Federal election 2016: stating obvious in querying spending plans

The biggest applause at the Sky News People’s Forum on Friday night was for Rob, the father of two teenage girls, who wanted to know when the two major parties would “get their hands out of our pockets and stop spending” and if the ­nation’s debt would be paid off ­before his daughters retire.

Yet while the audience cheered this plea from the suburbs about budget repair, when it came time for the 100 undecided voters to say which leader they were more ­likely to back, they voted for Bill Shorten, who had charmed them despite having the least convincing answer on the debt and deficit question.

Sadly we face another election where despite what voters say and the sentiments they applaud, they are encouraged to cast their ballot in favour of short-term self-­interest over the longer term ­national ­interest. Everyone shares the blame for this.

The repeated warnings of the Reserve Bank and eminent economists such as Chris Richardson about the need for serious budget repair are an inconvenient truth for the next seven weeks.

Politicians have failed to make the case well enough for spending restraint and despite lip service to budget repair and living within our means, they don’t really want to fight an election on the electorally unpleasant platform of cutting spending.

Even though a recent Newspoll found two out of five voters would support a reduction in taxpayer-funded entitlements, no politician has championed this sentiment.

The Senate has been shockingly populist and obstructive when tough decisions are proposed.

The Gillard and Rudd governments loaded up the budget with new spending, some of which was extremely worthy but reliant on revenue built on shifting sands that fell away.

And then in opposition, Labor even voted against some of its own spending cuts.

Tony Abbott and Joe Hockey exaggerated the rhetoric of the “budget emergency” and failed to make even modest budget ­repair gains.

In fact, with the support of the Greens, they removed the debt ceiling.

Both sides will seek to make soothing noises but neither is ­proposing the serious budget ­repair needed before the next ­election to answer this question posed by Rob:

“I’ve heard plenty tonight and in the election campaign about how much you’re going to spend. I’ve heard plenty before ­tonight about how much you’re going to tax. What I want to know is, when are you going to stop the spending, both sides, when are you going to bring the budget back into the surplus, and when are you going to pay off the debt?

“We started off in 2009 with no debt. We’re now on the trajectory that has been carried on by both parties throughout the course of both governments of spending ­increasing year on year on year. It’s unsustainable. I have a 13-year-old daughter and a 17-year-old daughter, and the way we’re going they’ll still be paying the debt off when they retire. I can’t see an end to it.

“And the promise of getting to a surplus somewhere in the never-never, all that means is we might start paying off the debt. I haven’t heard anything from either party which indicates that they actually know how to get their hands out of our pockets and stop spending.”

Shorten rattled off a list of government spending he would scrap, such as company tax cuts and the Direct Action carbon reduction scheme. He would also raise revenue by winding back negative gearing and top-end superannuation concessions.

But that money has been earmarked by Labor for other spending — not paying down debt.

Pressed by the moderator, David Speers, on when he would actually pay off the debt, Shorten said it would be “reckless of me” to give an answer before he’s seen the updated state of the budget, ­released in the next 10 days by Treasury and the Department of Finance.

In the first week of his campaign, debt and deficit simply did not fit anywhere in Shorten’s message each day that he will spend more on education. Even­tually, he conceded it was an “obligation to reduce the deficit”.

Malcolm Turnbull tried to make the issue of debt about intergenerational fairness, bringing his response back to Rob’s concern about his daughters.

“A budget has to be fair and one of the most important elements of fairness is not leaving a mountain of debt for our children and grandchildren to pay for after us,” the Prime Minister said.

He outlined the budget numbers to reduce the deficit to $6 billion by 2019-20, acknowledging that “is still a huge amount of money”, and added there “won’t be a deficit the following year, and from that moment on, debt will start to come down”.

Yet for Turnbull to personally deliver on that promise, he would have to win two elections and ­become the nation’s eighth longest serving prime minister. At present, he’s 24th on the longevity list.

Controlling spending is only part of the equation.

The budget is not yet two weeks old and already some of the key economic ­assumptions are under challenge, ­especially the iron ore price.

Last week’s disastrous West Australian state budget assumes an iron ore price, including freight to China, of $US47.70 a tonne, which is much lower than the federal estimate released just days earlier of an equivalent $US60 a tonne. The difference would leave the federal budget $20bn worse off over four years.

And if the Reserve Bank’s view holds that already low inflation will be even lower than expected, the rise in incomes needed to spur economic growth might fall short, punching another possible $10bn hole in the budget.

And that’s just two variables. The inevitable clash with the states over unresolved funding issues has been parked for another day while Turnbull’s ideas boom won’t grow fast enough to buffer the vulnerability to any shock from China’s economy.

This can’t be another election where politicians assume the best case scenarios as they campaign wearing rose-coloured blinkers. Rob has called their bluff. He knows it’s a problem.