The Turnbull government’s budget this week went a long way to neutralising the policy issues that Labor exploited at the last federal election, especially by whacking the big banks. But the government deliberately left itself exposed on the one issue that could bring it down.
The Coalition can now claim to have cracked down on big banks, who have managed to make themselves public enemy number one by treating customers poorly while raking in huge profits and showing inadequate contrition for the shonky operators among their ranks.
It’s impossible to tell definitively which budget measures were the result of rigorous policy analysis within the bureaucracy, and which were cooked up as a quick political fix in the minister’s office.
The deficit levy in 2014 on very high income earners was reported to be a relatively last-minute decision by the Abbott administration to pre-emptively counter accusations that the budget only imposed cuts on students, the elderly and the unemployed.
This year’s levy on the banks could be seen in a similar light, with reports emerging that Treasury officials who met with bank representatives after the budget knew very little about the levy or how it might operate.
The crackdown on banks involves more than just the levy. There is also a new requirement for bank executives to be registered with the industry’s regulator, with the attendant threat that bankers can be struck off the register for misconduct and stripped of their bonuses. Banks found guilty of misconduct will also face increased fines.
The government could argue these reforms would have been the likely outcome of a royal commission.
This of course does not sate the community’s desire for bankers to be subjected to a public inquisition and then metaphorically placed in the stocks or strapped to a crackling pyre.
Even though the government was prepared to reverse its position on a number of other policy issues, such as Gonski, it apparently didn’t see the benefit of conceding to Labor on a banking royal commission.
Perhaps this is because it occurred to Treasurer Scott Morrison that he could discipline the banks while filling a revenue hole at the same time.
It is no secret the Treasurer is unhappy with the banks – and not just because they’re singularly ungrateful for the government’s protection against the indignities of a royal commission.
ScoMo is unhappy because they appointed a senior Labor identity – former Queensland premier Anna Bligh – as their chief lobbyist.
That role had reportedly been earmarked for one of Mr Morrison’s senior advisers, and the Treasurer had apparently given his blessing for the appointment.
Anyone with an ounce of political common sense knows that lobby groups are unwise to appoint someone of the opposite political flavour to the government of the day.
The only exception to this rule is if it’s close to an election and there is a good chance the government will change.
Canberra circles are rife with stories of ministers and their staff not only refusing to meet with such lobbyists, but excluding them from other consultation processes.
Retribution can even extend to unfavourable policy decisions, as the bankers learned on budget night.
The Treasurer would be pretty happy with the outcome of the decision so far.
The bankers are squealing, voters don’t like one of the most trusted political faces in recent history shilling for the banks, and Labor can’t claim any credit for the crackdown.
ScoMo will also be confident in the knowledge that if the banks try to pull a mining tax rebellion – with a multimillion dollar advertising campaign – they will only reinforce voters’ resentment and the resulting backlash will demonstrate just how unpopular the banks are.
Big business tax cuts may be ScoMo’s undoing
However, just as Tony Abbott’s deficit levy didn’t magically make the rest of the 2014 budget fair, the banks levy can’t do the same for this year’s budget.
The decision to double down on promised tax cuts for the big end of town will be an albatross that PM Turnbull carries to the next election.
This is even more the case now that low-income taxpayers will be required to pay the Medicare levy increase for the NDIS and the total 10-year bill for business tax cuts has blown out to $65 billion. This weakness could have so easily been avoided.
The government could have set aside the big business tax cuts until the budget was in surplus (until we can afford it), or the average net tax raised from big corporates exceeded a certain threshold (until they are paying their fair share of tax).
For a budget that was so smart on politics, the decision to keep the tax cut for big business was dumb.
Leaving it on the books simply gives Labor a free kick. No wonder it was the main feature of Opposition leader Bill Shorten’s budget in reply address.
If voters conclude the Turnbull government is no better than the banks in wanting to rip them off, it will be the PM and the Treasurer being dragged to the stocks and the pyre at the next election.