How should you feel about the Budget?

HOW should you feel about the 2016 Budget? In one word: suspicious. Some things, like the lines in this graph, just don’t add up.

WHEN you open up a Budget you want to see something that will help Australia. You want to see a Budget that is fair, one that is smart and bold.

So, you want to know how you should feel about this Budget? You should feel suspicious.

It’s a jobs and growth budget that leaves the unemployment rate more or less untouched.

It’s all about the government spending less, while spending actually goes up.

It’s a budget that has some very good things in it … But it also has some things that make you go hmmmm.

BOB A JOB. IF YOU CAN FIND ONE

The 2016-17 Budget comes with four brochures explaining it. Each one has the words “JOBS & GROWTH” stamped on the front in big capital letters.

So you’d expect the forecasts in the Budget to show an employment miracle. A big nine-to-five festival for all of us. The reality is rather different.

Unemployment is basically flatlining. Unemployment is now 5.7 per cent (seasonally adjusted, according to the most recent data). This Budget forecasts that number to fall — slightly — to 5.5 per cent next year (hurray!) and then stop falling so it’s 5.5 per cent in the year after (hrmph!).

And jobs growth is actually forecast to be slower in the future than it is now. It goes from 2 per cent growth this year to 1.75 per cent in the Budget years.

So the 0.2 percentage point improvement in the unemployment rate is all we get to last for the next two years, apparently. So is all that jobs talk worth it? I’m suspicious.

Work’s good if you can get it.

LIVING WITHIN OUR MEANS. (BUT MEANS DOESN’T MEAN WHAT YOU THINK IT MEANS)

The suspicious-est (not a word but it should be) part of this Budget is the way the government just keeps on taking more money from the economy. Right now it is taking just under 24 per cent of GDP each year.

But in a few years that will have risen to over 25 per cent. An extra $90 billion a year.

That’s fine. It’s probably very smart. But that fact is confusing if you try to think about it and listen to the Treasurer at the same time.

He keeps talking about how Australia should keep spending under control. He talks about leaving money in your pocket, instead of taking it for the government’s pocket. He keeps talking about living within our means.

Then he sits back to watch the government’s means increase so we can live within them. It’s a clever trick. See how the blue line (receipts, i.e. mainly tax) is expected to rise above its long-term average?

This graph shows the percentage of GDP the government gets paid (in green) and the percentage it spends (in blue). The dotted lines are forecasts.

GOOD AND BAD IDEAS

This Budget has some moments that look a bit dubious. But it also contains some fine, upstanding, young ideas I really should mention.

Shout-outs to removing tax breaks on the wealthiest people’s superannuation. And kudos for making multinational companies pay billions more in tax.

But even as it takes these commendable steps, the Budget is leaning ever harder on cigarette smokers to fund the government and is trying to get everyone to focus on a jobs program for young people that is smaller and cheaper than Work for the Dole. Which it very quietly slashed.

So, the Budget is a mix of great ideas and things that look more like cheap magic tricks. Are the good parts enough to turn round the economy where it matters to the rest of us? On that, you’re within your rights to go: hmmm.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.

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