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Terry McCrann: Good time to be a good treasurer

THERE’S a ‘good time’ to be a treasurer and then there’s the question of whether the treasurer puts that good time to good use, writes Terry McCrann.

THERE’S a ‘good time’ to be a treasurer and then there’s the question of whether the treasurer puts that good time to good use.

This is a good time to be treasurer. The money is pouring in, the economy is in good shape and the world economic outlook is the best it’s been since way back before the GFC.

It’s certainly all better than 2014 when poor old Joe Hockey got the job, embarked on slashing and burning, smoked that ill-fated cigar, and ended up having to accept ‘second prize’ — ambassador in Washington. Some second prize.

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Treasurer Scott Morrison waits to deliver the 2018 Budget in the House of Representatives.
Treasurer Scott Morrison waits to deliver the 2018 Budget in the House of Representatives.

It’s not as good though as when Peter Costello was treasurer and the money was really pouring in. Even after all his tax cuts, year after year, Costello still took as much as 25.7 per cent of GDP in taxes and other revenues at the peak, in 2005-06.

Scott Morrison will only get to 25.5 per cent of GDP in 2021-22 after years of letting the good economy pour more and more money into Canberra.

Poor — even poorer — Wayne Swan got bushwhacked by the GFC. After getting as much as 23.3 per cent of GDP in revenues in 2008-09, the most he got subsequently was 22.9 per cent in that ill-fated ‘four surpluses’ 2012 Budget.

If he’d got the 25.5 per cent in revenues that Morrison is aiming for, the 2012-13 Budget would have been $20 billion in surplus instead of the $19 billion deficit that it was.

Swan could have been a Costello-contender. He goes down as a ‘four surpluses’ dunce. Them’s the breaks on the fiscal merry-go-round.

So how is Scott shaping up? As I wrote elsewhere, competent but no cigar (only craft beer?).

The two best things to be said about last night was that he ain’t spending more. He ain’t cutting, but he ain’t initiating any significant new spending; and he’s made a bit of a go at tax reform in a way that’s politically clever and arguably politically necessary.

The two things Morrison has to thank his lucky fiscal stars for are immigration and population growth, and Donald Trump and the US Fed. Picture: Mega
The two things Morrison has to thank his lucky fiscal stars for are immigration and population growth, and Donald Trump and the US Fed. Picture: Mega

By giving money back directly to low-end taxpayers, Morrison does two big things.

First it limits the Budget cost. If he’d cut the rates or changed the thresholds, the money would flow to everyone, even those wicked bankers on multimillion-dollar salaries.

Secondly it targets low-end taxpayers, but critically, you have to be an actual taxpayer to get some money back. It’s not a ‘cheque in the mail’ to everyone.

The big part of both the reform and the tax relief only comes in the manana years — when the 37c tax rate is scheduled to go into the dustbin of history.

That’s like an extended version of Paul Keating’s L-A-W law tax cuts. They only had to survive one election — and they didn’t; being repealed after 1993. Morrison’s have to go through at least two and possibly three elections.

So this can really only be called manana tax reform.

The two things Morrison has to thank his lucky fiscal stars for are immigration and population growth, and Donald Trump and the US Fed.

The last two have got the US, still the most important economy in the world, on the path to at least a few years of solid growth. Maybe it all ends in tears, but that’s another manana question.

Right now and for the next few years that solid US economy and a still-resilient China has turned our population surge into workers paying tax.

So, employment growth of 1.5 per cent a year joins with wages growth forecast to pick up to 3.25 to 3.5 per cent in coming years to pour money into Canberra. Personal income tax is projected to leap from $206 billion in 2017-18 to $263 billion in 2021-22.

Sort of puts those $4 billion-a-year tax cuts in perspective.

terry.mccrann@news.com.au

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