That the Morrison government will come out spending with its election budget on April 2 is a given.
What’s less clear is whether that spending will be aimed at trying to actually win the election, or to just look after the Liberal base on the way out the door.
Deloitte Access Economics’ Chris Richardson has belled the programmed Morrison tax cat – it’s a mangy critter incapable of catching mice, let alone the majority of voters.
There’s plenty of speculation that Treasurer Josh Frydenberg’s budget will bring forward the second stage of income tax cuts PM Scott Morrison announced as treasurer last year, from 2022 to 2019.
Mr Richardson says that would cost the budget between $8 billion and $9 billion a year, but: “Bringing forward the second stage of the tax cuts, and nothing more, would provide most taxpayers with an early tax cut of just 20 cents a week”.
That should be no surprise to The New Daily readers. We were first to call out those “middle Australia” tax cuts as a con that did little for average earners, while radically flattening the tax scale to benefit the top tier.
Which is where the intent, political judgement and perhaps desperation of the Coalition will be put to the test. It also could be where the result of next weekend’s NSW state election could have disproportionate bearing.
For all the usual talk of state elections being about state issues, the federal government was rocked by the extent of the Coalition’s losses in the Victorian election in November.
Should NSW Premier Gladys Berejiklian lose on Saturday, despite NSW’s strong economy, what’s left of federal Liberal discipline would disintegrate.
In that scenario, we could have a different sort of budget than one aimed at buying votes. It could become a matter of trying to lock in the big cuts for those at the top – the $7225 reduction for someone on $200,000 a year that’s presently scheduled to happen in 2024-25.
The government has already earmarked $3 billion that we know about for unannounced election goodies.
As AMP chief economist Shane Oliver explains: “The federal government’s Mid-Year Economic and Fiscal Outlook set aside around $3 billion a year in revenue ‘decisions taken but not yet announced’ starting from next financial year, and this presumably refers to tax cuts.
“On top of this, budget data up to January shows this year’s budget tracking around $3 billion a year better than MYEFO projected and the rise in the iron ore price is likely to have added to this although it may be partly offset by a downgrade to economic growth, employment and wages assumptions for 2019-20.
“Overall, though, it looks like there is scope for around $6 billion in extra fiscal stimulus in 2019-20 that would basically leave the budget projections into a surplus unchanged.”
It’s a question then of where that $6 billion might be most productively – or politically – spent.
My suspicion is that Frydenberg/Morrison will go for increased spending on infrastructure as well as income tax cuts. Contrary to the government advertising campaign, the Morrison budgets have actually reduced federal spending on transport infrastructure.
And the good thing about the trick the government uses for talking about infrastructure investment, is that it provides big numbers to flash around out into the distance without actually meaning much.
The immediate problem economic problem for Australia is our low wages growth. After half a dozen years of real take-home wages going backwards, it’s little wonder the consumer is battening down.
Prime Minister Morrison has been clear that he prefers tax cuts to wage rises in the year ahead – but bringing forward the announced cuts will do nothing for the spending power of most voters and represent another damaging homage to “trickle down” economics.