Federal Budget 2016: Treasurer Scott Morrison delivers clear fiscal view

TREASURER Scott Morrison has delivered the first “reality” Budget we’ve seen in years, but there is one big blind spot, writes Terry McCrann.

Treasurer Scott Morrison delivering his Budget Speech. Picture Kym Smith

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IN 2012, we had Wayne Swan’s “fantasy surpluses” Budget.

In 2014, it was Joe Hockey’s “horror” — no, just plain ’orrible — Budget.

I’d call Scott Morrison’s the first “reality” Budget we’ve seen in years.

It aims to deal with two sets of realities; broadly, it succeeds in balancing them.

The first and most unavoidable reality should be obvious. This is the first actual election Budget we’ve had in decades, if not ever.

That’s to say, it’s not just the Budget in the election year, but in the election itself.

So far as major election initiatives are concerned, this is it. So far as building an economic management framework and a “story” to take to voters, this is it. There is no way that the government could now do what John Howard and Peter Costello did in 2007: announce big tax cuts as they kicked off the campaign.

I think the government has got the balance broadly right. The Budget is politically realistic and, broadly, fiscally and economically responsible.

Mr Morrison has delivered the first “reality” Budget we’ve seen in years. Picture: AAP

It would be completely unrealistic to expect the government to have had a “slash and burn, eliminate the deficit immediately” Budget.

But equally, it has not gone down the path of trying to buy votes by splashing money around to every interest group.

There’s a reasonable and even shrewd balance between “election goodies” and “fiscal medicine”.

The tax relief for people earning around $80,000 — and, importantly, for people who will approach that income in future — is the best and cleverest use of the money available in the income tax space.

The pain affects rich and poor alike. Morrison has not only stolen Labor’s policies on cigarette tax and cutting superannuation concessions, but he’s outflanked Labor from the Left; arguably, from the far Left.

Above all, the changes, setting a lifetime limit of $1.6 million for tax-free super pension funds, is like a big — very big — increase in the top personal tax rate.

It’s far more onerous than Labor’s plan to tax super fund incomes above $75,000. It should be the basis for a bipartisan deal on super, which settles the issue once and for all.

The second reality that the Budget had to address is the fiscal one, and the economic environment.

Again, broadly, it does.

The projections of where the economy might be headed are realistic.

The operative word is “might”: everything remains hostage to what happens to China’s economy, and the global financial situation.

China feeds into our economy and the Budget most directly via the iron ore price. That’s a big factor in deciding what you get, in wages and salaries; and what Morrison (or his Opposition shadow, Chris Bowen) will get, in tax.

The Budget takes a reasonable approach to the China expectation; the government can’t know — indeed, nobody can know — what will happen to global interest rates and the multi-trillion-dollar flows of money around the world.

If the Budget does depart from reality, it does so where all Budgets do — in the expectation that we won’t get hit by some sort of financial or economic tsunami.

There’s a reasonable and even shrewd balance between “election goodies” and “fiscal medicine”.

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Originally published as Federal Budget 2016: Treasurer Scott Morrison delivers clear fiscal view