A few days after the “budget to beat all budgets” was announced, what is most noticeable is not the expected magnitude of spending, deficit and debt, but the consensus among commentators, analysts and economists. “Underwhelming”, “opportunity missed” and “hope and a prayer” have been the descriptions most used.
The Government plans to spend $127.8 billion more than last financial year, while receiving income of $5.6 billion less, for a deficit for the year of $213.7 billion to be added to the national debt burden. According to treasury estimates by the end of FY 2023-24 Australia’s net (Federal Government) debt is expected to nudge just shy of $1 trillion ($966 billion).
Big, scary numbers. So scary that even the masters of spin cannot quite conceal the horror.
If Messrs Morrison, Frydenberg and (soon to retire) Cormann were hoping for a pat on the back they would have been disappointed. Beyond the bastion of Coalition sycophants at Sky News, the reactions range from lukewarm to highly critical. The Australian and the Financial Review have been less than enthusiastic, and even The Spectator decries “too much spending, too little reform”.
It is definitely a budget for business, with a headline initiative allowing companies (with revenue of less than $5 billion) to deduct the full value of depreciable assets at the time of purchase instead of over time. The Government’s hope is that it will turbocharge business investment.
As the Sydney Morning Herald’s David Crowe quipped: “It is the kind of tax incentive that sells a lot of utes.”
And while it is headlined as a $27.8 billion incentive, buried in the details is the fact that it will increase tax revenue in subsequent years and the net effect over five years is a mere $3.2 billion.
As Michael Pascoe points out in his acerbic desecration of the budget (“Josh Frydenberg’s whirling dervish budget”), of the 41 federal budgets he has covered, “none has come anywhere near the spin and marketing BS…”.
Although not an actual budget item, the $4.5 billion additional investment by the NBN announced two weeks ago is being thrown into the bag of goodies again – under the evocative heading of “A Digital Australia” – without mentioning the bad decisions of years past that cost $14.5 billion more than budget and necessitated the additional spend.
And of course there had to be another program with a catchy slogan. JobMaker is designed to bring more young people to work by subsidising businesses who employ people under 35. The Government claims it will “support around 450,000 positions for young people”. As many commentators have said, it may serve to serve to further increase the casualisation of the workforce; as well as literally enable ageism by favouring casual young workers over older permanent hires.
Under the heading of “Lower taxes for hard-working Australians”, the budget is delivering (or more precisely, bringing forward) $17.8 billion in personal income tax relief already planned. For low income earners some of that relief will only come as a rebate on next year’s tax return.
Economists generally agree that the effect of tax cuts are uncertain at the best of times, which these are not. And for the many without income, tax cuts have no effect whatsoever. For higher income earners tax cuts may well go to savings instead of spending.
The broad consensus is the lack of direct support for those most in immediate need as the pandemic continues to wreak havoc. Tax cuts and JobMaker may work, but why phase out JobKeeper, which has been an immediate and largely effective way of supporting existing jobs?
The past seven months have uncovered systemic problems with our health sector, and in particular aged care. The budget offers no new solutions or initiatives to tackle those issues. This is just one of the myriad (job creating) opportunities lost.
Universities have lost billions of dollars in revenue from disappearing international students. We already know the pandemic has and will accelerate changes in how people work, and what new skills will be required in the future. Yet education spending is almost $8 billion less than last year!
The $10 billion in extra infrastructure spending is welcome. But the absence of any substantial initiatives to accelerate investments in renewable energy and combating climate change in general, while not surprising, is still distressing.
The almost universal view of this year’s federal budget is that it is devoid of new ideas, bereft of vision, without contingencies and based on spurious assumptions. All budgets are based on a forecast of what the future will bring, and the Government appears to have put all its eggs in the vaccine basket, hoping that one will emerge before the end of 2021.
What if it doesn’t?