This is the budget of a government that wants to be loved by everyone
May 11, 2023
The best word for this budget is “complacent”. There’s nothing wrong with it; it’s keeping us from getting further into trouble. But it’s doing little to deal with the many troubles we already have: the transition to renewable energy, declining home ownership, the rental crisis, and problems with Medicare and education.
And that’s before you get to the budget. All those problems will take money to fix but, as Treasurer Jim Chalmers insists, there’s little to spare. This year’s expected budget surplus is a one-off, with the prospect of government spending growing a lot faster than tax collections over the coming decade. The inescapable answer is that we need to pay more tax to cover our growing demands on the government. What’s the government doing about it? Not much.
Rather, it’s insisting on pressing on with huge tax cuts in a year’s time, the lion’s share of which will go to high income-earners (like me) who’ve hardly felt the surging cost of living. This will take us in the wrong direction and help those who least need helping.
This is the budget of a government that wants to be loved by everyone – the workers, the retired, people with huge superannuation, small business, big business, multinational miners, American generals, everybody. So, it’s doing as little as it can to annoy anyone, hoping to stay popular and win another term in office in 2025. Then it will be free of its foolish promise not to increase taxes and can start thinking about working on a few problems.
Until then, it’s treading water. But it’s hard to believe a government that’s so anxious to avoid offending powerful interest groups in its first term will become a roaring lion in its second.
The budget’s changes to the special tax on offshore gas producers will raise $2.4 billion over four years. Really? That’s $600 million a year – chicken feed.
The producers’ mild reception to this impost tells you they were let off lightly.
Similarly, the decision to cut back the big tax concessions going to people with millions in superannuation was limited to those in the top 0.5 per cent. That’s going far too easy on the well-off.
Chalmers plans to spend a few billion on each of our big problem areas, but not enough to make much difference. The unemployed, living in poverty, are getting a princely pay rise of $3 a day, for instance.
It’s hard to believe a government that’s so anxious to avoid offending powerful interest groups in its first term will become a roaring lion in its second.
But don’t listen to smarty-pants economists telling you Chalmers’ modest bits of help with the cost of living will add to inflation. They’re sort of right, but using a microscope to find the problem.
Likewise, don’t get too excited by the news that, by early next year, wages will be rising faster than prices. It’s only a forecast, and the next wages forecast the authorities get right will be their first in a decade.
In any case, “bracket creep” means higher wages cause the income tax you pay to rise at a faster rate, leaving a smaller increase in take-home pay.
Chalmers isn’t admitting that, next financial year, the economy will grow because our population grows, not because we’re better off.
He says he “couldn’t do everything” because he had to produce a budget that is “responsible and sustainable”. This one is neither.
It’s unsustainable because the government can’t go on increasing spending on all the things we want from it, without raising the taxes to cover it. Especially when, as Chalmers never tires of pointing out, we already have great public debt and must limit how much we add to it.
It’s an irresponsible budget because, at a time when it should be increasing taxation, it’s about to have a big tax cut.
The promised stage-three tax cuts were born in irresponsibility and remain so. It was irresponsible in 2018 for Malcolm Turnbull to promise them, six years ahead of an unknowable future (including massive government spending on the pandemic).
It was irresponsible for Scott Morrison to put them into law, five years ahead of their delivery.
Labor said they were bad, but voted to enact them in 2019. It compounded its irresponsibility by promising at last year’s election not to rescind them.
But apparently, not keeping a promise irresponsibly made and irresponsibly delivered is unthinkable. Really?
To be fair to Chalmers, however, nor has he reversed the secret tax increase that the Coalition snuck through just before the election, when it decided to discontinue the low and middle income tax offset – known as the “lamington”.
Many of those people benefiting from the budget’s centrepiece, the cost-of-living relief package, will feel this increase in their taxes after next month, when they discover their annual tax refund is up to $1500 less than last year’s.
But not to worry. And hang in there. It will all be fixed after the next election.
Republished from The Sydney Morning Herald. May 9, 2023
Economics Editor, Sydney Morning Herald.
Contributions to Pearls and Irritations
Your contribution will fund quality independent comment and analysis in Pearls and Irritations
Contribute
