Finance Federal Budget Federal budget 2022: Little substance beyond vote-buying sugar hits

Federal budget 2022: Little substance beyond vote-buying sugar hits

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The received wisdom before Tuesday’s budget was that Josh Frydenberg would be forced to perform the ultimate pre-election high wire stunt with fatal political consequences if he overbalanced.

In fact, the Treasurer’s problem was that he was handed one of the rarest interventions in political life, an unexpected gift arriving on the eve of what seems like an inevitable election loss.

An extra $38 billion in revenue ($115 billion over the life of the next Parliament) appeared at a most propitious time for Mr Frydenberg, courtesy of the confluence of rising commodity prices and a higher tax take from the booming jobs market.

But the problem for the Treasurer and his party was a condition known as choice paralysis, or not having any idea what to do.

Framed intelligently and directed to a worthy cause, the windfall could have reset the election debate.

Instead, the Coalition managed to turn their good fortune into what became the ultimate self-defeating budget program.

“My major criticism is that it’s not setting us up for the long term,” Grattan Institute CEO Danielle Wood remarked to the ABC.

A rod for his own back

It was the Treasurer who framed the budget as a competition between political and economic priorities. He need not have.

But after Mr Frydenberg did, journalists viewed his policy choices through that lens and his failure to achieve either was magnified.

From the lead-up to budget day, the government’s rhetoric was shot through with contradictions that undermined its overarching budget message and obscured other policies of merit.

The Treasurer could not help himself from waxing lyrical about the state of Australia’s economic recovery before speaking to the need to pump the country’s economy full of cash.

Pride in good work is one thing. But Mr Frydenberg’s colleagues say he was motivated by another factor, a consistent irritation for many Liberals: That the government does not get enough credit domestically for its management of the pandemic but is praised abroad.

Strong economy – but help needed?

Australian households are in rare financial health.

The Treasury tells us voters have at least 11 per cent more disposable cash than two years ago.

Businesses and households have added to the amount of cash they have on hand by more than $180 billion and $250 billion over the same period.

Can this be any wonder after a $314 billion stimulus package?

But after Mr Frydenberg had made this case for a resurgent Australian economy, one with an unemployment rate with a three in front of it, not seen in decades, he pivoted to the need to provide financial relief.

After such a good news story few could have been moved by Mr Frydenberg’s pitch to extend and expand what had meant to be a temporary tax rebate to now give workers earning up to $126,000 a year an increased payment of up to $1500.

Australia’s pensioners, by contrast, were offered a comparatively paltry $250.

The other concerning aspect of Mr Frydenberg’s cost-of-living plan is that it seems to have been chosen on the fly.

Opinion in the Liberal Party was strongly forming against junking the original low-to-middle-income tax offset in its fifth straight year; it was seen as a much less saleable cost-of-living measure than cutting the fuel excise.

On the morning of the budget some media outlets were already reporting that it had been junked.

For it to be not only retained but expanded by $420 gave the lie to the idea that the government was thinking about those who were doing it tough.

Adding fuel to the fire

It is unclear who might have been convinced by the message that such a policy would help the cost of living. With interest rate rises on the minds of central banks the world over, including Australia, a government pumping billions of dollars into the hands of people already in possession of disposable income is a serious potential inflation trigger.

But it was when Mr Frydenberg tried to frame his pre-election document as a piece of political philosophy that he so overreached.

This month the Treasurer said his budget would include only “targeted” measures and represented a shift to a new, post-pandemic fiscal strategy emphasising stability and restraint.

Plainly it did not. Some of the windfall went to lowering the deficit and confronting the nation’s net debt earlier.

It was very difficult to spot any difficult decisions in Tuesday’s budget.

Revenues went up along with economic activity and welfare outlays went down correspondingly.

Spending cuts of 5 per cent owed mostly to the expiration of COVID-19 programs.

Mr Frydenberg, or perhaps the simple passage of time, had cauterised pandemic spending.

But what else did he do?

No permanent fixes

Very little indeed on repairing the structural holes in our budget, which economists say will take decades and cuts worth tens of billions of dollars a year to fix.

In fact, after the easy decision to scotch pandemic stimulus, spending as a proportion of GDP will remain at 27.3 per cent.

This hardly leaves Australia in a strong position for another potential crisis.

It is also much worse than the 25 per cent managed by Labor under Kevin Rudd-Julia Gillard who mounted something of an extensive national stimulus program of their own.

Other conservative parties around the world have found new challenges to apply conservative philosophies to.

British Tories are enthusiastic boosters of renewable energy.

European Christian conservatives who only reluctantly made accommodations with the idea that mothers should work brought in some of the world’s earliest and most extensive childcare programs.

Tuesday’s budget had some laudable initiatives on workforce participation and training.

But they were not part of any coherent narrative from a government that now appears so badly worn down by political gravity.

Possible budget repair was frittered away for voter giveaways. And policies were close to non-existent on Australia’s big issues, such as the transition to electric vehicles or the ever-widening crisis in aged care.

Instead, we were reminded of the turn of the century when offering voters one-off cash handouts from the nation’s mineral wealth passed for public policy.