Enjoying the moment … Tony Abbott and his ministers congratulates Joe Hockey after the Treasurer delivered his first budget speech. Photo: Andrew Meares
Are the standards of debate between politicians and the ways in which they speak to their electoral masters worse now than they have been? It’s hard to tell, but it can be said with confidence that, at present, these standards are low.
The ‘deficit disaster’ is essentially the responsibility of a government in which Abbott, Hockey and the ever colourful Kevin Andrews were ministers.
Former federal Coalition leader John Hewson recently remarked on what he called ”the devastated state of political debate in Australia” and lamented that ”policy substance … has been almost totally eschewed”. Hewson ran one of the most honest election campaigns in modern Australia history and he lost; it’s an example that may have been taken too much to heart.
Of course it’s unreasonable to expect politicians to promote their fortunes in an even-handed way. To gain electoral support, they must stress their policies’ merits and expose the flaws in those of their opponents. Through such contests, degrees of balance can be achieved in political debate – provided that participants behave reasonably and honestly. Unfortunately, reason and honesty are now being significantly displaced by deception, exaggeration and a willingness to speak in riddles. In the befuddling murk, the public interest is left gasping for air
The Abbott government is not solely responsible for the predicament but it has things to answer for. As much as the budget’s substance is affecting its fortunes, the government’s political strategy and the ways in which it is communicated seem to be making matters worse for it.
Let’s look at some of the Coalition’s strategic themes.
In the first place, it can hardly bring itself to see that debt and taxation are even necessary evils. It believes debt should be avoided and tax reduced. Prime Minister Tony Abbott says ”it is my guiding principle that we are taxed too much” and he claims that no country has ever taxed itself to prosperity. The Treasurer, Joe Hockey, says: ”I look at my children and I say there is no way on God’s earth I am going to leave you with a debt.”
There’s no suggestion in the Coalition’s story lines that debt has been essential to the working of economies and that it helps to ensure equity in public financing. For example, it is entirely reasonable for the cost of roads being built now to be shared by those who will benefit from them over the years by debt financing. On tax, as this column has previously noted, a fair and efficient tax system has always been an important part of the good government of prosperous countries, while its absence is a defining feature of less fortunate ones.
If debt and tax are to be demonised, then the Coalition must blame any debt and deficit problems on its opponents, lest it look like a hypocrite. So, over the years, it has attributed the fiscal problems before the federal government to ”Labor’s debt and deficit disaster”. This refrain has been accompanied by Abbott’s claim that ”the fiscal position will always be better under the Coalition because budget surpluses and reducing debt … that’s in our DNA”.
Let the Rudd-Gillard governments take the rap for much of the current level of debt; however, it is low relative to much of Australia’s history and to current debt levels in comparable countries. The debt should be reduced but it is not at disastrous levels and, without it, the country may well have gone into recession.
Responsibility for the budget deficit can be more widely shared. It’s the cumulative product of decisions taken over many years, including by Kevin Rudd and Julia Gillard but also others before and after them. Indeed, Abbott can put his hand up on account of his generous maternity-leave scheme, trying to drop the carbon and minerals taxes, and his absurd promise, against the recommendation of Tony Shepherd’s audit commission, to restore defence spending to 2 per cent of gross domestic product.
Since 1945, significant budget surpluses have been achieved only rarely: once by Ben Chifley, three times by Bob Hawke, and eight times by John Howard, who shared another with Rudd, who was elected during the 2007-08 fiscal year. That is, the Menzies, Holt, Gorton, McMahon and Fraser governments managed only a few, small surpluses. So much for the claim about the Coalition’s DNA.
So what’s behind the budget’s difficulties? An economist and former secretary of the Department of the Prime Minister and Cabinet, Michael Keating, has helpfully pointed out that government spending for the current financial year is expected to be about 24.1 per cent of GDP, a bit below the average of the previous 12 years of 24.5 per cent. Government revenue, however, will come in about 23.1 per cent of GDP compared to the past 12-year average of 24.3 per cent, which is a relatively low take by the standards of many other countries. Keating concludes that ”if we have a fiscal problem, it does not seem to have been caused by excessive expenditure but by a drop in taxation revenue, and the prime cause of that was the miscalculations made by the Howard-Costello government when they embarked on their 2001 tax reforms, which have turned out to cost more than expected at the time”.
To put Keating’s point another way, the ”deficit disaster” is essentially the responsibility of a government in which Abbott, Hockey and the ever colourful Kevin Andrews were ministers. What the heck.
