By Professor Anne Tiernan, Griffith Business School
‘Jobs and growth’ were the central organising themes of Treasurer Scott Morrison’s first budget, delivered just three days before Prime Minister Malcolm Turnbull is expected to visit the Governor-General to recommend that both houses of the Commonwealth of Australia’s 44th Parliament be simultaneously dissolved.
The backdrop for both the Budget and the looming election is economic uncertainty and the prospect of continued sluggish growth in the global economy dampening investment and spending. The Reserve Bank’s Budget-eve decision to cut interest rates to counter the threat of deflation only emphasised the importance of fiscal policy in supporting the Australian economy’s transition from mining investment to a more diversified and new economy.
With the ghosts of Tony Abbott and Joe Hockey’s 2014 budget still haunting the Coalition, the Turnbull Budget needed to do two things. First, lay to rest complaints about the equity and fairness of cuts to education and health spending and policies that betrayed a deep antipathy towards the young unemployed. Second, the Budget needed to deliver the new economic vision and plan promised by Malcolm Turnbull when he seized the prime ministership in September 2015.
Despite the build-up – the strategic leaks and ‘barnacle-cleaning’ announcements ahead of the Budget proper (notably the decision to build new submarines in South Australia), one gets the sense the Budget was something of an anti-climax. Citizens and the commentariat suspect the real action will be found in the campaign proper. With characteristic pugnacity or chutzpah (depending on where you sit), Scott Morrison claimed the document is not ‘just another Budget, but a long-term economic plan’. Key announcements include:
- A ten year plan to cut the company tax rate from 30 to 25 per cent by 2026-27;
- Immediate reductions to the company tax rate for small and medium businesses from 1 July 2016. Businesses with a turnover of up to $10 million will pay 27.5 per cent tax and have access to the $20,000 instant asset write-off introduced in 2015-16.
Business tax cuts are funded by a $4.8B increase in tobacco excise, as the government adopts Labor’s plan to raise the price of a packet of cigarettes to a staggering $45/packet by 2020-21. Other measures, including addressing ‘bracket creep’ for middle income earners, are funded by modest changes to superannuation tax concessions and a promised crackdown on multi-national tax avoidance.
With an eye to the Federal election and responding to published polling, and doubtless too, internal Liberal Party research, the Government has walked back from some of the most controversial cuts to Health and Education. As agreed at the recent Council of Australian Governments (COAG) meeting, it has reinstated $2.9B in funding to the States and Territories for Health. Just weeks ago, the Prime Minister canvassed a Commonwealth withdrawal from schools funding. Last night it confirmed the weekend announcement that $1.2B would be provided to sub-national governments under certain ‘conditions’ that can be guaranteed to proliferate reporting and bureaucracy, rather than tangible outcomes in the nation’s classrooms. The promised White Papers on Reforming the Federation and Taxation have been cancelled – one of several opportunities for structural reform the Government is apparently unwilling to embrace.
While major infrastructure investments were announced in last night’s Budget, including the Melbourne to Brisbane inland rail, freight links in Perth, water and other ‘essential’ infrastructure investments in Victoria, what was left unsaid is potentially of most interest for Queensland.
Labor believes it is competitive in up to ten Coalition seats that are sitting on margins between 0.5 per cent (Petrie) to 6.7 per cent (Dickson, where Immigration Minister Peter Dutton is under challenge from former Queensland Attorney-General Linda Lavarch). The Federal government has continued to deny Queensland access to the controversial ‘asset recycling’ fund, which was available to States that privatised assets, but much interest is focused on $1.6B of spending that is decided but not announced. Expect some sweeteners as we roll through an eight-week election campaign.
This is a Budget of many moving parts. Needing to shed the legacy of the Abbott government, the Turnbull government has sought to balance domestic political concerns with the vagaries of a precarious global economy. This is no easy task given the schism between the moderate and conservative wings of the party – still bitterly divided over the leadership spill and sceptical of Malcolm Turnbull. Add to this the challenge of a Coalition partner that is under pressure from rural independents, to say nothing of the need to bolster seats in South Australia.
The honeymoon is over for Malcolm Turnbull, who to the surprise of most pundits, now faces a resurgent Opposition, led by an increasingly confident Bill Shorten. Much rests on the Budget Reply speech, but as the fault-lines of the campaign to come settle into starker relief, expect to hear much about ‘enterprise’ and ‘aspiration’, the ‘politics of envy’ and ‘class war’ on one hand; and about ‘equity and fairness’ for ‘ordinary Australians’ on the other. Quite how this will assist the transition to a new economy remains, like so much of our political discourse, unclear.