Menu Close

Grattan on Friday: Will the budget be seen as a bold blueprint or a bad case of overreach?

Prime Minister Tony Abbott is sturdy in his resolve to break the no tax promise in order to fix the budget. AAP/Lukas Coch

Now we learn that Tony Abbott’s pledge not to raise taxes will be broken on a second front. Tuesday’s budget will bring back the indexation of petrol excise.

The measure won’t yield much revenue in its early stage but it builds up. It’s a sound enough policy. But another breach of faith. Just in case the tax rise for high income earners hasn’t outraged enough people about broken promises.

Bringing back the indexation reverses a decision a desperate John Howard took in 2001, because he was staring at the prospect of defeat later that year.

More generally, much of Tuesday’s budget will be walking backwards from the Howard approach, when booming revenue allowed the then PM to hand out largesse now condemned by Treasurer Joe Hockey as part of the “age of entitlement” that must end.

Peter Costello’s first budget in 1996 was tough, and even broke a tax promise by imposing the superannuation surcharge on high income earners (which Costello now says he regrets as a bad decision).

But Howard liked having open purse strings as time went on and the coffers swelled. The funds could be used for electoral bribes or to ward off political problems. Howard’s argument was that it was the people’s money. Costello was frustrated. The approach was symbolised by Howard’s big spending 2007 campaign, with its over-generous tax cuts – that Labor mostly delivered.

Hockey is back with the 1996 model, determined to be as fiscally pure as possible, with current budget circumstances a straitjacket.

It had been thought Abbott might be more wobbly, especially with that weight of promises. Seemingly not. Who knows if he’ll show Howard tendencies further on? But opportunities will be limited.

Senior ministers are unrelenting in their argument that Labor has left them a fiscal time bomb - in particular in the years just beyond its last forward estimates - which will ruin the country if not defused.

As the government heaps blame on the ALP Wayne Swan, who delivered all the Rudd-Gillard budgets (but not its last gloomy economic update) has fought back. In a strongly-worded address on Thursday, Swan declared Labor had left the budget “in sound shape” and had always “faced up to the challenge of finding large savings”.

“Australia’s public finances are amongst the healthiest in the developed world, envied by most of our competitors,” he said, accusing the Abbott government of demonising Labor’s record by fiddling forecasts and manufacturing a sense of crisis. But Swan knows if Labor had survived it would be making fresh cuts.

The government is piling a huge amount into this budget. It doesn’t seem to be exaggerating the nastiness so it looks better on the night. Pain will be good so long as it is fairly shared, it’s telling us - one reason it was so insistent on the tax levy.

Much of the budget is about long term measures. But laying it all out now does probably mean the government needn’t revisit the savings issue (apart from routine housekeeping) later in the term. The short three year cycle lends itself to softer budgets as time goes on so you don’t want to be forced to have to find new big cuts as the election draws near.

There is an air of zealotry. Hockey has long been on his mission against the age of entitlement. But the government displays its own sense of entitlement, claiming the right to do whatever it believes is needed to save the budget, twisting the past to suit the present. Despite Abbott’s repeated commitments, Hockey told the Australian Financial Review this week, “We went to the last election promising to introduce a levy for PPL [paid parental leave] so claims that we said we would never introduce new taxes are just wrong.”

Now the die is cast – the budget goes to the printers at the weekend but the decisions are made – the question is whether it will be seen as a bold blueprint or a bad case of overreach.

Ahead of delivery it is being attacked from all sides, including by business and some fearful backbenchers. A survey of company directors out this week showed wider disillusionment with the government in business circles.

As Sean Kelly, press secretary to Rudd and Gillard, wrote this week, a government’s first budget is “not only about the budget, but about the image the government has of itself, that it hopes others will adopt. It is not just about the short term, in other words, but about the longer run hope that with this event the government will convince an uncertain nation that they are up to the job.”

The latest Newspoll, showing a 5-point slump in the Coalition’s primary vote to 38% and Labor leading 53-47% on a two party basis, was a sharp remainder to the government that voters are sceptical of any claim to political entitlement. It’s there because they thought Labor had to go.

If the budget fails to convince people the government is on the right track, but instead deepens the public’s alienation, that will frighten the backbench and encourage a bolshie Senate, turning the next few months into a political nightmare for Abbott.

Listen to the latest Politics with Michelle Grattan podcast with guest, Chris Richardson, here.

Want to write?

Write an article and join a growing community of more than 125,100 academics and researchers from 3,982 institutions.

Register now