The problem for the Abbott government is that its useful political mantras about reducing tax and its deceptive wailing about the alleged spending atrocities and waste of Rudd and Gillard have turned it into a policy cul-de-sac. Apart from the Medicare-PBS co-payments and undoing the Howard freeze on petrol tax indexation, its principal means of improving the budget is cutting spending. This, however, doesn’t address the critical fiscal weakness around revenue. Indeed, Abbott has bound himself into reducing taxes and, if he does so, he will compound the fiscal problem he has – unless he’s able to make further large-scale and unpopular spending cuts. Such are the hazards of mantra-based policy.
Abbott says there’s only one plan, it’s his and there’s no alternative. He has to say that because he’s caught in his own policy trap that distances him from any number of meritorious options.
For example, economics professor Ross Garnaut has said: ”Australia can stay within the boundaries of fiscal responsibility over the next four years … by retaining carbon pricing rather than the array of changes that are at risk in the Senate.”
If that’s too much of a U-turn, the government could move now on the fundamentally inequitable superannuation and capital gains tax concessions, negative gearing, trusts and, as Australia Institute head Richard Dennis has suggested, consider extending the GST to private school fees and private health insurance – the burden of which would fall more on the better-off. These are rich revenue sources that would not need to be pressed far to make more significant contributions towards getting the budget back into the black than all of the measures Abbott is now taking.
As the Coalition’s broad strategies have hamstrung it in government, it has tied itself into numerous tactical knots.
Hockey’s spiel on the budget has been full of riddles. At the National Press Club, he said: ”Last night’s budget was forged on the values that modern Australia embodies: the values of enterprise, of hard work, of self-reliance, of control of your destiny, of the fact that we’ve got to move away from a culture of entitlement in some areas to a culture of opportunity and hope.” What on earth does this string of false opposites mean? Most likely not very much. Certainly exhorting unemployed young people about getting with opportunity and hope might not cut a lot of ice while they’re being refused any benefits for six months and perhaps more. It’s no wonder this speech is not on Hockey’s website.
Then the Prime Minister put his foot in it. When caught short on a question about opinion polls, he said the Howard government took a big hit in them after its first budget – it did not. Then he claimed that modelling by the National Centre for Social and Economic Modelling of the budget’s effects on certain groups was based on assumptions devised by the opposition. The NATSEM says that’s not so. As Abbott has created an impression that he might not have stuck to some of his pre-election promises as closely as some hoped, his office leader, Peta Credlin, might suggest he now follow Mark Twain’s advice: when in doubt, tell the truth.
Finally, in a policy and political sense, the government is not being much helped by a couple of its ardent supporters, those doughty friends of the overdog: audit commission chairman Tony Shepherd and Murdoch press journalist Henry Ergas.
Shepherd (a former Commonwealth employee in the now defunct Department of Supply, with curious gaps in his Who’s Who entry) is upset about the raw reception the budget has copped, including from David Gonski of the education review fame. Shepherd says he would have ”loved to keep education funding at the levels of Gonski” but that ”all areas have to make a contribution” to ”bring spending under control”. That kind of thinking is precisely wrong. Spending cuts should be made on their merits and in ways that do not conflict with other high objectives of government. For example, if cutting education funding restricts productivity improvement, and that’s likely, then it should be protected. The ”all areas making a contribution school” is a fool’s paradise from which Shepherd should try to withdraw himself, but only after he’s found the way to correctly calculate the average number of times per year that people visit a medical practitioner.
Consistent with the Murdoch press formulas, Ergas says: ”When spending is allowed to get out of control, it is consequently on the relatively poor, who are the main recipients of public expenditure, that the burden falls.” The point is that spending hasn’t been ”out of control” but a greater burden has been put on the ”relatively poor”. Ergas wouldn’t go along with that, of course, and he points out that ”the effective average rate of tax on Australian top-income earners is three percentage points higher than in Canada, give percentage points higher than in Sweden and 10 percentage points higher than in the US”. The international comparison of tax rates is not a simple matter and it’s unclear what Ergas means by ”top-income earners”, but data prepared by KPMG shows Australia with a top marginal tax rate of 45 per cent, Canada between 39-50 per cent depending on differing rates of tax levied by provincial governments, 57 per cent for Sweden and 39.6 per cent for the US, onto which must be added state and local government income taxes. But, however all of this computes, Australia’s international ranking on the tax of ”top-income earners” may be of scant consolation to unemployed young people now destined to spend long periods without any income.
Perhaps the Prime Minister should have the last word. He said Opposition Leader Bill Shorten’s address in reply to the budget was ”all politics, no policy; all complaint, no solutions”. It’s a fair comment and one that could have been made about Abbott when he was the opposition leader. There’s a lesson here for Shorten.
Paddy Gourley is a former senior public servant. pdg@home.netspeed.com.au
source:brisbanetimes.com.au
STUDIO 3 NEWCASTLE AUSTRALIA 