A big reason Joe Hockey isn't getting much support from independent
observers like me in his battle to get the budget through the Senate is
that so few of his contentious measures are worth fighting for.
If he
were facing opposition from vested interests struggling to protect their
privilege, or even just unthinking populism from the punters, it would
be a different matter.
For a bit I thought I'd be in the trenches
with him defending a plan to impose a temporary deficit levy on
individuals with incomes above $80,000 a year but, as we now know, his
boss insisted on lifting the threshold to a far-less-contentious
$180,000 a year.
What would have made the lower threshold
defensible is the inconvenient truth that so much of our present
distance from budget surplus is explained by the folly of eight tax cuts
in a row, the savings from which were skewed in favour of higher
income-earners. This would have clawed back a bit of it.
It's
remarkable anyone could put together a budget at once so unpopular and
so lacking in Paul Keating's "quality cuts". Who did Hockey imagine
would join him at the barricades apart from the mindlessly partisan
commentators? (Even they haven't been particularly vociferous - although
the government hasn't raised much of a banner to rally behind.)
In
my initial assessment I said "I give Joe Hockey's first budgetary exam a
distinction on management of the macro economy, a credit on
micro-economic reform and a fail on fairness".
Nothing wrong with
the F, and the D on macro management has stood up well. The decision to
announce a lot of measures that didn't take much effect until the last
year of the forward estimates, 2017-18, was a clever combination of
macro-economic good sense - nothing to gain by hitting demand while it
was expected to be weak - and political necessity.
By delaying
the start of so many measures until after the next election Hockey was
able to claim the budget didn't really break all the election promises
Tony Abbott made when pushing his contention that a "budget emergency"
could be fixed without pain.
It's not part of my religion to
insist politicians keep irresponsible promises they should never have
made. But that's not to say such blatant promise-breaking carries no
political price. After all the fuss Abbott made about "Ju-liar" Gillard
and his pretence about restoring trust in politicians, my guess is the
price his government is paying is high. The pity is he could have won
comfortably without such dishonesty.
On closer inspection, my C
for micro reform was badly astray. Should have been an M for missed
opportunity. There was a lot of cost shifting, but precious little that
could be claimed to increase the efficiency with which the government
delivers its many high-cost services or to reduce rent-seeking by
private industries.
The greatest disappointment was that, after
making a good start in eliminating handouts to the car makers and
refusing to bail out fruit canners, Hockey dropped the ball on business
welfare, thus leaving all his talk of ending "the age of entitlement"
looking like nothing more than a shameful attack on the poor and
disadvantaged.
One honourable exception was the decision to remove
the always-indefensible subsidy to locally produced ethanol. Another
was the plan to resume indexing the fuel excise.
Removing the
carbon price involved allowing fossil-fuel industries to continue
imposing external costs on the rest of the community and the intention
to abolish the mining tax involves allowing much receipt of economic
rent by foreigners to go grossly under-taxed. That's efficient?
Add
to that the failure to remove the fuel excise credit, which constitutes
a favour to miners and farmers but no one else, and you have to ask
what hold the big three mining companies have over this government.
Similarly,
take the cutting back on the age pension while doing nothing whatsoever
to curb the excesses of the concessional tax treatment of
superannuation, combine it with watering down the Future of Financial
Advice Act despite the presence of gross information asymmetry, and you
have to ask what hold the big four banks have over this government.
On
its face, you could have expected the "deregulation" of university fees
to bring significant gains in efficiency - but only if your
understanding of economics had progressed no further than 101. To take a
relatively small number of government-owned and still highly regulated
agencies with a monopoly over credential-granting, allow them to set
their own fees and then imagine an adequately competitive "market" would
emerge isn't economics, it's magical thinking.
