While it is the case that every federal budget is as much a political document as it is a statement of economic policy, the 2017 budget brought down by treasurer Scott Morrison places political objectives well ahead of economic rationality. Yet, for all its attempts to construct the notion that this is a plan put together by a pragmatic, centrist government, the Morrison-Turnbull budget will increase the tax burden on all Australians both directly (with an increase in the Medicare levy and, for those who have been or are going to university, higher tertiary education charges) and indirectly (as when the four major banks who have been targeted for a levy pass the cost of this tax on to consumers).
In other words, the Turnbull-Morrison budget contains some real nasties for the voters although this has been obscured somewhat by the change in the government’s rhetoric and the inclusion of some stand-out individual proposals. In explaining its approach to the public, the Turnbull government has abandoned the rectitude and the hectoring of an allegedly indolent middle class that characterised the approach of Turnbull’s biggest political opponent, former Liberal leader and ultra-conservative Tony Abbott.
In its place has come many more positive and progressive ideas; such as the need for a budget to be equitable and for the government to be taking the lead in attracting investment to allow for the building of infrastructure. The obsession that previous Liberal economic ministers such as former treasurer Joe Hockey (gone, of course) and finance minister Mathias Cormann (still there, but noticeably absent from the post-budget campaign) had with privatisation as a means to achieving a reduction in the role of government has been abandoned.
To re-enforce this notion that he is quite different from his Liberal predecessor, Turnbull (via Morrison) has gone so far as to appropriate policies and ideas of his formal opponent, the Labor party. The Gillard government’s approach to secondary education funding is now Turnbull policy, complete with David Gonski on board and with the additional element of the conservatives being prepared to wind back assistance to very wealthy schools. The spectacular U-turn implicit in this policy has caught the attention of commentators, and, partly as a result, has obscured the way the lower to middle-class tax burden has been increased thanks to changes to tertiary fee structures and the HECS repayment arrangements.
A similar dynamic emerges in health policy. The Medicare levy is to rise, yet the headlines prefer to note the Coalition’s total appropriation of Labor’s NDIS policy and the removal of the freeze on Medicare payment rates to general practitioner services which, of course, seeks to state that the Coalition is as committed to nationalised health care as its Labor opponents.
Perhaps the most spectacular feature of the budget is the government’s proposal to levy a tax on the four major banks. At one level this levy aims to address the need for the government to come up with a revenue stream that can underpin its claim to being in surplus some years hence, but the politics behind it can’t be ignored. This initiative also seeks to address anger at the banks that simmers in some of the Coalition’s core constituency who have a series of complaints about how the major banks handle everything from structuring business loans through to superannuation. The driving force here has been the National Party, although fear of what One Nation is doing to the Nationals’ constituency is clearly influencing the government’s approach.
The prospect of the national government taking on the behemoths of the Australian financial services industry may be making political observers salivate in anticipation, but for everyone else the reality will be that, if this proposal is passed, the cost will simply be passed on to those consuming the services provided by the banks. If this is done by way of raising interest rates, the consequences may be severe for the economy especially if world economic recovery turns out to not be as strong as the Australian treasury predicts it to be. Rising interest rates might help retard the rate of increase in house prices in Melbourne and Sydney, but the increase in the cost of taking out a loan does very little to address the ‘housing affordability crisis’.
The political imperatives surrounding this budget have thus been many and varied, and Morrison and Turnbull appear to have made a pretty good go at trying to address them all. There are railway lines, new rural financial corporations, and a promise to beat up the big banks to placate the Nationals and the restive regional and rural constituency that flirts with Pauline Hanson. There are commitments to Medicare and Gonski to try and gazump Labor’s attempt to scare voters in swinging seats with allegations that the conservatives want to close down the public sector, and there is an array of commitments to roads, railways, and airports to allow the prime minister to project himself as the builder of ‘infrastructure” and come across as a more positive and optimistic conservative than the Hobbesian version that emerged when Tony Abbott was prime minister.
This is all cute politics, but there are dangers lurking. There will be an increase in the tax burden shouldered by average income earners, even though it has been carefully hidden behind rhetoric about the NDIS and a populist tilt at the big banks. Many of the infrastructure commitments are actually simply feasibility studies and some of the projects on the drawing board will need to be undertaken with the assistance of state governments. There is also the matter of the restive Senate.
But perhaps the most intriguing thing of all will be how the government manages its relationship with the banking sector. Memories will flood back of Labor’s attempt to recast the tax regime with its ‘mining tax’ and the campaign the mining industry ran in response. The Morrison budget has thrown down the gauntlet with its proposed levy on the banks. It remains to be seen if the Turnbull government has the stomach for the big fight it has picked.