingly close to “we’ll save money by cutting waste and duplication”.

    And when they are returned and it becomes evident that they are a pack of liars, Palaszuk’s government will risk being as crippled as Bligh’s and Newman’s, for exactly the same reason. Those “hardheads” never learn.

  9. ChrisH
    November 25th, 2017 at 18:16 | #9

    Doug says ‘improved service levels’ is a euphemism for ‘more Labor voters’. What tosh!

    Worse services cost and better services save. The case for a real NDIS was made by the productivity commission because dumping the cost of disability on the disabled and their carers had huge flow-on costs to the community more widely. The case for providing sewerage services in Western Sydney and in many rural towns wasn’t that doing so would buy Labor votes – it was that failing to provide sewerage services imposed huge costs. And so on and so on.

    Better services for all, paid for with a bit of revenue from the best-off, are cheaper for the whole community than worse services, taken from the poorest, with tax reductions for the rich. But it certainly isn’t better services for Labor voters: from vaccinations through hospitals to schools, better services make everyone better off absolutely, rather than giving the rich more than all the growth in the cake as we have been doing for some years.

  10. D
    November 25th, 2017 at 21:34 | #10

    Jackie Trad’s victory speech included whipping up a crowd chant of “Shame Greens! Shame”.

    It’s fitting really, since she won on LNP preferences.

    The Greens are a curious mixture of ALP stooges and utter sellout/fools for continuing to support a party that utterly hates them.

  11. D
    November 25th, 2017 at 22:02 | #11

    This evening started out rather depressingly with all the “experts” ‘splaining that it was an ALP win by about 3 – 5 seats, but it’s getting rather enjoyable!

    If the ALP wins enough seats to form government they will have done so on One Nation preferences.

    Very funny.

    What looks more likely at this stage is a hung parliament – and an added bonus is that with fixed four year terms we will have that check on the government until 2021!

  12. paul walter
    November 26th, 2017 at 08:16 | #12

    Dark weekend. The Greens knifing Rhiannon, Whats her face from Labor ready to knife the electorate immediately a majority is confirmed re Adani and the sheer imbecility of the Nats fascists.

    They really shoehorned unelectable Palaszczuk back in, a concept I would have found unthinkable as to the achieving even a few days ago and should be put up against a wall and shot along with the federal neoliberals like Turnbull.

    Reaches for bucket.

  13. John Quiggin
    November 26th, 2017 at 08:50 | #13

    @D

    Of the many silly concepts in Australian politics, that of a “hung parliament” is among the silliest

    http://johnquiggin.com/2016/04/11/a-deliberative-parliament/

  14. Smith
    November 26th, 2017 at 10:01 | #14

    Looks like vindication for the ALP hard heads. They’ve fought off the Greens in Brisbane and One Nation in the regions, as impressive a piece of barbed-wire fence straddling as we’ve seen in Australian politics in a long time.

    Hopefully we can also have a break from the constant refrain that Hanson is the lumpenproletariat whisperer. She is an opportunist, she has her moments, but she is not, as the Germans say, serious. If she was, she would not have spent the first week of the campaign on a junket in India taking selfies by the Taj Mahal.

    And the LNP really do need to take a good hard look at themselves. They’ve won one election since 1986.

  15. J-D
    November 26th, 2017 at 11:34 | #15

    D :
    … – and an added bonus is that with fixed four year terms we will have that check on the government until 2021!

    Actually, no. Because this election was held before the end of 2017, the date fixed for the next one is 31 October 2020:
    https://www.parliament.qld.gov.au/work-of-assembly/sitting-dates/ElectionFAQ

  16. paul walter
    November 27th, 2017 at 08:28 | #16

    @John Quiggin
    Actually, there is an intriguing piquancy to that concept.

  17. Garry Claridge
    November 27th, 2017 at 08:40 | #17

    Perhaps a State owned bank and our own currency could be a way of the future 🙂

  18. I am and will always be Not Trampis
    November 27th, 2017 at 19:21 | #18

    @derrida derider
    Indeed in my view it is worse afterall they are the government. They had the resources to do this properly and they failed to.

  19. totaram
    November 28th, 2017 at 17:51 | #19

    @Garry Claridge
    Australia does have its own currency and the RBA, or are you suggesting the states each have their own?

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