Don't be too alarmed by the startling proposals by the National
Commission of Audit. Few of its recommendations will make it into the
budget on Tuesday week. They were never intended to.
Ostensibly, the
commission wants to reverse the tide of a century of federal-state
relations, crack down on the age
pension while leaving superannuation tax concessions unscathed, reduce
Medicare to something mainly for the poor, hit middle-income families
and make the treatment of welfare recipients much harsher.
Don't
believe it. Truth is, almost all incoming Coalition governments have
commissioned commissions of audit since Nick Greiner used the tactic in
1988. What all the federal and state audit reports since then have in
common is that only a handful of their recommendations are ever acted
on.
That's not their purpose. Rather, it's to claim that the
previous, Labor government left the books in a terrible mess, thereby
justifying an initial, horror budget - all Labor's fault - and the
breaking of any election promises now found to be inconvenient.
In
this case, the audit report is softening us up for the budget by
raising the spectre of a much tougher budget than we're likely to get.
It's Joe Hockey getting ready to leave unsaid: See, I let you off
lightly.
Audit reports are never put into practice because they
are commissioned from worthies who make radical proposals no politician
hoping for re-election would ever implement. The cuts we do see in the
budget will have been worked up by the professionals: Treasury and
Finance.
This report's proposals go so far over the top - are so
impolitic, impractical and improbable - that today is the last you will
hear of most of its 86 recommendations.
What distinguishes this
report from its predecessors is the blatancy of its commissioning. It
comes from an "independent" inquiry effectively handed over to just one
business lobby group, the one composed of the most highly paid chief
executives in the country, the (big) Business Council.
Not
surprisingly, the commission found ways to solve our budget problem at
the expense of almost everyone bar the top "1 per cent" whose interests
the council represents. Speaking as a near one percenter myself, there's
little in its 86 recommendations that would make a dent on my pocket.
There's
little in the report's analysis of the budget problem that is new. Not
to anyone who had bothered to read Hockey's midyear budget review in
December, Treasury's budget review published early in last year's
election campaign or any of Treasury's three intergenerational reports.
Don't
be in any doubt: we do face a genuine and worrying problem with the
budget which, without unpopular measures, will remain in annual deficit
for years to come and rack up an excessive level of public debt. It's
not a problem yet, but it will become one and the best time to start
making tough decisions is now.
What's new - and dishonest - is its
claim that the problem is all on the spending side of the budget, whose
projected growth is "unsustainable". Its solution is to slash spending
that supports the living standards of low- and middle-income earners,
while arguing that asking high-income earners to chip in by paying
higher taxes is unthinkable.
It exaggerates the projected rapid
growth in government spending by focusing on the 15 biggest spending
programs, which happen to be the fastest growing, while ignoring the
many other programs, expected to grow much more slowly.
It turns
out total spending is projected to grow at the rate of 5.3 per cent a
year, while the economy grows at 5.1 per cent. That says there's no big
problem on the spending side.
In fact, the commission exaggerates
the size of the problem by adopting the arbitrary assumption that the
growth in tax collections is capped at 24 per cent of gross domestic
product. It justifies this by claiming the cap is needed to avoid the
evil of bracket creep, conveniently ignoring the scope for covering the
cost of limiting bracket creep by cutting the many tax breaks enjoyed by
the big end of town.
But none of this fiscal prestidigitation
says the budget will be a cakewalk. It will be the toughest budget since
the Howard government's post-election budget in 1996. Its bark,
however, will be worse than its bite.
A lot of its toughest
measures won't take effect until after the next election. And some of
its most unpopular measures are unlikely to make it past a hostile
Senate.
