The amount of ink spilled in the analysis of the 2015 Australian budget would probably fill Sydney Harbour. The number of electrons expended in the same way would probably light up a small town for a week. There is no need to add to the consumption of electrons here. Instead, let’s look at the sales pitch.
To put it into perspective, there is, unfortunately, a little bit of economics that we have to endure. Australia is one of the few countries in the world to maintain a AAA ‘credit rating’. Nominally, that means that the country can borrow money at lesser cost. Australia is one of the few countries in the world that can truthfully claim that the economy has not been in a recession in the last 20+ years. Things are, however, not all rosy in the garden: while it is a positive that we do have a Reserve Bank official cash rate above 0%, it is at the time of writing a hardly stellar 2%. In fact 2% is the lowest it has
ever been. The official cash rate is the measure of how much interest the Reserve Bank is prepared to pay lenders should it decide it will hold on to money that banks can’t place elsewhere (at a higher return).
Interest rates, to an extent, also refer to consumer confidence. If consumers are confident that the economy is bubbling along quite nicely, they are more comfortable to borrow to upgrade the house, buy the shiny new car or spend the ‘rainy day money’ on a visit to Disneyland, the new lounge suite or buy the larger TV (because a 55 inch TV would look absolutely fabulous!). In a similar way if business thinks that the consumer is going to ‘walk’ into their business and make a purchase, they will be more inclined to upgrade the computer system, buy the new delivery van, upgrade the shop fittings and so on.
The problem is that once consumers lose confidence, it takes a lot to get the confidence back. At the start of the Global Financial Crisis, the Rudd Government, on the advice of Treasury, distributed billions by way of $900 cheques. The Opposition at the time decried the extravagance claiming that some would spend the money wastefully — and produced examples of people taking the money straight to the local pokie palace or to the local electronics store to purchase the largest TV they could get. Regardless of the morality, those that work in pokie palaces and electronics stores kept their jobs as a result of the expenditure. While Rudd was trying to appeal to his constituency, the $900 cheques did keep the economy ticking along and, with assistance from other programs, did keep Australia from tipping into recession. The pumping of the economy by the Rudd/Gillard Government also retained consumer confidence — people were prepared to go out and spend the windfall. The other parts of the Rudd/Gillard package prolonged the demand through both quick and long term infrastructure improvements to people’s homes (while assisting to reduce energy usage and costs) as well as considerable new infrastructure to schools, health care providers and so on. Human nature being what it is, if people have a reasonable expectation of receiving an income next week, they will not conserve every cent they have this week.
In contrast, prior to the 2014 — it’s going to be tough — budget, Hockey and Cormann were pictured smoking cigars. The reason for the ‘toughness’ that was to be imposed on the community was claimed to be due to the ‘debt and deficit disaster’ inherited by the
Abbott Government.
Regardless of the truth of the ‘debt and deficit’ claim, Hockey killed consumer confidence. The marketing of the budget in 2014 resulted in News Corp publishing an article
like this, dryly listing the adverse effects of the budget on ‘the average person/family’, such as:
IF YOU NEED TO SEE A DOCTOR WHO BULK-BILLS ...
All the rumours were true. From July 1, 2015, you will have to pay a $7 “patient contribution” fee each time you visit your GP.
You’ll also get slapped with that charge when you visit out-of-hospital pathology and imaging services, such as getting an X-Ray or an MRI.
Concession card patients and kids under 16 years will only have to pay the contribution for their first 10 visits a year.
Doctors have discretion to choose who pays the fee, but there is a catch.
If GPs choose not to charge a patient, they won’t receive their $6.20 bulk billing consultation payment from the government.
While Abbott and Hockey were effectively telling us all to swallow our medicine, they were showing a distinct inability to get budget measures through the Senate. The ABC reported in late May 2014 that Hockey was threatening that interest rates, as well as taxes and charges, would increase if the budget measures did not pass
the Senate. History will tell us that a lot of the measures that weren’t passed by the Senate were quietly rescinded in the 2015 Budget. We also now know that the official interest rate set by the Reserve Bank fell over the period of the 2014 budget to the lowest level ever — 2% — causing the Chief Executive of CPA Australia,
Alex Malley, to comment, as reported in
The Saturday Paper:
“A 2 per cent interest rate is another way of saying there’s no pulse in the economy,” says Malley.
