Politically a nice piece of work

Economically the budget is hastening slowly. The trend is right and really is a matter of taste. I wouldn’t expect any serious revival before 2015 but this has hardly been the savaging everyone was talking about. After 2015 it sets us up for a quite good recovery. As with everything in economics, there are so many unknowns of the known and unknown variety that nothing can be certain. But it puts us in a good position to catch any passing wind.

Politically, however, it looks even better. I teach of a Tuesday night so don’t get home till late and had to catch up by watching ABC News 24. And what struck me was the extent to which the critics were pretty subdued. No real heavyweight venom and anger, just the usual negativity about trying to repair what everyone knows needs repairing. We are the lucky country in the sense that the harder we work the luckier we get. Just as in 1931 the Lyons Government cut deeply into public spending allowing Australia to be the first economy in the world to emerge from the Great Depression, so the cuts and crafting of expenditure this time round will allow us to put ourselves on a very solid foundation for growth.

Even the supposed nasties, listening to some woman worrying whether she might be able to find the $7 to get to the doctor came across as a pretty weak and whiny complaint. The co-payment is designed to make you think twice in a way that a freebie doesn’t. For 98% of the country, if your illness isn’t worth paying $7 for the medical advice you get, you either have your priorities wrong or you have been wasting a lot of our precious medical resources because you’ve treating them as a free good. Well, it might have been free to you but not to the rest of us.

Same with cutting Newstart for the under-30s. Luckily again we are a community that doesn’t look benignly on living off the earnings of others although there are many still trying to expand this constituency. But what is more important is that it will mightily discourage many from a wastrel style of life. Falling into a welfare trap young and early is a disaster. Maybe it will save a bit of money but more importantly it may save a few lives from being lost and wasted.

We’ll see over the next few days and months how the politics plays out in the real world. In the meantime I think it is a job well done.

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44 Responses to Politically a nice piece of work

  1. Combine_Dave

    These are good points, but what happened to the audit’s recommendations and why haven’t they implemented them?

  2. Gab

    These are good points, but what happened to the audit’s recommendations and why haven’t they implemented them?

    lol. Good one, Dave.

  3. val majkus

    thanks Steve; there’s always more that could have been done and I for one think the ABC’s budget should have been slashed; but maybe next time

  4. Combine_Dave

    I dont think it’s bad. A little disappointing for sure, but much better than what Swanny had been producing.

    I give it a C-

  5. viva

    No real heavyweight venom and anger

    You obviously haven’t been reading the Budget thread.

  6. JC

    I dont think it’s bad.

    There’s a budget emergency, remember. Where are the spending cuts? Spending has gone up.

  7. Cold-Hands

    While Politics is the art of the possible, this is still a timid budget, frightened of really wielding the knife. It looks as though Treasury is still captive to the Keynesian mandarins who dominated the last government’s thinking. In the first year of their term, cuts should be hard and deep to create a warchest for the pre-election budget. This is a lost opportunity.

  8. MemoryVault

    Steve, have you ever considered bee-keeping or raising orchids as alternative career options?
    You are certainly way out of your depth when it comes to politics.

  9. egg_

    Where’s the /sarc tag?

  10. wreckage

    In the first year of their term, cuts should be hard and deep to create a warchest for the pre-election budget.

    Exactly. They needed to establish the battle lines comfortably distant from a solid surplus, leaving plenty of room to fall back. As-is it’s marginal, the merest setback and they’re fucked.

  11. Gab

    I just think back to all their hype about this being a tough budget we have to have because we’re in “budget emergency” and then they produce a budget that’s as tough as melted beeswax.

    “Mean what we say and do what we say” certainly has a hollow ring to it from this Abbott government.

    In the first year of their term, cuts should be hard and deep to create a warchest for the pre-election budget.

    Precisely! Pah! I give up on them. In eight months they’ve proven themselves to be weak, lacking courage and no idea how to get the economy moving.

    Except Morrison with his portfolio.

