Scene: A villa on the Gold Coast.
Mathias Cormann: This is nice Joe, how did you find this place – on the beach, rolling surf, blue skies, leggy blondes on the sand…
Joe Hockey: Thank Tony. He’s a good mate of Clive Palmer – it’s his pad. He thought we needed some peace and quiet to work out how to find $70 billion in savings to pay for all the stuff Tony’s promised.
Andrew Robb: It’s better than the inside view in our Canberra offices and a lot warmer. But we might have to pull the blinds – it’s pretty distracting out there.
Mathias: Where’s Tony?
Joe: Tony’s not that interested in money matters – he finds economics boring, and frankly I’d prefer to keep my hand on the till – you know Tony! He wants us to get the ball rolling and he’ll come later to look over what we’ve come up with.
Andrew: So how much savings does he expect from us? It seems to get bigger all the time; he keeps coming up with his expensive ideas.
Joe: Let’s start with $70 billion – that’s big enough.
Mathias: But that figure was before he came up with his nanny scheme!
Joe: I know, I know, but that was just an idea he floated to appeal to the female of the species. You know, he has hasn’t got much of an image with them and he thought a nanny scheme might get him a few brownie points. All he’s said is that he’ll ask the Productivity Commission to look at it. He knows he can easily knock it on the head if he gets into government if the PC reckons it would be too expensive. He says his idea is all gain but no pain. It’s the female vote he’s after; don’t you worry about how to pay for it. That’ll be on the never-never!
Andrew: So we don’t have to work out how to pay for it. Good.
Joe: So let’s start.
Andrew: Before we do, let’s all agree on what we have to pay for and what money’s coming in.
Joe: Well for starters, if Tony’s determined to knock over the carbon tax, there’ll be no carbon tax revenue, or at least none once Tony kills the scheme. Swan will have it on his bottom line though from July 1. We can hardly include it in ours as Tony’s going to kill it.
Mathias: I know we’re looking ahead a bit, but how would he kill it? When he gets into power, he might get a repeal motion through the House, but the Greens in the Senate say there’s no way they will vote it down. So he may be stuck with it. If that’s the case, will he use the revenue from the tax to fund his promises?
Joe: I don’t know. To do so would look a bit hypocritical wouldn’t it? You’d have to ask him, but I guess if it’s money in the bank, he’d use it – he can’t give it back. I suppose he’s thought about that!
Andrew: What if he can’t kill the tax – the Greens will still have a majority won’t they?
Joe: Well he’ll threaten them with a double dissolution that would wipe them out – they’ll come to heel don’t you worry.
Mathias: Don’t be too sure! I’m in the Senate and I can tell you the Greens are pretty stubborn – I reckon calling their bluff won’t work, and what if the people don’t like having to go to another election so soon and end up voting against us? Pretty risky stuff I reckon.
Joe: Well, Tony’s crazy brave as you know. He could do anything.
Andrew: So do we or don’t we count carbon tax as revenue in our costings for the 2012/13 budget, and do we or don’t we use it each year after that until Tony kills it, that is if he can?
Joe: I hadn’t thought of that. Sounds messy, but better not to count it, otherwise the media that aren’t in our pocket would be all over it. Let’s get on with finding these savings.
Mathias: What about the minerals tax? Doesn’t the same problem arise? How can we count minerals tax revenue in our budget calculations when Tony’s promised to repeal the tax? Swan would tear us limb from limb if we counted taxes that we’ve vowed to knock off, and so would the economics writers. Imagine what Gittins would say.
Joe: OK, lets work out how we can pay for all our promises without any money coming from the carbon tax or the minerals tax.
Mathias: Jees that’s going to be hard! Can we jot down the things Tony says he going to knock off and what he reckons he’ll still keep after he kills the two taxes.
Andrew: Well he’s said he’ll keep the super increases – he reckons knocking that would land him in big trouble with workers. But it’s a bit vague what will happen to the reduction in company tax; Tony’s got his own ideas about giving them a tax break.
Mathias: What about the pension increases, upping the tax-free threshold, family compensation and other benefits? Tony says they will have to go because if there’s no carbon tax, there’s no need for compensation. So do we leave those payments out of our alternative budget?
Andrew: That all very fine for Tony to say, but try taking money off pensioners that they’re already getting – all hell would break loose.
Joe: I guess we’d just have to wear it – after all it would be our first term and the old folk would have forgotten that come the next election. I just hope Tony has got his lines worked out before the proverbial hits the fan when he abolishes their pension increases.
Andrew: OK. Let’s accept then that while Swan will count the tax revenues as income, we can’t in our shadow budget. Let’s get on with savings – we’ve got to find around $70 billion.
