BUDGET 2021: BIG DOLLARS, SMALL AMBITION
CANBERRA BUSINESS CHAMBER AND INSTITUTE OF PUBLIC ACCOUNTANTS BUDGET BREAKFAST
WEDNESDAY, 12 MAY 2021
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It’s a pleasure to be speaking again to you at today’s budget breakfast. This is the eighth Liberal budget I’ve discussed at this breakfast. They’ve been quite a rollercoaster.
In 2014, the Liberals were going to introduce a Medicare co-payment, change pension indexation from wages to prices, and cut the CSIRO.
In subsequent years, budgets from Treasurer Scott Morrison saw billions ripped out of the ABC, hospitals, schools and aged care.
Last year, the budget’s centrepiece was the JobMaker program. Forecast to create 450,000 jobs, it fell just short. 449,000 jobs short, to be precise.
As you know, the economy is performing better than expected.
But before you join the Treasurer in patting himself on the back, consider this thought experiment.
Suppose you didn’t know anything about the Australian economy, just how the world economy was performing.
In other advanced countries, unemployment is returning to pre-pandemic levels, growth is returning to trend, and house prices are soaring. No surprise – we’re seeing similar trends in Australia.
The iron ore price is over $200 a tonne – a lucky break for the lucky country, but not something for which we can take credit.
These changes – what the budget calls “parameter variations” have improved the budget bottom line by about $100 billion over four years.
You might expect that a Treasurer who speaks of his fondness for Margaret Thatcher would have put all this additional revenue towards budget repair.
This budget takes its lucky bounty, and spends it, leaving gross debt peaking at $1 trillion. That’s one with twelve zeros after it.
The party that produced Back in Black mugs never produced a budget surplus, and never will.
This is a budget that spends a lot, but doesn’t leave a lasting legacy.
It’s a spendathon to win the next election, not a reforming budget to create a better Australia.
At the end of World War II, the Curtin and Chifley Governments didn’t simply say “let’s restore the world of 1939”. Instead, they set about delivering full employment and boosting home ownership. And they delivered.
Likewise, we know that the economy of 2019 wasn’t delivering for many Australians. Startup rates were down, business investment was in the doldrums, home ownership was down, and wages were flatlining. A policy of “back to 2019” is a lousy deal for many Australian families.
Compare last night’s budget with the reform package just announced by Joe Biden. Investment in clean energy, research, early childhood and community colleges. There’s none of that ambition in Josh Frydenberg’s budget.
There’s an issue of twin deficits.
There’s a budget deficit - $106 billion, in case you’re counting.
But there’s also a credibility deficit.
We’re supposed to believe that the government that cut $1.7 billion from aged care – when Scott Morrison was Treasurer – will now fix the rampant problems in the sector. The aged care package falls well short of what the Royal Commission recommended. For example, the Royal Commission called for 24/7 registered nurse cover in nursing homes. The budget fails to deliver it.
We’re supposed to believe that the party that axed the Family Court will now address the crisis in family violence.
We’re supposed to believe that the party that failed to meet its own vaccination targets will finally get the jabs into Australian arms.
We’re supposed to believe that the party that won’t even commit to net zero emissions by 2050 can credibly tackle climate change.
We’re supposed to believe that the party that axed the Women’s Budget Statement in 2014 should be taken seriously when they finally restored it, seven years later.
We’re supposed to believe that the party that gave $15 to $20 billion of JobKeeper to firms with rising earnings will crack down on multinational tax avoidance.
We’re supposed to credit the government for cutting taxes on middle-income earners – when in fact they’re just putting off a tax hike by a year.
We’re supposed to believe that the party whose debt truck warned of a “$315 billion debt bombshell” deserves to be re-elected after delivering a trillion dollars in debt. Debt that’s been made worse by sports rorts, dodgy land deals, and excessive advertising. Note too that this budget contains an additional $4 billion across 21 slush funds.
The budget has more promises than an episode of The Bachelor. But if you want to know what it will deliver, don’t look at the promises, look at the hard economic numbers.
In last year’s budget, vaccination was going to be “done” in 2021. Now they say a “program is likely to be in place” by the end of this year.
Whatever that means.
After inflation, wages will be lower in two years’ time than they are today. The budget predicts that real wages for the typical worker will fall by $200 in the coming financial year.
Business investment will be lower – despite billions in investment incentives.
Migration and tourism won’t return to normal until 2023, with migration forecasts for the coming financial year significantly downgraded. More crawl-back than snapback.
And then there’s the risks that the budget ignores.
Conflict with our biggest trading partner – with the government recklessly fanning the flames.
Exports to Europe hit by carbon tariffs due to our failure to address climate change.
New strains of COVID sweeping through the country if the vaccination program is inadequate.
Diminished productivity as a result of permanent damage to the research and training capacity of our universities.
I’m a congenital optimist, so I want to finish on a positive note.
- I like the decision to scrap the $450 per month threshold for superannuation contributions.
- I like the decision to permanently fund 15 hours of preschool for the year before school.
- I like the decision to scrap the public service staffing cap.
Labor took these policies to the last election, and we’ll be pleased to support them in this budget.
This month is Labor’s 120th birthday. Over our 12 decades, we created the pension, universal superannuation, and the National Disability Insurance Scheme. We made the tough decisions to introduce Capital Gains Tax and Fringe Benefits Tax. We created the APEC leaders’ meetings, brought Australia through the Global Financial Crisis without a recession, and built Medicare.
Australia faces major challenges. Inequality. Productivity. Civic disconnectedness. Declining test scores. Climate change. But despite the massive price tag on this budget, it makes minimal progress on addressing these problems. Australia deserves better.