Monday, 19 May 2014

"Crisis"


The Abbott government's first budget is a shambolic mess of contradictions and half-measures. Despite what the News Corp prognosticators might say, there is no overarching narrative of cuts and savings for the national good, just a number of cruel an incogruous measures that do nothing to address the real structural problems in the nation's fiscal position.

A lot of people a lot smarter than I am have put forward their analysis of the budget. I'd recommend looking here, here or here for some good pieces. But there are a couple of points I'd like to add.

On the massive cuts to state funding for education and health: as many have mentioned, this is obviously a ploy to get the states to beg for an increase in the rate of the GST. Abbott will pretend to act only if the states "make a case" for an increase, but now it's almost certain to be an election issue in 2016.

The hypocrisy, though, is breathtaking. While self-proclaimed "Infrastructure Prime Minister" Abbott trumpeted the "new" (little of which is actually new) roads spending in the budget, Joe Hockey cut billions from promised health and education funding to the states, saying that it wasn't the Commonwealth's job to run schools or hospitals.

Hmm, the Commonwealth can pick and choose which parts of state expenditure it wants to contribute to. Wow. Liberals do good Federalism well. Good luck budgeting for the future, states and territories.

Second, there is the budget "crisis" the Liberals have been brewing up since 2010. Abbott has run his throat sore arguing Australia is "living beyond our means," blaming Labor for everything from the "debt" to the bad weather. This furphy of a debt argument now occupies much of the central economic narrative of this government. Too bad for them, it's largely not true.

While there is certainly an issue for any budget that runs at a sustained deficit, Australia's problem is largely one on the revenue side (i.e. taxes raised by government and concessions paid by government) rather than spending (i.e. health, hospitals, welfare, defence etc).

Duplicitously, Abbott has picked and chosen his "crises", arguing that while his confected federal budget crisis is real, the states are feigning an "emergency" on the massive health and education cuts. "...we've got three years," to come to an arrangement, Abbott reassured the states, but while the PM is busy with crisis envy in the federal sphere, the states are perfectly right to be afraid.

They have virtually no way of adjusting their revenues to meet the shortfall in federal funding. They have no income tax to levy, no GST to increase. All they can really do is increase vehicle registration fees, speeding fines and take a bit more from the pokies. And with elections due for three states in the next eight months, none will be popular.

This budget looks as if it will be very unpopular in the wider community. What we know from past experience is that voters are willing to accept tough decisions if they are explained clearly and demonstrated to be in the national interest. What the electorate doesn't appreciate is duplicity and radical changes. Abbott would do well to heed this lesson both from his conservative political mentor and Labor predecessors.

(I'll post separately on the egregious waste of money that is the quarter of a billion dollar school chaplaincy programme - it needs space of its own.)

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