Party Games: Treasurer aims to leave a legacy with bold Budget

IF SCOTT Morrison’s Budget plan works, he can take a bow in the not very long list of treasurers who have entrenched some real tax reform.

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TREASURER Scott Morrison has woven more stories in his ambitious, possibly legacy-making third Budget than there are deaths by misadventure in a season of Midsomer Murders.

The marquee story is aimed at getting enough of Australia’s 12 million or so voters to re-elect the Turnbull Government at an election that is all but certain to be held in the first four months of next year.

This is why he’s loaded up the Budget with personal income tax cuts over and above not hiking the Medicare levy to pay for the disability insurance scheme.

While this starts off modestly – out of necessity – it end up being generosity on steroids by the end of the coming decade.

All up, these new tax cuts will cost the Commonwealth revenue $140 billion over a decade – which is a lot more than the $13.4 billion over the next four years and what’s known in the trade as real money.

Treasurer Scott Morrison in Budget lockup at Parliament House in Canberra. Picture: Kym Smith

The hidden story of his tax cut plan is that by the time that generosity really kicks in, we’ll have something that looks like serious reform of the system achieved in the main by simplifying the way Australians pay tax.

The 37 per cent rate will be abolished entirely, cutting the number of rates from five to four and have all Australians earning more than $41,000 paying just 32.5 per cent in the dollar all the way to the top rate which will kick in at $200,000.

This all but abolishes bracket creep – that pernicious mechanism which steals dollars back the more people work – for about 94 per cent of taxpayers.

If this plan works, Morrison can take a bow in the not very long list of treasurers who have entrenched some real reform of what is a system that’s been maintained more by tinkering than structural change.

The next story we see in this Budget is a surrender, again born from necessity.

The Government hasn’t quite thrown in the towel on spending cuts but the ambition on this front is a passing memory.

Morrison and his colleagues have said they’ve got the $41 billion from the spending cuts the Coalition has been aiming for since 2013 and that’s where it’s going to stop.

Sure, there’s some savings from a hefty crackdown on the black economy, a slash of the blade towards business research and development concessions as well as a grab at fine defaulters and sharp elbow of an efficiency dividend laid on the new Home Affairs Department.

But Joe Hockey and Tony Abbott in 2014 it isn’t.

While cuts are hard to find, the Government is keeping a tight rein on spending, something Finance Minister Mathias Cormann is justifiably proud.

This pride is based on the fact that over the four years of the forward estimates, spending growth is projected to be 1.9 per cent while during the 11 years of the Howard government it exceeded 3 per cent.

If this target is met, this would be the lowest rate of spending growth by any government in half a century.

Morrison and Health Minister Greg Hunt have constructed a story about looking after seniors that is ingenious in its own way.

Unlike the cash splashes we saw during the Howard years – and the big spending pension hike Kevin Rudd handed down in 2009 – this basket of carrots contains tens of thousands of the very popular additional home-care packages, making it easier to earn money before welfare payments are cut and a scheme to reverse mortgage homes.

Morrison and Cormann have also made sure they’ve got a story to tell about debt as well as driving down the deficit and getting the Budget back into surplus.

Net debt will peak as a share of GDP this year – earlier than previously projected – at 18.6 per cent and by the end of the coming decade will be just 3.8 per cent of GDP.

A senior minister laughed at a Budget-eve pessimistic comment from previous Liberal treasurer Peter Costello that he might be dead before debt was eliminated.

“I think Peter might find he’s going to live a lot longer than he thinks,” said the minister.

And that might be the story Morrison is really aiming for – that he can be mentioned in the same breath as Costello, regarded as a Liberal lion when it comes to financial management.

Originally published as Party Games: Treasurer aims to leave a legacy with bold Budget