Forget all the disclaimers that Scott Morrison’s third budget, to be delivered on Tuesday night, is not the last before the next election.
The Treasurer is on a seek and destroy mission. He is seeking to repair the government’s standing with its base, particularly older Australians, and to destroy Labor’s seemingly entrenched standing with a majority of voters.
The giveaway clue that the government has an election top of mind is the Finance Minister Mathias Cormann hitting the “risk” scare every time he does a pre-budget interview: “This is not the time to go back to Labor.”
In economic terms the government has got lucky. Over the past four months the revenue drought since the global financial crisis and the end of the mining investment boom has broken.
The “humungous” lift in the tax take, as described by one leading economist, has landed an unforeseen $57.5 billion in the coffers.
Already we know about the $24 billion to be spent on “congestion-busting” infrastructure. These projects, however, are long term, and the eye-glazing numbers tend to get lost in the hubbub to really impress voters.
It will be fascinating to see how the Treasurer disguises his “cash splash” in the name of fiscal rectitude.
The ground has been laid for tax cuts going all the way to the highest income earners but over a decade – purposefully timed to coincide when the banks and major corporations get their prize.
The “targeted tax relief” for low- and middle-income earners looks to be delivered by the low income tax offset. That’s worth $445 and tapers out at $66,667. Mr Morrison is likely to raise it to $1000 and extend it to incomes up to $100,000.
Certainly not “mammoth” but better than nothing. If it is timed to come in on July 1 the PM would want to pull the election trigger soon after.
Former treasurer Paul Keating used to complain voters only notice it in their first pay packet and their gratitude is limited by the view they were entitled to more.
The government is banking on voters noticing that it is not only the major corporations set for tax relief. Labor counters that by its rejection of these company cuts it will have $80 billion to spend not only on personal income tax cuts but on everything else. In a pre-election auction this could be critical.
Shadow Treasurer Chris Bowen draws the battlelines this way: “We actually can have budget repair and a return to surplus and engage in tax reform which benefits low- and middle-income earners as well.”
Labor feared Mr Morrison would ditch the corporate tax cuts like he will the Medicare income tax hike. But Senator Cormann still hopes to win over the two Senate votes needed to pass them, otherwise they will be taken to the election.
Two years ago Mr Morrison derided “10-year plans” for pushing off into the never never what can’t be afforded now. The Keating government’s L-A-W tax cuts that didn’t survive an election Labor actually won is a cautionary tale here.
And Tony Abbott has chimed in with the observation his government was the last one to take debt and deficit seriously. There are strong hints the budget will be back in balance a year earlier than predicted if not in small surplus. Bur not enough to arrest the debt continuing to record levels.
Just how the Treasurer will do it all is the big question. Presuming this year’s revenue surge is now a permanent feature simply won’t cut it. We’ve seen this magic pudding before.
Coming up with a credible path will be no mean feat.
Watch your inbox for The New Daily‘s special coverage of the federal budget on Tuesday evening and Wednesday morning.