So then we come to Budget 2015. If Hockey and Cormann shared some time smoking cigars again, it certainly wasn’t in public view. Hockey returned to his ‘genial Joe’ persona pointing out the benefits to all from the latest budget. Sophie Morris, who wrote
The Saturday Paper article linked above, observed:
In an extraordinary about-face, Hockey has gone from being the treasurer who helped destroy consumer and business confidence last year, with a tough budget and talk of “debt and deficit disaster”, to an enthusiastic hawker going all-out to try to rekindle it. He’s throwing himself into the task with all the gusto of a steak knife salesman on daytime television.
In an interview with one of the ‘doyens’ of the Australian media, Laurie Oakes, Hockey was asked what happened to the ‘debt and deficit disaster’ last year since there has been little improvement in the Australian Government’s budget position:
Hockey replied: “Well, we made significant progress last year, Laurie, and that’s underestimated, but we actually have come a long way. Now we are on the next stage of our plan to build growth, and we’re investing.”
You could also question if the change in attitude was somehow influenced by the last 12 months of opinion polls, as evidenced by the commentary that the 2015 budget has ensured the ALP would now win an election by a smaller margin than for most of the past
12 months.
The ‘highlight’ of this year’s budget is the $20,000 immediate write off for asset purchases by small business. The plan apparently is for small business to go out and purchase business related equipment — which in turn means money is pumped into the economy, people in the businesses that supply equipment to small business retain their jobs and go out and spend their income to inject further money in the economy. Of course it is a complete coincidence that the strategy is similar to the Rudd/Gillard strategy to address the GFC, which the LNP so roundly criticised at the time for being
economically reckless. There are some differences of course: Rudd/Gillard were responding to a worldwide event; Abbott and Hockey are responding to an event of their own making. Both political parties are of course favouring their preferred demographic.
It appears, however, that the ‘sales job’ to unaligned Senators in 2015 is no better than it was last year. Fairfax Media
is reporting:
Almost three weeks into its budget sales job the Abbott government is still struggling to secure Senate support for some of its key proposals, leaving billions of dollars of savings in doubt.
The government's age pension changes, childcare package, cuts to paid parental leave and plan to impose a one-month wait for the dole all still face an uncertain fate in the upper house.
While crossbench negotiations are set to ramp up even further in the coming weeks, it looks increasingly likely the government will be forced to abandon or heavily amend some of its plans. The latest crossbench talks come after the Parliamentary Budget Office warned Senate intransigence could carve a $100 billion black hole in revenue in the next decade.
Abbott, Hockey and others have accused the Rudd/Gillard Government of spending excessively, in turn making the dramatic spending cuts of the last two budgets prudent and necessary. For a number of years, this ‘self-evident’ truth has been accepted at face value by a large proportion of Australian media (and the community). It is clear that the unaligned Senators have thought differently when disallowing a number of the revenue measures proposed by Abbott and Hockey.
It is perhaps ironic that the elected Senators of Australia have demonstrated the sales pitch doesn’t convince them and the ABC’s FactCheck unit determined that Abbott and Hockey are now
spending more that Rudd/Gillard did. Hockey’s sales pitch this year is better, but the budget is still about ideology rather than improving the status and wellbeing of our society.
What do you think?
What can we expect from this government except a litany of failure? 2353 points out that in selling their two budgets they have shown that they couldn’t sell a glass of water to a thirsty man. Worse, they demonstrate their hypocrisy with an approach in 2015 that they roundly criticised when in Opposition and is the polar opposite of their own approach in 2014. Can they get any worse? Let us know what you think.
Come back next week when 2353 will consider the politics of the marriage equality issue.
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