Budget 2016: Cut through the spin with our pass notes
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Cut through the BS (budget spin) and be the most valuable contributor to your dinner table debate on the Federal Government's finances with these crib notes.
1. Pre-election sweeteners
Let's be real. It's an election year, which means the Government is working with two opposing motivations: (a) to show it's a responsible economic manager that can claw its way out of deficit versus (b) the desire to "reward" target voters with budgetary goodies. Those competing motivations are even stronger this year because the Prime Minister will call an election within a week of the budget being handed down. This also means you'll have to take the Government on trust; there will be almost no time to pass any legislation giving effect to budget announcements before the current parliament wraps up.
2. Hidden nasties
Some budget cuts and spends are notoriously difficult to locate. The documents are dense and governments often work to keep things opaque. It means some effective cuts don't become clear straight away. If a levy or charge goes up or a benefit is harder to get, it will be somewhere in the budget, but you may not learn about it immediately. The Government will point to no "overall" increase in the burden of taxes and charges, but that doesn't mean you won't pay more or get less. Don't forget the potential for the Government to struggle to get budget measures passed, if crossbenchers continue to hold the balance of power after this year's expected double dissolution election.
3. Scott Morrison's debut
As many commentators have noted, most treasurers get three budgets before they go to the polls, so they can sink into the job like a comfortable chair by the time they hit the all-important election year document. But Scott Morrison only rose to the role in September last year and he will be unveiling his first budget as we head into election territory. It means economists and reporters will be on the lookout for any slip-ups that give the air of someone still coming to grips with a $400 billion economic plan. Mr Morrison will also have to provide that all-important "narrative" of what the budget means. I don't want to spoil it for you all, but expect a lot more on "jobs and growth", "mums and dads", "rewarding those who work, save and invest" and stressing the need to "live within our means".
4. Smokers coughing up
We are confident the Government will hit heavy smokers hard in this election. A pack of cigarettes will rise in price because of a hike in excise, even though former prime minister Tony Abbott was one of the most vocal critics of what he called a "workers tax" on smokers. The reality seems to be that this is one area where the Government can boost taxes without fear of widespread voter recriminations. Statistics suggest this is a tax hike that will hit the poorest hardest, but they have few allies among those who manage the health budget.
5. Deficit is a cert
There is no doubt we are preparing for a deficit, and the Government isn't expecting to be back in the black for years to come. The question is, just how much red ink there will be, and in which year will it stop? The tip is that revenue the Government expected as recently as December will again disappear as a sluggish global economy takes its toll. Deloitte Access Economics is predicting the mid-year budget update deficit of $37.4 billion will blow out to $41 billion. Using key indicators like employment and GDP growth, Australia is faring better than most developed economies, but inflation and wages remain stubbornly low and, for the first time in more than 20 years, there is the possibility that the Reserve Bank may deliver a stimulatory interest rate cut on the same day the federal budget is handed down. What's not in doubt is that both the major parties will be blaming each other for putting the country in a fiscal hole.
6. Is the federal budget just like the household budget?
In his pitch to "middle Australia" the Treasurer will make much of the idea that his job is to do for Government finances what families do for theirs: "… to live within its means, because Australians are doing it, Australian householders are doing it. Families are doing it. Businesses are doing it". It's true that managing any budget is a simple exercise about money in/money out. But the difficulties for governments are greater. Parents don't normally ask their kids to vote on taking out a bigger mortgage or to cancel a planned holiday — they just decide. Mr Morrison makes decisions with an eye on the Senate, the backbench and the more than 13 million voters who will cast judgement on July 2. Now while you consider all of this, take a brief interlude and revel in the glory of this mash-up of federal politics and Seinfeld. You deserve it.
Topics: budget, government-and-politics, federal-government, australia
