More to Turnbull’s budget move than meets the eye

CHANGING the Medicare Levy in the next federal budget is a wise move if Turnbull wants to get his polls and the coffers back on track, writes Peta Credlin.

THE government’s latest Budget move — to scrap the increase in the Medicare levy that was supposed to fill the NDIS funding hole — is probably smart politics but there’s much more to this than first meets the eye.

By dropping the increase, the government cuts away a political barnacle and gives itself the best chance of resetting the political agenda, and hopefully, for the Prime Minister in particular, turn around 20 months of losing polls.

In philosophical terms too, dropping the Medicare Levy increase is in line with the fundamental view of the Liberal Party that no new tax is a good tax, and that increasing taxes should only ever be a last resort.

But in fiscal terms, it gets a little more difficult. As it stands, the Turnbull Government is promising an NDIS with no levy, real personal income tax cuts, a return to surplus and $50 billion dollars of corporate tax cuts. Scott Morrison is no magician, so something’s got to give or the Budget just won’t be believable.

Scott Morrison is no magician, so something’s got to give or the Budget just won’t be believable. (Pic: Dan Himbrechts)

Right now, the government’s strategy for corporate tax cuts must be revisited. Despite not having the numbers to legislate them, the cost of the tax cut is baked into the bottom line as revenue forgone. With the banking Royal Commission playing out in loungerooms around the country, night after night, the timing couldn’t be worse to hand out tax relief to big corporates, particularly the banks.

This week’s budget backdown is the result of more tax coming into Morrison’s coffers, rather than spending restraint. With debt now around half a trillion dollars, the government can’t keep hoping that strong resource prices will pull us out of this fiscal hole. The unfortunate reality is they’re going to have to make some tough decisions now or we won’t be able to pay for our future.

Originally published as More to Turnbull’s budget move than meets the eye