Budget 2020: Scott Morrison paves the way to the polls
Scott Morrison is leaving Labor behind on the election road.
Neither is certain.
But both are now at the heart of an effective post-COVID economic and political debate as the longest and biggest-spending budget in history looks likely to define the longest election campaign in history.
The Prime Minister and Anthony Albanese are both proposing economic plans and reforms looking primarily at the economic recovery and longer-term return to low unemployment and higher growth.
Morrison is winning now and there is the danger of a dispiriting sense of defeat and division spreading through Labor and further undermining the Opposition Leader’s chances. Also, Labor’s risible use of the “Morrison recession”, with the slim prospect of people having forgotten what the recession was about when they vote, doesn’t help Albanese’s efforts to claim economic credibility and maturity.
The early sparring over the handling of the health aspects of the global pandemic has essentially passed, as has the political fight at the edges over the $507bn emergency stimulus spending that has kept hundreds of thousands in work but condemned millions to generational debt.
So far, Morrison has succeeded in the health fight against COVID-19, despite state-based failures in NSW and the catastrophic quarantine failure in Victoria, and succeeded in suppressing the initial outbreak nationally.
In health terms, including infection and death rates, Australia now ranks near the top of the world in limiting the pandemic.
Building on this success, the basis for economic forecasts including GDP and jobs growth in Tuesday’s budget is the assumption there will be a generally available coronavirus vaccine in Australia by the middle of next year, which will ease the business lockdowns and border closures that have strangled economic activity and put a million people out of work. Josh Frydenberg has not hidden the “substantial uncertainty” within the budget forecasts because of the vaccine assumption but both the Treasurer and Morrison argue a middle-course assumption had to be made for economic forecasts and planning.
Treasury estimates that a vaccine before the middle of next year will add $34bn and 1.5 per cent to GDP in 2021-22 but a later vaccine will hit the economy for $55bn and lose a full percentage point in growth for two years in a row.
Labor accepts the Treasury assumption as Albanese and shadow treasurer Jim Chalmers shift their focus from extending temporary measures such as JobSeeker, to permanently raising unemployment benefits and embarking on a long-term alternative vision for economic reforms.
While Albanese criticises the Coalition for spending — which is estimated to lead to a gross national debt of $1.7 trillion and a budget deficit next year of $207bn — he has not queried the assumption central to the forecasts that there will be a vaccine next year. It’s as if the health half of the twin global pandemic crises has passed, political leaders are anticipating a vaccine and have largely stopped fighting over the emergency spending measures.
It’s now about recovery from the recession, with both sides expecting and necessarily planning for a likely October-November 2021 election.
That election will be fought on the response to the global pandemic and whether the economic recovery is meeting the optimistic budget forecasts, including unemployment peaking at 8 per cent in December and falling to 7.25 per cent by June next year, as a result of tax cuts, infrastructure spending, business incentives, education and skills boosts, income support and private sector-driven investment and job creation.
While there is at least one official pre-election budget still due, the reality is that Tuesday’s budget was a pre-election document too, part of a nine-month rolling spend that will feed into the Mid-Year Economic and Financial Outlook (which will probably be delayed beyond Christmas) and the scheduled budget in May next year.
The other reality is that Morrison has been able to take advantage politically of the economic uncertainty and disrupted financial agenda to keep Labor constantly guessing and forced into agreeing to a Coalition agenda.
That agenda appeals to both Liberal supporters of private sector growth and business incentives and Labor supporters of egalitarian wage support and targeted programs in manufacturing, the regions, trades, and low- to middle-income earners.
Morrison’s pandemic response, budget measures and economic plans have a particular Labor flavour but the broad principles remain Liberal, and so he has been able to simultaneously protect jobs and cushion the economy while appealing politically to diverse groups, including traditional Labor supporters. By bringing forward legislated tax cuts from 2022 to July this year for low- to middle-income earners and permanently undercutting the regressive nature of income tax bracket creep, which provides disincentives for earning more, Morrison gave Labor no choice but to wave through the tax cuts this week.
Not wishing to “pick a fight” over tax cuts for high-income earners or big business, Morrison didn’t bring forward relief for those on more than $120,000 or corporations with turnovers of more than $5bn.
Morrison is not just appealing to wider constituencies in Labor territory, he is also sidelining and frustrating Albanese knowing it’s the Prime Minister’s advantage of incumbency to call the election when he wants. He’s also working hard on the politics.
As a relatively new leader, Morrison’s stature has grown during the pandemic: his leadership is unassailable and his apparent calm and methodical approaches have given him authority and credibility.
But the Prime Minister is not neglecting the overarching, necessary election elements of promoting the Coalition’s traditional advantage in economic management in a crisis and pointing to Albanese’s “inexperience” and lack of policy conviction. As a Liberal leader he accuses the Labor leader of “going for a win and a place in a two-horse race” and demands how he will manage debt as well as detail how Labor would pay for any new policies.
“Those opposite are saying here today that the debt is too high, the deficit is too big. That is what they’re saying. But they are also saying that the debt should be greater, and we should spend more … If he wishes to spend more, he needs to say what in the budget he wants to spend less on,” Morrison told parliament on Thursday.
The Coalition is tagging Albanese with Labor’s last election strategy of big spending, high taxing, anti-investment, uncosted climate change policy and generational division while freeing itself of the mantra of cutting debt and deficits.
Albanese’s first detailed budget response was a $26.7bn pitch to women, families and blue-collar workers, especially those over 35, as he tried to reconnect with Labor supporters lost at the last election and who show no sign through the polling of returning to an ALP that has lost its affinity with workers.
Albanese embraced the “post-COVID” debate on economic recovery, rejecting the Liberal prescription and pledging an alternative that will deliver a “stronger, fairer and more secure future for all Australians” with a $6.2bn childcare plan aimed at the “three Ps: population, participation and productivity”.
He didn’t miss the significance of the fourth P — politics.
“The budget reflects the government’s character of being guided by short-term politics, not long-term vision. This budget leaves people behind,” Albanese said in his first budget reply speech.
But Morrison made sure on Friday, after the Senate passed the tax cuts, to reaffirm he’s barely begun the year-long journey towards the next election with the declaration that “the economic recovery from the pandemic recession begins here”.
Two basic assumptions are driving the economic and political debate into 2021, which will decide the fate of Australia for decades to come: that COVID-19 restrictions will progressively ease in the months ahead and that Scott Morrison will call an election in the last quarter of next year.