    I heard tonight that Lucretia Credlin gathered everyone together and told them not to show any celebratory displays in the corridors of parliament. I mean really, they’re supposed to be adults.

  12. Nanuestalker

    I don’t know the content ( refused to watch !!!!) but I’m guessing that if you’ve spent your working life practicing thrift you are going to be punished?

  13. Squirrel

    “Politically a nice piece of work” – yes, if they’d gone much further this time, the temptation for the Senate to force a double dissolution might have been too great.

    The scope for very significant and growing savings simply by making modest changes to indexation of, and access to, benefits illustrates the truly vast amounts of money being churned through the welfare system, and a good start has been made in winding that back.

    Likewise, the reduced growth in Commonwealth funding, over time, for hospitals and schools, is an overdue dose of reality – but it still begs the question of why the Commonwealth should retain a detailed policy role (i.e. duplication) in these areas if it is now arguing that they are State responsibilities.

  14. gary

    Howard/Costello had the budget in surplus immediately, and after ten years had all the federal govt debt paid off – and were then sacked. The replacements were complete lunatics who promptly spent like crazy and again incurred massive debt.
    Abbott seems to think he will spend ten years getting the budget to surplus, and then, if given another ten years, may pay off some of the debt he has incurred. When the Labor party get in power next, they won’t have the free run Rudd/Gillard/Swan had, and instead will be required to show some financial constraint – but I am sure they won’t.

  15. sabrina

    There was budget emergency before the election.
    Now there is medical research emergency after the election.
    Cut funds for research at CSIRO, slug all doctor visits $7 to fund medical research.
    We have genius running the country!

  16. A Lurker

    Howard/Costello had the budget in surplus immediately, and after ten years had all the federal govt debt paid off – and were then sacked. The replacements were complete lunatics who promptly spent like crazy and again incurred massive debt.

    Agreed. Why bust a gut to get to a quick surplus, when the swinging voters will just give you the middle finger once they are bored with your Government.

    Cut funds for research at CSIRO, slug all doctor visits $7 to fund medical research.

    Why not – CSIRO seemingly has been captured by Green-Left ideology, so start afresh with a new institution that isn’t compromised. You never know, they might even come up with some useful discoveries.

  17. Baldrick

    In the meantime I think it is a job well done.

    Surely you jest. Where’s all the CUTZ!

  18. kelly liddle

    I tend to agree that politically this is ok because who is going to change there vote from LNP to ALP based on this budget? The high income people, no because they are hitting the Labor voters harder eg. high paid public servants not those with small companies who actually will on average recieve a tax cut, the poor eg. those who see welfare as a way of life, no they are rusted on Labor voters, the middle income families, no depending upon there ideology they are not likely to change, if you recieve average income then either you want to take from the rich or don’t believe you should be recieving welfare and as such will vote accordingly.

    I wish in the interviews they interviewed a smoker like me about the $7 GP visit and the smoker would reply that is much less than the tax on a pack of tobacco (approx. $24 or 3 gp visits for a 50gm pack before the last increase) . If it is such an impost why has no one noticed the plight of the smoker who is often in a low socio economic situation.

  19. Bruce of Newcastle

    It amazes me that Abbott broke his promise to not raise taxes when the predictable is now happening.

    - The Greens are now backtracking on passing the fuel indexation unless it is used only for public transport, not roads.
    - They also have said they won’t pass the deficit levy because it isn’t permanent (utter hypocrisy as usual).
    - Palmer is refusing to pass fuel indexation at all.
    - Neither will vote for the copayment.

    So the revenue raising parts of the budget are looking DOA. Yet Abbott has nuked all his political capital by breaking a promise and putting them in the budget. Not a good look, and pretty damn awful political strategy.

    It is just possible that Shorten will let through the tax rises (but not the copayment – he’s ruled that out). But why would the ALP do so when all they have to do is say no and spin something inane about holding the government to account?

    And there aren’t actually many real cuts at all. Much of the reduction in deficits is due to heroic growth assumptions. Will the deficit really fall at all? As politics go, it is looking rather suicidal.

