Among the measures in last night’s budget was the decision to kill off, once and for all, more than $10 billion of “zombie measures”. These cuts proposed in Joe Hockey’s disastrous 2014 Budget, rejected by the Senate, but kept on the books as proposed savings until now.
More importantly, the Budget abandons the undead ideology of market liberalism (aka economic rationalism, neoliberalism and so on) that dominated policy thinking in Australia in the decades leading up to the Global Financial Crisis, and continued to be taken for granted by most of the political class long after that.
Among the specific elements of market liberalism, I described in Zombie Economics back in 2010, those most central to current policy debates are privatisation (in the broad sense of rolling back the size and scope of state activity), trickle down economics, and austerity. All of these have been abandoned, to a greater or lesser extent in this budget.
The zombie that has been killed off most thoroughly is austerity. Extreme rhetoric about debt and deficits, and the claim that the only appropriate response was cuts in spending are central to the zombie idea of austerity, and have now been abandoned.
Privatisation has similarly been abandoned, at least in crucial respects. The government has abandoned attempts to squeeze Medicare and accepted the reality of the NDIS. The cut down version of Gonski now on offer may be unsatisfactory, but it is at least an acceptance of public responsibility. And Morrison’s discovery of ‘good debt’ has seen a return to traditional public infrastructure investment financed by borrowing.
It’s true that the budget doesn’t do anything to make the tax system more progressive. The company tax cuts pushed through last year will do the opposite, as will the expiry of the ’emergency budget levy”. Still, the push in the opposite direction has been abandoned. The top marginal rate of income tax and the threshold at which it applies are the same as they were in 2008, when the Rudd government partially implemented the tax cuts promised by Howard and Costello. So, even if the zombie of trickle down economics is still walking, it’s taken some heavy damage.
The willingness of the government to hit the big banks with billions of dollars in new taxes (or levies) is also indicative of the change. In the heyday of neoliberalism, the Efficient Markets Hypothesis presented the financial sector as the ultimate source of economic wisdom, standing in judgement over governments. Now, the banks are seen on all sides as a burden on the productive economy, an appropriate target for taxation.
Of course, there’s still plenty to dislike about the budget. Most obviously, there are the gratuitous attacks on easy targets like welfare recipients and foreign aid. But these represent culture war gesture politics, not a serious economic policy.