Tony Abbott has turned out to be a chameleon. Before the election, he
took the guise of a populist, opposed to all things nasty and in favour
of all things nice. Since the election, he's revealed himself to be a
hard-line ideologue, intent on reshaping government to suit the
interests of big business and high-income earners.
Before the
election, he was the consummate vote-seeking politician. Since the
election, he has transformed into an inflexible "conviction politician"
who doesn't seem much worried about whom he offends.
Dr Mike
Keating, former top econocrat, says the budget is always the clearest
guide to a government's priorities and values. That's certainly true
this time.
This budget scores high marks for its efforts to get
the budget back on track. As almost every economist will tell you, there
is no "budget emergency". But there would be problems if we allowed the
budget to stay in deficit for another 10 years, which was a prospect
had Abbott failed to take tough measures (all of which were in marked
contrast to his sweetness and light before the election and many of
which were in direct contradiction to his promises).
The budget's
great strength is its approach of announcing savings while delaying
their major effect until 2017-18, by which time it's hoped the economy
will be strong enough to cope with the reduced spending. That, plus
Treasurer Joe Hockey's efforts to increase spending on infrastructure in
the interim.
But the budget goes further than is needed to fix
the budget. It's our first genuine attempt to achieve (as opposed to
talk about) "smaller government". So as to minimise the need for future
tax increases, it puts government spending on a diet.
It does so partly
by increasing user charges (for GP visits and tests, pharmaceuticals and
university tuition), but mainly by changing the indexation of pensions
and government grants to the states for public schools and hospitals,
from indexes linked to the growth in wages to the main index linked to
consumer prices.
That's a saving of at least another 1 per cent a
year, cumulating every year forever (or at least until it's reversed as
politically and economically untenable).
By restricting his
savings to cuts in government spending and studiously avoiding all the
lurks hidden in the tax system, Abbott ensured the burden of his savings
is carried overwhelmingly by low and middle-income earners, leaving
high-income earners largely unscathed, save for a small temporary tax
levy. He also ignored almost all the government spending constituting
welfare for businesses.
You would have to be terribly trusting to believe all this happened by accident rather than design.
The
public's wholehearted disapproval of the budget makes it likely a lot
of its measures won't make it through the Senate. Abbott's opponents
will have a field day acting as our saviours.
No doubt much of
this disapproval arises from simple, short-sighted self-interest. After
all, Abbott spent the past four years fostering our selfish
incomprehension. People got it into their heads that their cost of
living was rising rapidly, causing their standard of living to slip. It
wasn't true, but Abbott reinforced rather than corrected the
misperception. (To be fair, the Labor government was no better.)
But I'd
like to believe there's more to our disapproval than simple
selfishness. John Howard says the public will accept a tough budget
provided people are satisfied it's reasonably fair and in the nation's
interests.
Trouble is, this budget is neither fair nor in the
nation's interest - unless you share the Business Council's certainty
that the world would be a much better place if only big business was
allowed to do whatever it pleased and executives paid minimal tax.
What
surprises me is how Abbott could change from being such a supremely
pragmatic, vote-obsessed pollie in opposition to being so willing to
alienate so many interest groups while in government.
I never
imagined I'd see the day when any government decided to take on perhaps
the most powerful voting bloc of them all, Grey Power. The fury of the
old will be even greater when they fully comprehend how the planned
change in pension indexation will lower their relative incomes.
Nor
did I ever expect to see any government declare war on virtually the
whole of the younger generation. The plan to deny education leavers the
dole for six months involves high social costs with little budgetary or
economic merit, but is the reappearance of one of Abbott's personal
bonnet-bees.
The plan to let universities charge what they please
for their courses and impose a real interest rate on students' HECS debt
will saddle our brightest and best with big debts, lingering for many
years. I've heard of worse injustices, but it seems a strange way to
endear yourself to those who represent the future Liberal heartland.
Abbott
is no doubt counting on there being a long time for voters to forgive
and forget before the next election in 2016. But despite its goal of
avoiding future tax rises, the budget's incorporation of a further two
years of bracket creep means it will push up the tax rates faced by a
lot of low to middle-income earners.
If I were Abbott, I wouldn't be counting on too much voter gratitude for fixing the budget.