  20. Likewise, the reduced growth in Commonwealth funding, over time, for hospitals and schools, is an overdue dose of reality – but it still begs the question of why the Commonwealth should retain a detailed policy role (i.e. duplication) in these areas if it is now arguing that they are State responsibilities.

    That’s been flagged in the budget text to be addressed over the course of the year. Expect the changes to resolve federal-state imbalance next year. That will take some degree of discussion with the states to work through.

    If the Federal government makes the GST changes suggested in the NCoA and passes the income taxation above the 17% step to the states, that should set things up nicely going forward.

  21. kelly liddle

    One thing that strikes me as a very big political gamble in the next term of government should they win is the indexing the pension to cpi, at various times in history the cpi has run way ahead of wages and this could actually be giving a large bonus to pensioners. It is basically the same as flipping a coin to predict in 3 years time which will be running faster considering the long period of low inflation that has happened recently. Over a long time frame like 20 years it should work out cheaper but that is a long time in politics.

  22. Senile Old Guy

    So the revenue raising parts of the budget are looking DOA. Yet Abbott has nuked all his political capital by breaking a promise and putting them in the budget. Not a good look, and pretty damn awful political strategy.

    And there aren’t actually many real cuts at all. Much of the reduction in deficits is due to heroic growth assumptions. Will the deficit really fall at all? As politics go, it is looking rather suicidal.

    Yes. I see trivial cuts, increased spending (at least in the short term), increased taxes (but, as Bruce says, dubious), billions on roads and medical research and dodgy assumptions.

    I don’t see public outrage but I do see slow burn anger. And instability because of the Greens and PUP. Politically, I think this budget is a loser.

  23. John Comnenus

    The first Hockey budget is politically idiotic – attacking it’s base and leaving it’s enemies unscathed. Economically it includes very modest cuts and massive new spending based on huge new taxes. However, the parliament is likely to block some of the revenue raising initiatives. That will leave Hockey in the same idiotic position as Swan. He has spent the money before he received it.

  24. .

    This whole thing is crazy. How are hypothecated excise taxes meant to work?

    Don’t all of these Federal Parliamentarians know this is unconstitutional?

  25. one old bruce

    Maybe so, but isn’t it a good thing to encourage young people to develop skills like skateboarding and public art/signage?

    Under 30′s dole seems to me to encourage all the young folk so intently practising their skateboard skills during work days, and how are they supposed to stay up at night tagging buildings if they have a normal job?

  26. Senile Old Guy

    McCrann:

    The budget’s nowhere near as brutal as might have been feared. Indeed, it will almost certainly be criticised from ‘the right’ as being too soft — the total of supposedly savage cuts knock less than $2 billion off the $32 billion deficit expected for this year.

    Yes, the cuts are projected to grow, to slice a much more impressive $14 billion off the deficit in 2017-18. This, combined with the continued ever-rising harvest of bracket creep, is projected to get the budget bottom line essentially back to balance around then.

    Indeed the roughly $30 billion reduction in the deficit is split almost equally between spending cuts and higher income tax from bracket creep.

    Now it’s always a worry that most of the pain comes later.

    So…a wealth tax, raise excise and spend it on roads, raise the cost of healthcare and spend it on medical research, leave the cuts until after the next election… There’s a hostile senate now and after July.

    Numpties.

  27. Combine_Dave

    One thing that strikes me as a very big political gamble in the next term of government should they win is the indexing the pension to cpi, at various times in history the cpi has run way ahead of wages and this could actually be giving a large bonus to pensioners. It is basically the same as flipping a coin to predict in 3 years time which will be running faster considering the long period of low inflation that has happened recently. Over a long time frame like 20 years it should work out cheaper but that is a long time in politics.

    That’s okay Kelly. At that point they’d freeze the pension to prevent further raises :D

  28. Combine_Dave

    @Bruce,

    Maybe that’s the point :P

    Have all the tax hikes fail and then the spending that was to be fueled by them (as per hockey’s speech) will in turn be cut (medical research, direct action etc), with their existing proposed cuts to the APS, ABC, Foreign Aid, & welfarism continuing irregardless.

