- Coalition slashes foreign aid as part of $9b saving measures
- Click here for the Coalition's election commitment costings
- Click here for the budget impacts of the costings
Remember all the times shadow treasurer Joe Hockey furrowed his brow, shook his jowls and growled that Australia had a budget crisis? Turns out he was only joking.
Either that or his “costings” disclosure is a joke. Or both.
After all the huffing and puffing, Hockeynomics is only proposing a $6 billion improvement in the budget’s cash bottom line over four years. In light of the past four years of hyperbolic fiscal posturing, this is genuinely astounding.
Even if you take year three and four budget projections seriously (and you really can’t, as everyone should now know), that works out to be an average improvement of $1.5 billion a year on a $400 billion budget – all of 0.375 per cent. It’s not even a rounding error. A half-decent Queensland storm can blow that away in half an hour.
"It’s not unreasonable to claim that the Coalition isn’t making any savings worth mentioning".Credit: Jay Cronan
By way of comparison, Tony Abbott is blowing $1.8 billion on reviving the novated lease/FBT tax lurk enjoyed by a minority of new car buyers, let alone an even smaller minority of voters. Consider the massive percentage increase in the Coalition’s budget improvement goal that could be obtained by implementing just this one tax policy based on principle and equity instead of subsidising a few salary packaging firms. Hey Joe, do the math.
VIDEO: 'He's hiding something'
(My suspicion is that this particular branch of the tax minimisation industry is very fortunate Labor didn’t accept Treasury’s advice to fix the rapidly-expanding anomaly when it was first offered. If the reform had been a little further away from the election, Joe would have done the head shake again and moaned about needing to responsibly accept some things that he didn’t like, as he has with the rest of Labor’s savings. So it goes. )
The partial, belated and not-at-all-guaranteed guesses about Hockeynomics’ savings and costings only confirm the suspicion that the Coalition has never been serious in its ranting about deficits and debts, that we don’t actually have a budget crisis. Alternatively, the Coalition is not serious about tightening fiscal policy when it would be responsible to do so – in those somewhat vague years three and four.
It’s not unreasonable to claim that the Coalition isn’t making any savings worth mentioning despite the many billions claimed - their “savings” mostly are immediately spent again and thus don’t save anything. In fiscal terms, rather than promising to be the ideological demons conjured by Kevin Rudd, the Liberal Party is offering itself as Tweedle Dum to Labor’s Tweedle Dee.
That’s mainly good news in the short term. It could indicate that the Coalition understands that trying to slash the deficit this year would be bad and dangerous policy, that the budget updated by Chris Bowen a month ago is basically sound, that the economy needs that budget’s $30 billion or so of deficit stimulus and is likely to still require a light touch in 2014-15. The wild world willing, we could be on track to handle renewed discipline in those projection years, or so we hope.
And that’s the bad news - there’s no sign that Abbott/Hockey won’t be as populist and fiscally hopeless as the final Howard/Costello administration. Oh, it was a grand old party over those final three years, the punch spiked twice over, but everyone’s forgotten that it was forcing the Reserve Bank to hit the brakes so hard we were heading for a recession, saved only by the GFC giving us a soft landing.
The challenge this time is different, but it also requires honesty that has been seriously lacking on both sides of the game. Australian governments really can’t keep promising to give people more and tax them less. The longer the pain of our looming demographic challenge is postponed, the much worse it will soon enough be.
The rhetoric about the Coalition “always being better economic managers” is likely to provide a honeymoon business confidence boost, but it doesn’t actually mean anything - as inane as the claim that “interest rates will always be lower under a Liberal government”. The big drivers of the Australian economy have generally been outside the control of whatever party was in power. The government of the day can make matters better or worse, but they can’t do a King Kanute.
Which is why the Joe Hockey who made the Age of Entitlements speech nearly 17 months ago needs to be resurrected, or at least writer of that speech needs to be put in charge of the soon-to-be Treasurer. What we’ve been promised during this miserable election campaign is actually no improvement at all, just slightly different priorities – more entitlements for some new car buyers, maternity leave takers and the makers of Cadbury’s chocolates, fewer entitlements for the parents of school children, “clean energy” proponents and small businesses.
But sometimes you have to trust politicians to lie. Hopefully Joe Hockey is still joking, not telling the full story today. Whether that will turn out to be a good or bad thing probably depends on what entitlements matter most to you.
Michael Pascoe is a BusinessDay contributing editor