Budget 2018: company tax cuts a good idea ... until the banking royal commission

Treasurer Scott Morrison may find one part of his budget a very hard sell. Picture:AAP

So called “election budgets” almost never become the single biggest factor in an election victory and are very often gone in a week. Joe Hockey’s 2014 budget had three unsaleable measures that harmed the Abbott government — a ridiculously lavish parental leave scheme, a $7.50 Medicare co-payment in direct breach of an election commitment and slowdown in indexation of the Age Pension.

No matter what the economic arguments were for those measures, the mob was never going to accept them. Scott Morrison, who looked and sounded confident, avoided any clangers of that size. He did, however, leave the government with a political dilemma that will haunt and hunt them.

I have agreed with the government, despite Labor’s best efforts, that company tax cuts were a good idea to keep Australia competitive and keep investment flowing. I could not accept that the banks should be excluded from this because they are businesses and tax cuts should not be for some business and not others. Then came the Hayne royal commission and those appalling revelations about the banks robbing their customers. The banks still don’t get it and I note Westpac chief executive Brian Hartzer is still whingeing about the commission’s tactics. He complained about a report being taken out of context but I have some advice to him and the other bank bosses: this would be a really good time to pull your heads in and understand that every time you open your mouths you do your institutions no good whatsoever. Your obscene salaries and bonuses mark you as people not to be pitied or trusted.

Just how Morrison and Malcolm Turnbull can sell giving a miserable $4 a week for some and $10 a week for others while at the same time offering those very banks who have connived and thieved their way to massive profits, another $20 billion windfall is beyond me and I am certain is beyond them, too. Bill Shorten and Chris Bowen will run hard on this contradiction. Throwing largesse at the banks just makes the government look out of touch and no economics pitch can change that.

The Treasurer concedes that much of the additional revenue pouring into government coffers comes from recent increases in the price of iron ore and coal. When the last mining boom began, I am not sure if too many observers had predicted that the dollar would surge. If this mini mining boom continues then how do we know we will not witness the same phenomenon again. Australia does not have the advantage of Germany, which hides behind the euro while knowing that the Deutschmark would be infinitely higher value. We also can’t manipulate our currency like the Chinese do, so we are subject to the vagaries of international financial markets.

My other concern is that Morrison is still assuming 3 per cent growth or more for years to come. It is a decade since the GFC, yet we have struggled to reach 3 per cent. Any external shock in the US, Europe or China would see us in real strife. This budget makes the Turnbull government the biggest spender ever. From a party that used to proclaim from the rooftops that paying down debt was a core value, this is really disappointing.

The real interest will come when the whole tax cuts package hits the Senate. The government will present one bill containing both the personal and business cuts. Given that Labor has already declared its support for the personal tax cuts, the government would look awful if it maintained its stance of not splitting the bill. The mob will know if their personal tax cut does not arrive because of politicking on the part of the government, and the Coalition will pay a devastating political price. It is therefore almost certain that, no matter how much posing and rhetoric is heard, the bill will be split.