    Could end up with smaller government by default :D

  29. entropy

    The problem with a CPI indexed welfare payment a system is when you reintroduce indexed fuel tariffs you end up a lovely little inflationary cycle.

    I actually believe indexed fuel excise is evil.

  30. Entropy, perhaps that’s the plan – inflate the debt away. It would certainly make those who loaned money to the government think twice next time.

  31. Rococo Liberal

    Lyons with an ‘s’ and the cuts occurred in 1932

  32. kelly liddle

    The problem with a CPI indexed welfare payment a system

    Well I personally don’t believe any government expenditure or revenue item should be indexed. For a long time welfare seems to have been indexed but personal income tax never has been. Net taxpayers should show the equivalent amount of rage but they never do.

  33. Joe Goodacre

    I disagree Steve that politically it was a nice bit of work.

    The Liberals expended a lot of political capital talking up a crisis and the necessity of cutting spending.

    The budget overall still spent substantially more than what was spent in 2006/2007 ($412 billion vs $271 billion) and indicated that there was simply a shifiting of money from one form of welfare to another. The creation of the medical fund was odd, not leaked and a massive surprise from a government of no surprises. To top it all, taxes were increased when it appeared that they could have been left constant at least.

    They are being trashed in the media for hurting the vulnerable, without actually doing anything of the sort. Hockey then proceeded to bungle his way through the sell with Sarah Ferguson. Bit of a fail for me.

    If they weren’t really doing any cuts – why let the narrative spin that way?

  34. Demosthenes

    Why not – CSIRO seemingly has been captured by Green-Left ideology, so start afresh with a new institution that isn’t compromised. You never know, they might even come up with some useful discoveries.

    Just four years ago:

    CSIRO in bed with big coal

    Paddy Manning
    Published: July 3, 2010 – 3:00AM

    Questions are being raised about the closeness of BHP Billiton and the CSIRO under its chief executive, Megan Clark. A former technology vice-president at BHP, Clark was appointed in 2008 and is regarded as a straight shooter.

    In May 2009 CSIRO announced a deal with BHP, under negotiation two months before Clark started, which saw 15 of the company’s scientists transferred to the Queensland Centre for Advanced Technologies – run by the state government – for research into iron ore, manganese and metallurgical or coking coal.

    BHP pitched in two pilot-scale coking ovens to the centre, worth about $10 million – a drop in the ocean compared to CSIRO’s annual budget of $1.2 billion.

    CSIRO agrees research project interactions with BHP in this field have increased strongly since the agreement, to reach “significant levels”.

    For CSIRO, finding the best way to use Australia’s coal assets is core business – that’s the ”industrial” part of its charter.

    The deal attracted some criticism last year, with the Australia Institute’s Clive Hamilton attacking the connections between CSIRO and big coal, particularly under CEO Geoff Garrett and continuing under Dr Clark, in an article for Crikey.
    ……………………..
    Spash says there is concern about the imbalance in research funding at CSIRO, particularly in responses to climate change.

    “Renewables like solar thermal seem to have been totally under-funded, whereas carbon capture and storage or clean coal technologies seem to be getting a disproportionate share of funding.”

    Hard figures are tricky to get. According to CSIRO’s operational plan for 2009-10, headcounts in the energy group roughly favour fossil fuels 70:30, with 212 people working on petroleum resources (136) or clean fossil fuels (76) and 82 people working on renewables. Renewables and clean fossil fuels come under CSIRO’s energy technology division, which received $12 million last financial year, but the funding split is not public.

    And as it happens, the CSIRO has been quite useful.

  35. .

    They are being trashed in the media for hurting the vulnerable, without actually doing anything of the sort. Hockey then proceeded to bungle his way through the sell with Sarah Ferguson. Bit of a fail for me.

    If they weren’t really doing any cuts – why let the narrative spin that way?

    It is just bizzare. They are criticised from the left for not spending enough – even though spending was up.

    The lefties don’t know it, but they’re criticising a tax – the “cancer tax”.