Joe: But let’s tot up Tony’s promises first. His PPL is pretty pricey; some reckon it will cost over $3 billion a year, but he wants it funded by a 1.5% increase in company tax on the nation's big firms, although we still have to find a top up of $100 million from the budget. So let’s put that in and hope that the company tax hike won’t cause us too much grief. And don’t forget he said he’d reduce personal taxes and pay for this by reducing debt and save $6 billion a year now going on interest payments. Or so he says. I wish he were here to spell all this out.
Andrew: What about his Direct Action Plan? That will cost a packet. Labor keeps saying it will cost each family $1300 a year and Tony doesn’t deny that. How will we get them to wear that? And where do we get the money for his 15,000 Green Army people that he reckons will cost $50,000 per person per year? That’s $750 million a year we have to find. And what about the millions of trees he’s going to plant, and the land to plant them? What will that cost? How much will the soil carbon plan cost? Has anyone costed the DAP fully? How much do we have to find?
Joe: As far as I can make out the Green Army will start at $100 million in 1012/13 and edge up to $250 million the next year as the Army grows, and so on. I don’t know if anyone has costed the trees and the land; I don’t know if there’s enough land for the millions of trees he has in mind, and by the way they won’t absorb much carbon before they’re 5 years in the ground anyway. Tony Windsor reckons there’s not enough arable land to plant the millions of trees, but our Tony says he’ll use semi-arable land. Anyway let’s not worry about the details; let’s just find the savings.
Andrew: Remember that Tony said he’d retain the super increases, and he’d give companies a modest company tax break – does anyone know how much is modest? How much will that cost?
Mathias: We’re spending a lot of time on the extra costs; let’s get on with the savings.
Andrew: But surely we need to know how much Tony has committed us to before finding the savings to fund it.
Joe: Well let’s look at the savings and add in other costs as we come to them. This is not easy guys – we don’t know exactly how much savings we have to find, but at least let’s take a jab at it.
Mathias: Tony says that one of his big savings will be made by cutting public servants by 12,000, but we don’t know if he’ll do this by natural attrition or slash and burn. He’s vowed to abolish the Department of Climate Change completely and he intends to target the Health Department, the Education Department and the Defence Materiel Organisation.
Andrew: How will he administer his DAP and his Green Army without a climate change department. Who will recruit these Army people, and place and pay them? How will he house them – housing is pretty short and expensive. Should we allow for dongas like they use on mining sites? I reckon he’ll need quite a lot of public servants to run this. So he might not save much upending the climate change mob.
Joe: Well I suppose we’ll have to cut health and education staff pretty savagely. He’s got this nice line that none of the Canberra bureaucracy teach kids or attend the sick, so why do we need so many? The voters swallow that hook, line and sinker, but really we do need some administrative types – but how many, and how can we cut them without messing too much with education and health delivery?
Andrew: I don’t know how many we can cut without leaving a mess, so I suggest we just pick a figure that will give us a good chunk of savings, and let the departments sort it out. Don’t forget, this is just a shadow budget, so we can cut as hard as we like without the consequences hitting us, can’t we?
Joe: That’s true – the consequences are on the never-never; we can always pull back once we’re in power, and no one will even remember how savage the cuts were.
Mathias: What about the NBN – we can save a packet there.
Andrew: Yes we can if we use a bit of sleight of hand. The problem is that the total cost of the NBN isn’t even on Swan’s bottom line – it’s an investment that he claims will yield around 7% some time in the future, God know when. But as we’ve trumpeted the huge cost of the project, we might be able to slip it in as a saving, or at least a saving on interest on money borrowed, and the punters will swallow it unless someone like Gittins blows the whistle.
Joe: OK, how much do we put in as NBN savings? We’ve not got too much on the slate yet, so let’s be generous!
Mathias: How much does Tony reckon he can save by ditching it?
Joe: He has no idea. He doesn’t even know if he can ditch it. If it’s about a third rolled out, and contracts galore have been signed, and Telstra’s threatening that it will insist on compensation if the transition from copper to fibre is halted and their payments with it, how can he jam on the brakes, and if he did, how much would he save? What’s more, there are a lot of farmers and business people, and teachers and doctors who are clamoring for fast broadband, who are going to be hopping mad if they miss out and have to wear our el cheapo version. The regions that miss out and are stuck with slow Internet will be ropeable. Frankly, I think the NBN will be pretty hard to torpedo and we won’t get any bouquets if he tries. The punters are not interested in us saving money if they get stuffed around in the process. Anyway that’s Tony’s problem – all we have to do is find some NBN savings – let’s make a stab at it.
Mathias: What other savings have we got – can we use some we came up with last year?
