After such a long period as a policy-free zone, the Coalition’s switch into full campaign mode is refreshing, and is producing news cycles full of useful stories and sensible debate. At last.
We’ve had the cheap-but-good-enough NBN policy, the nothing-to-see-here IR policy and Tony Abbott’s signature policy of putting motherhood at the centre of economic life via a generous paid-parental-leave scheme.
We’ve also had some pointers on how the Coalition would bring the budget back into balance – most notably by allowing public servant numbers to wither by natural attrition, pushing out the government’s share of superannuation increases by two years, making smallish cuts into middle-class welfare, and axing Labor’s green loans scheme.
Today Joe Hockey is expected to put more flesh on the bone (no pun intended for the increasingly svelte Treasury spokesman) regarding the Coalition’s reforms to the budget process.
Rather than stand before a bunch of Treasury wonks, bent forward like an angry football coach, and shout ‘LIARS! YOU'RE ALL COMMIE LIARS!’, Hockey is expected to promise to put firmer ‘structural’ fiscal data into every budget. That's a much more constructive approach, especially given Treasury Secretary Martin Parkinson's robust defense of his department's recent forecasting errors.
The structural position of the budget, had it been included in full detail before, would have shown that there was nothing disciplined about the profligate last few years of the Howard/Costello years, and that the intentional deficits of the Rudd years were actually more reckless than the headline figures would have suggested.
On Wayne Swan’s watch, the revenue collapse that caught everyone by surprise would have been more visible if all budgets back into the distant past had warned of the long-term structural position of the budget.
As Stephen Koukoulas sagely pointed out last week, the rhetoric of the Coalition in this election year – namely that it will do what it always does and cut spending to return the budget to surplus – overlooks that plain fact that Howard and Costello did not do that at all (BUDGET 2013: Seven-year deficit itch, May 14). Koukoulas notes that when Howard repaired the damage of the Keating recession: “A recovery in tax receipts, rather than spending cuts, drove the improvement in the budget bottom line.”
Moreover, economic history shows that the last government to substantially cut its way to a surplus was that of one Robert James Lee Hawke, beginning in 1983 – riding a wave of global sentiment emanating from the Thatcher and Reagan governments that saw fiscal restraint and the liberalisation of markets to be the way forward. And there was plenty to cut from the budget following the Fraser government’s ebullient Keynsian spending splurge – resisted, but not prevented by then treasurer John Howard.
The Hockey/Abbott gameplan is a mixture of these two approaches – sharp cuts in public spending in the Hawke mould, and, the Coalition hopes, a jump in tax receipts as business and consumer confidence rockets upwards for no other reason than Tony’s in charge.
The first half of that formula is within the Coalition’s control. The second half most assuredly is not.
The falling dollar, if it continues its journey south, will do more to boost confidence than anything else.
But that boost will be working against a resources-linked slowdown. Yesterday’s stark revision to guidance figures for contractor Transfield added to similar revisions at WorleyParsons and UGL in the past week. The ‘stronger for longer’ super-profits phase of mining boom is looking, well, prematurely flaccid.
There is little doubt that the long-term effects of a lower dollar will provide a filip to struggling sectors such as manufacturing, tourism, services and education exports. However, that all takes time, particularly when large tranches of sectors such as food processing, auto manufacturing, and footwear and textiles have been shut down, relocated abroad or mothballed.
Inclusion in every budget of data showing the true structural position of the nation’s finances is to be welcomed. However, given the uncertainty of the revenue side of the budget in the first couple of years of an Abbott government (should one be formed), we might end up in May 2014 looking at charts of a structural surpluses across the forward estimates, but actual large deficits in the budget bottom line.
Should all that come to pass, we might see future Labor leader Bill Shorten assuming the footy coach posture and shouting ‘LIFT YOUR GAME!’ at Mr Hockey.