Shorten and Swan put on an Occupy Caucus protest

AFTER six years of inaction fiscal reform must happen.

IF an audit were to examine the ALP’s ranks it first might suggest that Wayne Swan be sent packing. The former treasurer’s economic delusion is manifest, and either he has befuddled Bill Shorten with his advice or his presence is forcing the Opposition Leader to feel he must defend Labor’s economic legacy. Mr Shorten needs to recognise the budget dilemma facing Australia and Labor’s role in creating it, so he can contribute to a solution. Instead he is like Comical Ali, insisting the problems are overstated while others get on with facing reality. Mr Swan took to Twitter yesterday to share his insights. “Comm of Audit is merely an Abbott/Hockey wish list prepared by their Sydney business mates,” he tweeted, “to implement hidden Tea party agenda.” This is not the ranting of a student at an Occupy protest, it is the contribution of the man who delivered the past six federal budgets. “They’re cooking the books for a fabricated budget emergency,” Mr Swan posted on Facebook yesterday, “which is setting the scene for middle income families to cop it in the guts.” His leader has been echoing this fiscal denialism. “This government is enacting a brutal right-wing, caveman-like ideology with the Business Council of Australia,” Mr Shorten told the ABC yesterday. “They’re going after Medicare, they’re going to make it hard for working-class kids to ever go to university with student debt.” The alternative government is starting to sound like an Occupy Caucus rally.

Yet two years ago this month Mr Swan stood before parliament as treasurer to deliver his fifth budget and uttered the now infamous opening line: “The four years of surpluses I announce tonight ...” It was clearly nonsense — with opposition MPs falling about in guffaws — but has been made to look even more absurd with the passage of time. Instead of a surplus that year, Mr Swan delivered a $19 billion deficit, and even before the election this year’s deficit was estimated at $30bn (since revised at the mid-year economic and fiscal outlook to $47bn, including some new decisions). MYEFO also predicted deficits next year ($34bn), the following year ($24bn) and the one after ($18bn).

This history contrasts Labor’s aspirations with the fiscal reality and shows that either Labor’s aims were false or the budget does need urgent restructuring to avoid crisis in years to come. Despite this need for reform, Labor blocks repeal of the carbon and mining taxes, and rejects even budget savings it proposed in government. Now it condemns the long list of potential savings from the audit commission as an exercise in class warfare. Mr Shorten is misguided if he thinks this juvenile obstructionism is a path back to power; it is more a path to scorn and irrelevance for Labor.

The serious policy debate will continue with or without the ALP. And Tony Abbott and Joe Hockey have some tough choices to make. Plans to increase marginal tax rates, temporary or not, should be rejected. They would constitute a clear broken promise but also provide no meaningful solution to tax simplification or the real problem of expanding expenditure. Already nearly half of all income tax is raised from the top 10 per cent of wage earners, so to force them to pay even more would be just a political sop to the Left rather than a budget fix.

The Coalition must focus on cutting spending, a job made extremely difficult by its recklessly expedient pre-election quarantining of vast areas of the budget from attention. Health, education, defence, pensions, disability services and public broadcasting together make up the bulk of all payments, including the areas of greatest growth and some of the key areas of waste and duplication. It will be impossible to put the budget on a path to structural surplus without reforming and cutting in those areas. Either Mr Abbott is going to be forced to break commitments or he is going to delay the necessary action by three years. Neither of these outcomes is ideal. Yet, unlike Labor, he does not have the luxury of pretending there is no challenge. His priority must be fiscal repair over political popularity.