Extract from The Guardian
Coalition agenda shifts from pushing for ‘essential’ budget savings
to presenting its failure to get them through the Senate as something
close to success
The Abbott government is now in serious lipstick-on-a-pig mode. The
big changes from last year’s budget have hit the fence. The savings once
declared essential have gone with them. The task now seems to be to
dress up this failure of the first term agenda as something close to
success.
Budget savings worth more than $15bn over the next four years have either been defeated, or are stalled, in the Senate. As recently as last month, the treasurer, Joe Hockey, was saying that unless those measures passed, the budget would “never get back to surplus”.
Given the impact of the continued deterioration of commodity prices on the budget, that seems like a fair assumption unless the government finds alternative savings of similar size. (Remember last December’s mid-year economic forecast was still showing a deficit of $11.5bn in 2017-18).
But Hockey’s statement was made when at least some members of the government thought the intergenerational report might help them make a convincing case for their savings. Despite the taxpayer-funded advertising campaign to help make a case for change, that hope now seems to be shelved.
Problem. How does the government explain why this policy retreat does not amount to a debt and deficit disaster? How to climb out from under the “bad news” – from the government’s perspective – of recent events, including the defeat of the savings from the higher education changes and the shelving of Medicare changes. How to explain the reversals of position, at some cost to the budget, on car industry assistance and defence pay.
The prime minister, Tony Abbott, has turned to the intergenerational report for inspiration. It shows that currently legislated policy might bring the budget back to something close to balanced by 2020, before plunging back into deep deficits which reach 6% of GDP by 2055.
He leaves out the second part of that sentence and concentrates on the next five years to say that the IGR “showed that on the measures that this parliament has already passed … we get back to broad budget balance in about five years.”
In other words – no disaster to see here. No problem. And no need for the further deep savings that the prime minister now lacks the political authority to prosecute. The budget will be “dull”, the prime minister insists.
This lipstick analysis takes into account savings that have been passed, but neglects to explain some other significant things like:
• How the projected $11.5bn deficit in 2017-18 in the actual budget’s calculations – which took into account many of the policies now defeated and was based on higher commodity prices, can possibly turn into a “broad budget balance” just two years later unless the government implements savings policies that would be anything but dull.
• Who is going to pay for hospitals. By far the biggest long-term savings measure included in the IGR was the decision taken in the last budget that from 2017, the federal government’s share of hospital spending will grow each year in line with inflation and not by the previously promised 6% or more (which was calculated to help meet the actual cost of running hospitals). This saving starts to take effect before the budget returns to “broad balance” in 2020. But of course it wasn’t a saving at all, it just just hand-balled the cost on to the states.
• What will happen to pensions. The IGR assumes a big saving from the policy that pensions will grow in line with inflation for 12 years from 2017, but the government is already moving away from this policy.
The new looking-on-the-bright-side approach goes further. It includes daily offerings of things to talk about other than the unfortunate failure of key elements of the budget and much of the Coalition’s first term program.
Abbott told his party room on Tuesday the government was changing focus from the policies it had been unable to get through the “feral Senate” to smaller things that were “meaningful” to the person on the street and didn’t need Senate approval. Things like enforcing rules on foreign investment in real estate, new country of origin labelling on food, a voluntary code of conduct for supermarkets, waiting a while before taking unclaimed money from dormant bank accounts.
They had to be optimistic, he told his MPs, and present a “glass half full” message to the electorate.
Of course, it’s possible the electorate may still see the pig.
Budget savings worth more than $15bn over the next four years have either been defeated, or are stalled, in the Senate. As recently as last month, the treasurer, Joe Hockey, was saying that unless those measures passed, the budget would “never get back to surplus”.
Given the impact of the continued deterioration of commodity prices on the budget, that seems like a fair assumption unless the government finds alternative savings of similar size. (Remember last December’s mid-year economic forecast was still showing a deficit of $11.5bn in 2017-18).
But Hockey’s statement was made when at least some members of the government thought the intergenerational report might help them make a convincing case for their savings. Despite the taxpayer-funded advertising campaign to help make a case for change, that hope now seems to be shelved.
Problem. How does the government explain why this policy retreat does not amount to a debt and deficit disaster? How to climb out from under the “bad news” – from the government’s perspective – of recent events, including the defeat of the savings from the higher education changes and the shelving of Medicare changes. How to explain the reversals of position, at some cost to the budget, on car industry assistance and defence pay.
The prime minister, Tony Abbott, has turned to the intergenerational report for inspiration. It shows that currently legislated policy might bring the budget back to something close to balanced by 2020, before plunging back into deep deficits which reach 6% of GDP by 2055.
He leaves out the second part of that sentence and concentrates on the next five years to say that the IGR “showed that on the measures that this parliament has already passed … we get back to broad budget balance in about five years.”
In other words – no disaster to see here. No problem. And no need for the further deep savings that the prime minister now lacks the political authority to prosecute. The budget will be “dull”, the prime minister insists.
This lipstick analysis takes into account savings that have been passed, but neglects to explain some other significant things like:
• How the projected $11.5bn deficit in 2017-18 in the actual budget’s calculations – which took into account many of the policies now defeated and was based on higher commodity prices, can possibly turn into a “broad budget balance” just two years later unless the government implements savings policies that would be anything but dull.
• Who is going to pay for hospitals. By far the biggest long-term savings measure included in the IGR was the decision taken in the last budget that from 2017, the federal government’s share of hospital spending will grow each year in line with inflation and not by the previously promised 6% or more (which was calculated to help meet the actual cost of running hospitals). This saving starts to take effect before the budget returns to “broad balance” in 2020. But of course it wasn’t a saving at all, it just just hand-balled the cost on to the states.
• What will happen to pensions. The IGR assumes a big saving from the policy that pensions will grow in line with inflation for 12 years from 2017, but the government is already moving away from this policy.
The new looking-on-the-bright-side approach goes further. It includes daily offerings of things to talk about other than the unfortunate failure of key elements of the budget and much of the Coalition’s first term program.
Abbott told his party room on Tuesday the government was changing focus from the policies it had been unable to get through the “feral Senate” to smaller things that were “meaningful” to the person on the street and didn’t need Senate approval. Things like enforcing rules on foreign investment in real estate, new country of origin labelling on food, a voluntary code of conduct for supermarkets, waiting a while before taking unclaimed money from dormant bank accounts.
They had to be optimistic, he told his MPs, and present a “glass half full” message to the electorate.
Of course, it’s possible the electorate may still see the pig.
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