The ‘Alice in Wonderland’ budget

Today’s budget will not be a typical big-spend budget. AAP

Softening up voters for harsh measures, Julia Gillard observed a fortnight ago that “Tuesday 14 May will be no old-fashioned pre-election budget night”. The budget would not be a “political pamphlet” but an “economic program,” she said.

She might have added: It will be a budget that breaks promises and raises taxes. It will have deficits when its centrepiece was meant to be the first surplus in years.

Presumably, there will be some (fresh) attractive good news, kept for the night. But if there is, it is hard to see how that can offset the bad.

In political terms, the conventional budget cycle usually works on a certain pattern. Do the really tough things in the first year after the poll. Consolidate in the second budget. Strut your stuff to the voters in the pre-election one.

John Howard, his back to the wall in 2001, started an electoral revival with a budget appealing to older voters. In 2007 he spent (and promised in the campaign) like a fiscal mad man - but to no avail. Indeed, Kevin Rudd made a virtue of restraint with his line that “this sort of reckless spending must stop”.

It is possible to turn restraint into a positive strategy. Throwing round a lot of money is not necessarily a political winner. But other things have to be going in the right direction to make a virtue of straitened times. Rudd, who was talking from opposition, was already headed to victory. On the evidence, Gillard is headed out the back door.

Also, while people might accept that some pain is needed for the country’s good, when they are hit individually, it’s different. Many who support higher tax to part-fund the NDIS will complain about actually paying it.

In a sense, this is the Alice in Wonderland budget. It is being framed and discussed as a fiscal blueprint for the next financial year, but with most people on both sides of politics assuming that much of it will be unpicked by a new government.

The challenge for Treasurer Wayne Swan is to have tonight’s document judged credible. That means the assumptions about revenue (and other parameters) must look reasonable - when Treasury has a very poor recent record.

It means the path he is promising back to surplus has to be more convincing than last year’s road - which ended abruptly in a dead end.

And it means the cuts in total, including presumably some still to be unveiled, need to be enough to show the government is fair dinkum about belt tightening - while it says it won’t sacrifice jobs.

It is vital for the budget to be believable, even though it almost certainly won’t have to be believed for very long.

The government has followed the not-unusual practice of getting out bad news early. But this year there is so much of it, involving such big numbers and so many broken commitments. The family tax benefit rise due on July 1 won’t be delivered; the 2015 tax cuts are gone; the Medicare levy will increase to help pay for the disability scheme. All three involve big dollars and breach undertakings. As does another delay in meeting the foreign aid target.

The government finds it harder and harder to get out key positive and reasonable messages. These are that the economy is strong and that its reform initiatives, especially the disability scheme and Gonski, are potentially big changes with important benefits.

Tempers are fraying. After Business Council of Australia president Tony Shepherd was quoted saying there was alarm that “the reform agenda has just died”, Climate Change minister Greg Combet yesterday lashed out: “What’s his vision again?” The point is less who’s right or wrong than that the relationship with business has frayed beyond repair. Business is basically just sitting the government out.

One had to feel a little sorry for Wayne Swan, flayed and ridiculed by Laurie Oakes in his pre-budget interview. Trying to defend himself over his non-existent surplus, Swan said “I’ll take my medicine; I’ll accept the politics of this are very uncomfortable”. A lot more than that, probably.

In the unreal mood of the times, budget eve was full of play acting. The cameras were invited into the cabinet room to hear Gillard say the budget would be putting jobs and growth first, and Swan assure colleagues that it would chart a course back to surplus. Reality for the government is dire, but they continue to attend carefully to the visual spin.

Over in the opposition party room, Tony Abbott was releasing “The Little Book of Big Labor Waste”, replete with shock-horror newspaper stories. Reality for the opposition appears to be all on the upside, but it is still thought important for the leader to be pictured clutching what looks like a brightly-coloured kid’s book.

And, by the way, Abbott confirmed in answer to questioning that yes, he did intend to move, before too long, that no confidence motion he foreshadowed a few weeks ago.

No confidence motions go to a government’s life or death. If one is passed a government falls. But no one is taking this one too seriously, not even the opposition. It’s more part of the psychological warfare than based on an expectation that Labor, now on the cusp of the election, will be swept away prematurely.

The opposition has its lines written before it opens the budget today. Whatever the figures, it will declare them wrong. Not that Abbott doesn’t have a few problems of his own. Some of the colleagues are still trying to tear away at his paid parental leave scheme. He won’t abandon it but could it be trimmed, or delayed?

The critics will have noted yesterday’s Essential Research poll, showing 34% prefer the government’s less generous scheme (already operating) to 24% who back Abbott’s plan.

At the end of his news conference yesterday Tony Abbott stood close to Joe Hockey and declared: “We are absolutely on the same page here. The number one priority for an incoming Coalition government has got to be to restore the nation’s finances.”

On all the probabilities the next budget will the first of a new Coalition government. Expect it to follow the old cyclical orthodoxy. It would be very amazing if there were not lots of nasties.

Photo: AAP/Alan Porritt