  36. brc

    Why not – CSIRO seemingly has been captured by Green-Left ideology, so start afresh with a new institution that isn’t compromised. You never know, they might even come up with some useful discoveries

    Who here doesn’t think that this new institution won’t be completely captured by socialists within 6 months of opening? We’re creating another CSIRO/ABC beast here, and funding it for eternity. It will be untouchable within one election cycle because cancer. But in reality it will just become a parking spot for Labor-friendly academics handing out the goodies to their socialist activist mates in academia.

    Why not cut R&D tax breaks for multinationals locating research facilities in Australia? Same thing achieved, one less government kleptocracy left behind for the ALP to commandeer and use to fund its shenanigans. No doubt the next ALP government will lease the medical fund a new buiding owned by the AWU on a 30 year, unbreakable and grossly inflated lease.

  37. brc

    TL;DR – it’s a political flop, a giggle of naivety, a damp squib of cuts.

    Hockey has to go. Give the job to Morrison.

  38. egg_

    Demosthenes
    #1305033, posted on May 14, 2014 at 10:50 am

    They also authored a major IPCC Paper on Sea Level rise, oft quoted on the subject globally in any scientific considerations of the matter (even coastal windfarm location siting).

  39. Joe Goodacre

    As spending has not decreased in absolute terms, what is the deficit tax in actuality – a tax to fund the new spending committments of the Liberals.

    This whole saga also raises hope for lefties…

    A Labor government only needs to get elected, ratchet up the spending and then if kicked out watch as Liberals leave that new spending level untouched.

    Fun fact – no Federal Australian Government has cut spending in absolute terms in our nation’s history.

    There have only been 3 years where spending was cut in real terms… 86-87, 87-88, 88-89. All three occasions were Labor governments.

    Anyone have any theories as to why in Australia’s history, the only three years where spending decreased occurred under a Labor government?

  40. Infidel Tiger

    Hockey has to go. Give the job to Morrison.

    It’s worth a punt, but for all we know Morrison has a picture of Keynes next to his pics of Orange Freedom Tubes on his study wall.

    They all suck.

  41. Bruce of Newcastle

    Demosthenes – You obviously haven’t worked for them or had work done for you by them.

    For a start the two coke ovens were transferred from Newcastle when Kloppers closed down all BHP’s tech centres. So CSIRO was only the pair of hands to operate the existing gear – which is not R&D. It is service work for BHP/BMA’s coal marketing arm.

    Furthermore you appear to be unaware of Dr Clark’s family company business. I will leave it to you to find out.

    Solar thermal is appalling, almost as bad as wind turbines. As it happens CSIRO does work on it and on wind turbines here in Newcastle. Which is in character. Two more horrible energy generating systems would be hard to design.

    As for CSIRO’s inventions I would not expect to see any more of them, not real ones. The culture is ghastly, they are captured by the left – except in Minerals, but even there industry people have a pretty dim view of them.

    The world would not end if the CSIRO closed their doors, believe me.

  42. wreckage

    The CSIRO should be busted back to ag research, which is what they were actually pretty good at. Make the big bucks in funding shower down on people who come up with actual improvements in productivity, and the culture WILL change.

  43. .

    CSIRO was set up along with ANU to build a particle accelerator, nuclear weapons and research nuclear power.

    As the ALP-Green hegemony (and fifth columnists in the LNP) have banned this or spiked any attempt to change policy, it is time to shut down the entire nest of Marxists at the foot of Black Mountain.

  44. Senile Old Guy

    Mr Abbott also defended the decision to bring back fuel excise indexation after a 13-year freeze, saying it would add 40 cents a week to the average family budget in the first year.

    “I know they won’t like it, I don’t like it, but again set against that we’re abolishing the carbon tax and what that means is that the overall the burden of taxation drops by $5.7 billion over this forward estimate period,” he said.

    The problem for Abbott, and us, is that abolishing the carbon tax has been blocked by senate. Until it is gone, he cannot say that the burden of taxation is dropping.

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