Scott Morrison plans to woo middle Australia with ‘credible’ budget for all

Scott Morrison is framing a budget­ aimed at boosting the governm­ent’s flagging stocks in middle Australia.

Treasurer Scott Morrison has left open changes to the capital gains tax. Picture Kym Smith

Scott Morrison is framing a budget­ aimed at boosting the governm­ent’s flagging stocks in middle Australia, vowing to address­ housing affordability, possibly with tax changes, and avoiding funding cuts to critical services such as Medicare, schools and hospitals.

The Treasurer has left open changes to the capital gains tax and signalled that the government may dump $13.5 billion in “zombie’’ savings measures blocked by the Senate if Labor fails to pass them in the remaining two sitting weeks before the May budget, warning that projections must be “credible’’.

However, Labor would be to blame for the loss of Australia’s AAA credit rating if a failure to pass savings measures caused ratings agencies­ to downgrade the nation­’s standing with credit markets­, he said.

“At the end of the day you have to deliver growth, guarantee services and get the budget back to balance in a credible way,” Mr Morrison told The Australian.

“The growth objective is paramount: without growth you can’t do all the other things you want to do.”

He said Labor’s years in government of heroic and failed forecasts and projections, which were never questioned at the time, had led to ratings agencies now being intolerant of anything other than realistic assumptions that could be delivered.

“Now Labor has doubled down by vetoing savings measures in an act of sabotage,’’ he said. “They are now working against the nationa­l interest and are working for their political interests.”

Earlier in an interview on Sky News’s Australian Agenda, Mr Morrison signalled that his first budget since last year’s federal election would avoid a repeat of the 2014 Abbott-Hockey budget, which attempted to cut public spending on health and welfare services, and sparked a fierce backlash from the states, community groups and in the parliament.

The pitch to middle Australia comes as the government is under assault from Pauline Hanson’s One Nation and facing a 10-point two-party-preferred deficit in Newspoll.

Malcolm Turnbull is also under pressure to counter Labor’s “Mediscare’’ campaign, which he acknowledged gained traction because­ of the government’s previous failed attempt to introduce a $7 co-payment on GP visits.

Hitting back at One Nation’s anti-immigration stance, Mr Mor­rison defended the government’s migration program, signalling there would be no cuts in the budget and arguing the an­nual intake of 170,000 helped ­balance the ageing popul­ation.

Stronger growth appears to have given the government some breathing space on revenues. The budget is heading for a smaller deficit than the $36.5bn predicted in the mid-year update, as soaring commodity prices deliver a boost to quarterly company tax receipts.

Deloitte Access Economics partner Chris Richardson said although there was a “tug of war” currently between company and personal income tax receipts, the outlook was for wages to improve and for profits to remain firm, at least for the next year.

“The net impact is modest in the immediate term while, as you roll out, things are clearly getting better,” he said.

Acknowledging that families had been doing it “tough” and arguing­ that flat wages growth had seen greater demand on essential­ public services, Mr Morrison­ signalled there would be spending on schools, hospitals and Medicare in the budget, which could include an end to the Medicare rebate freeze.

“At a time when wages growth is admittedly and, regrettably, flat, I think Australians, particularly hard-working Australians on middle­ incomes, rely more and more and depend more and more upon these services,” he said.

“Hard-working Austral­ian families rely on these services and I think an important message for the government is to ensure that we give them that confidence about that, that they can rely on those services, and they can rely on them under a Coalition government. And so the budget does need to signal, I think … that people can feel confident about the support for those services.”

Flagging that “growth is the goal” of his second budget, Mr Morrison also indicated he wanted to see the living standards of Australians lifted, and said the government would do more to help people struggling to buy a home.

“The growth story must remain the focus of the budget, because it is growth that actually not only improves the budget but it is growth that’s going to lift wages; it is growth that is going to lift business expansion; it’s growth that will continue to drive the improvement in living standards. So the growth is central to everything.”

With the housing affordability package set to be a centrepiece of the budget, Mr Morrison indicated the government wanted to boost supply and left open making changes to the tax system to reduce­ pressure on house prices.

“Now, I am as much concerned about someone on a low income, struggling with their rent as I am with someone who I know wants to get into home ownership for themselves,” he said.

“There’s a focus (in the budget) on housing affordability that is looking at everything from homelessness and social housing.”

The government has indicated it will scrap the $9bn National Housing Affordability Agreement, which the Treasurer said yesterday had seen it “shelling out billions and billions and billions for a program that isn’t achieving anything”. While stressing that the federal government still believed returning the budget to surplus was a critical task, Mr Morrison signalled he would not repeat the mistakes of the 2014 budget by introducing measures that were unlikely to win the support of the Senate crossbench.

There are 15 so-called “zombie” budget measures stalled in the parliament worth $13bn, nearly half of which are from the Abbott government’s controversial 2014 budget. “It’s got to be credible … we have to deal with the political envir­onment that we work in,” he said.

Additional reporting: David Uren