Joe: Of course we can. We got done over a bit, and when those HK Howarth accountants that did the job for us got pulled up and fined, it took Tony and I some fast talking to fend off the press. ‘We stand by our costings’ was about all we could say, but I think we got away with it. Most of the journos didn’t hammer us too hard – it’s easier when they are onside.
Mathias: Can I bring up another curly one – Nauru. Tony says he’s going to open it up again. Do we have to allow for that in our budget or can we shelve that until Tony’s at the wheel? Swan reckons reopening Nauru would cost over $300 million rebuilding for 750 detainees, and $1.6 billion operating costs over four years, but Tony’s quote from the catering firm he enlisted was much less. How do we deal with that?
Joe: I suggest we forget Nauru – it’s complicating things for us now, and we can work out how to fund it when Tony gets in.
Andrew: Guys, were not making much headway here. We’d better get this right or Tony will be livid. Let’s go through last year’s savings and see what we can salvage.
The trio work through the reams of paper that cover the coffee table and spill onto the floor, and after several hours of poring over estimates they decide enough is enough and retire for a long restaurant dinner, with good wine to ease the pain of finding $70 billion of savings.
Next morning, after a hearty breakfast, they are surprised to find Tony Abbott at the door.
Tony: How’s it going fellas – are we there yet?
Joe: Well not quite Tony, this is tough going. $70 billion is a helluva lot of money. And what’s more we’re stuck with a lot of queries about what you’re going to do.
Andrew: We’ve put in $100 million a year for your PPL after the big companies have coughed up the tax, sorry levy, you’re laying on them. Is that enough?
Tony: I wouldn’t know – I’m not an accountant. If it sounds reasonable to you, that’ll do. Let’s not make it any higher though – it’s my signature policy so it’s going to happen, but I don’t want it to cost an arm and a leg.
Mathias: We wondered about how much we should allow for Nauru. Are your costings kosher? Maybe you don’t want to include Nauru on the expenditure side until you get your hands on the wheel, or should I say joy stick, as you’ll be flying high.
Andrew: Very funny Mathias. Let’s be serious here.
Tony: I reckon we can defer Nauru for a bit; if we dragooned the Government to refurbish it, that would let us off the hook.
Mathias: But wouldn’t you have to agree to the Malaysia agreement before they did that.
Tony: Don’t you worry about that! I have ideas about that, but only after we’ve milked the asylum seeker saga for as much as we can.
Mathias: What about the NBN Tony. How much do you reckon we can put in for savings?
Tony: Look, I’m not an economist, otherwise I’d have been here sweating it out with you. So don’t ask me. If I had a stab, I would do what we did last year and hope we could get away with it again.
Mathias: Sorry Tony to bring up all these problems, but what happens if you can’t quickly kill the carbon tax or the minerals tax, what if the pension increases and other goodies are so much a part of people’s income that taking them away would be political suicide?
Tony: Don’t you worry about that! The name of the game is to Softly, Softly Catchee Monkey, or if I can put it another way - don’t frighten the horses before the elections with too many policies or nasties. Be vague, get elected and then we can do what we like. We can always blame Labor for leaving the budget in an awful state – that always works, for a year or so anyway. The punters will have to wear whatever we do, and by the time we get to the next election, they will have forgotten any pain we laid on them, and we then soften them up with some nice juicy John Howard handouts, and they’ll eat out of our hands, just like they did with Johnny. One step at a time!
And as for our budget, it doesn’t have to be perfect, or even plausible; so long as we can talk our way through any bumps in it, we’ll be OK. We can rely on Murdoch’s mob not to be too tough on us; we certainly won’t see nasty headlines in the tabloids. And if we get a few nasty reviews in the broadsheets, who reads them anyway – only the latte-sipping, sandal-wearing lefty intellectuals!
Joe: Well, I wonder how worthwhile it is sweating over our shadow budget all this time, if it doesn’t matter how legitimate it is. We might as well have stayed home, or just relaxed and enjoyed the scene outside, which I must say is pretty attractive. Finding savings is such a messy business, too many twists and turns for me!
Tony: Joe, you should know by now that it’s not what you come up with that’s important, it’s that you look as if you’re taking the budget seriously. I’ll make sure your meeting here and all your sweat gets lots of good press. Leave the outcome to me; Peta and I have great ideas on how to sell our budget, warts and all. We’ve got a tame firm of accountants to give it a tick, and we’ve even got a couple of tame journos ready to give it a leg up. So don’t you worry about that!
Joe, Andrew, Mathias in chorus: If you say so Tony!
Joe: So long as you don’t leave me holding the baby like you did last year, Tony.
Andrew: Me too, Joe!