06/05/2013 - 15:09

Crucial pre-election budget

06/05/2013 - 15:09

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The last thing we need ahead of the federal election is the major parties promising to outspend one another, but that’s probably what we’ll get

The first casualty in war is truth, so don’t expect Julia Gillard or Tony Abbott to take you too much into their confidence as political hostilities intensify ahead of the September 14 election.

Admittedly Ms Gillard was frank in the lead up to next week’s budget when she revealed that government revenue was expected to fall short of Treasury’s target by $12 billion, meaning another deficit budget. But the ‘take’ will still be up by at least 7 per cent on last year.

Nevertheless, she’s also keen to get some big-spending initiatives that represent ‘true Labor values’ – the National Disability Insurance Scheme and the Gonski recommendations to improve schools – locked in before polling day.

In fact, Ms Gillard announced the increase in the Medicare levy to help fund the NDIS just two days after the revenue shortfall. A great coincidence.

It’s amazing how the budget mindset changed after Treasurer Wayne Swan finally levelled with voters last December and said he would not be able to deliver a balanced budget. When that discipline evaporated, the spending ministers moved in.

Mr Abbott’s dilemma is linked with becoming prime minister. He will inherit not only the NDIS commitment and the promise of extra billions for education, but has his own proposal for a $4.3 billion paid parental leave scheme, the affordability (or not) of which is causing unease within his own party.

That promise came completely out of left field last year as Labor’s female ministers, led by Ms Gillard, stepped up their assault on the opposition leader, claiming he was unpopular with female voters. If that is the case, opinion polls show Ms Gillard scoring similar ratings with male voters.

But the upshot was that Mr Abbott unveiled what in anybody’s terms seems to be a very generous scheme, with the aim no doubt to soften his image within female voters. The plan is for the scheme to be paid for by a 1.5 per cent levy on big companies, not directly by ordinary taxpayers.

And Mr Abbott has promised substantial savings in the public sector, ‘slash and burn’ to his opponents, which will make him politically vulnerable. So he will try and blur the detail on that front.

About the only big-ticket issue that hasn’t resurfaced in the pre-election gyrations is a national dental insurance scheme. It was mooted last year to offset the high cost of dental care and the big waiting lists for state government funded dental clinics.

Its introduction would no doubt involve another levy, and there are only so many levies any economy can absorb all at once. There is also the issue of whether there would be enough dentists to meet the demand from such a program.

It will happen, however; it is just a matter of when.

Ms Gillard and Mr Abbott will dance around these issues, along with Wayne Swan and Joe Hockey, as they attack each other the next four months of shadow boxing up to polling day. But the facts are that revenue has fallen short at the same time as both sides are committed to big new spending.

No leader in the current climate wants to wave the caution sign by saying the increase in spending on disabilities and schools will place strains on the economy, without commensurate increases in national output.

When Paul Keating came under fire from Labor’s left, which thought him too close to business on some issues, his response was that to do the things Labor governments were expected to do (provide a hand up to battlers) you first of all had to grow the economy. Then the economy had better capacity to fund the extra assistance programs.

There doesn’t appear to be great incentive to grow the economy right now, although the resources sector continues to provide the lead.

Enter former Liberal treasurer Peter Costello, who reminded viewers on the ABC’s 7.30 program last week that he produced 10 surplus budgets compared with none by Mr Swan. After that swipe, however, he also had a veiled warning for Mr Abbott and the current Liberal team.

Mr Costello said he would not be introducing the NDIS in its present form right now. In fact he would be looking at ways of cutting spending, and even “put some money aside in the future”.

The former treasurer cautioned: “We’ve had five budget deficits in a row, we’re heading for another one, we shouldn’t be introducing new spending,” adding, for the benefit of both sides, “the easiest spending cut you’ll make is the new spending you don’t go into … because you’re not taking anything away from anybody.”

Hopefully Ms Gillard and Mr Abbott take note before the election campaign becomes an even more expensive bidding war, which the economy cannot afford.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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