Government budget trickery

I would like to state upfront that I already had the word ‘trickery’ in this title before Bill Shorten used it in his Budget Reply speech. I could say he stole it from me but I suspect he thought of it himself. It is such an appropriate word for this budget.

One thing Bill Shorten didn’t mention was the blatant strategy adopted by Abbott and his minions in the lead-up to the budget. First there was the approach that the budget would be ‘dull’ and ‘boring’: the government basically trying to tell us ‘nothing to see here’, forget about it and just go about your normal business. They were initially telling us that, after last year, this year’s budget would be a do nothing budget that we could ignore.

Then there was an apparent change. They had three new words: that the budget would be ‘reasonable, measured and fair’, that it wasn’t quite something to ignore but nothing to worry about, something that would not raise our hackles. And after the reaction to the previous year’s budget, this one would be ‘fair’. (I will come back to that word.)

Then came the final stage in their three-part plan. (Why do they have a fixation on ‘three’?) As you are aware the government began making announcements about budget measures prior to budget night but they were the ‘positives’: such as the child-care package and the benefits of the changes to the pension, including dropping the previous idea of linking pension increases to CPI rather than growth of the average wage. At that time they weren’t saying very much about how the new measures would be paid for — although they occasionally mentioned, when pressed, that there would be off-setting savings, there wasn’t much in the way of detail regarding those savings.

They had learned the lesson from the previous year when their mantras of ‘debt and deficit disaster’ and ‘Labor’s mess’ had failed to convince people that the draconian cuts were necessary. This time they were trying to influence our mind-set going into the budget: rather than focusing on a negative, they wanted us to see the positives that would be announced and were making sure we noticed by announcing or leaking them in advance. We were being softened up and, to my mind, it was so obvious and contrived (partly because it was such a stark contrast to last year) that it was almost laughable. You could see that it was planned, that ministers were still being given their daily messages, the lines they needed to follow at ‘door stops’ and interviews: first, ignore the budget; then don’t worry about it, it will be measured; and finally, ‘gee whiz’, look at this, look at the offer we have for you. Do they really think the voters are so stupid as not to see through that?

After last year when their budget was widely lambasted as unfair, this year they decided to come out fighting and try to control the debate around that word ‘fair’. Now they were claiming that everything about this budget was ‘fair’. Again they were trying to shape our mind-set to their interpretation of the word and not let it be controlled by the Opposition and the media. Rather than being a word that could be used to attack their budget, this time they were trying to attach it in our thinking to what was to come on budget night.

While it may have been ‘fair’ to reduce the asset limit for the part-pension, they took fairness too far when they claimed that women receiving both government-paid and employer-provided parental leave were ‘rorting’ the system. Hockey even refused to rule out that it could be ‘fraud’ when Laurie Oakes used that word. At the very least, it was ‘double dipping’. The new proposal was that the stay-at-home parent (they seemed to have forgotten that men can also claim parental leave) could access only one form of parental leave and that this was ‘fair’ because we all know that double dipping is unfair (unless, of course, you are a board member of four or five companies and government authorities/inquiries/businesses). As others have pointed out, when the current government system (based on the minimum wage) was introduced by Labor it was designed to operate with employer-provided schemes to allow people to top up their income or to extend their period of leave: in other words, it was a compromise proposal to support parental leave without becoming too expensive for government (as Abbott’s gold-plated version would have been — which was one reason it was abandoned; the other being that he was asking big business to fund it with an extra 1.5% tax).

To further undermine their argument, it turned out that some Liberal ministers’ wives had used both. They tried to justify it by saying that the current system allowed it — but was that ‘fair’? It was double dipping! They told us so. If they already knew it was double dipping, why didn’t they act on principle and refuse the additional support?

On budget night, they finally made clear that their new child care package would be funded by major changes to Family Tax Benefit Part B. This was something left over from the previous budget that had not passed the Senate but now it was being ‘sugar coated’. While people may like the new child-care package, they won’t get it unless the savings measure is passed by the Senate — in plain language, a bribe. Of course, it is also tied to the change to parental leave entitlements. People will be forced to accept the new child-care package because they will be forced back to work earlier if they can only receive the minimum wage for a maximum of 18 weeks.

These approaches are justified by the government (by Scott Morrison) in terms of being ‘workforce’ measures. They are not about supporting people (welfare) but only supporting people who are in work or seeking work. They are aimed solely at improving workforce participation.

That fits with the government’s philosophic approach that focuses on individuals and families and their role in the economy — ‘communities’ do not exist (it was the same under the Howard government). In Hockey’s budget speech the word ‘community’ (or communities) is used in only three contexts: ‘regional communities’ (probably The Nationals’ influence), assisting jobseekers where ‘community workers’ are mentioned, and in relation to terrorist threats to ‘our communities’. Families are mentioned 11 times. For the Liberals, a community cannot exist in its own right but only as an agglomeration of families and individuals. There is no such thing as ‘community spirit’ because that is counter to the spirit of ‘individual self-interest’ that is the basis of their philosophy and, they believe, of economic growth. You will rarely, if ever, see a Liberal government of recent ilk providing funding for ‘community’ services — only services for individuals and families (even if they are delivered by ‘community’ organisations).

Aside from the changes to Family Tax Benefit Part B, there are other measures in this budget that are left over from the previous budget. The government didn’t mention them but Bill Shorten, state premiers and media commentators did. The big one is the reduction in funding ($80 billion) to the states for schools and hospitals over the next decade. Although the premiers will be meeting with Abbott at a ‘COAG retreat’ in July to discuss that, the savings from the measure are built into the forward estimates. That is one of a number of matters that make a mockery of Hockey’s claim that the government has established a ‘trajectory’ to a surplus. If the government has to find at least some of that money to meet state demands, surplus projections move ever further into the future.

A future surplus is now almost entirely dependent on real GDP growth and the commentators have suggested that the estimates contained in the budget are optimistic: they are higher than the current estimates of GDP growth by the Reserve Bank. There is nothing inherently wrong with allowing for GDP growth except when it is optimistic and future revenue does not match the forecasts based on that optimism (see my piece ‘Are budgets worth the paper they’re written on?’).

The other aspect that will contribute to better future revenue for the government is ‘bracket creep’, when pay-as-you-go wage earners move into higher tax brackets as their wages rise. Talk of reducing taxes to overcome the effect of bracket creep has disappeared for now in favour of achieving a surplus.

Neither of those was spoken about by the government and yet they underlie its future projections. They could possibly have gotten away with that if they hadn’t made such a hue and cry about the ‘debt and deficit disaster’ the previous year. Last year the government had to fix ‘Labor’s mess’ — which, they said, comprised high spending and growing debt. This year that doesn’t seem to matter. No wonder people are left wondering which is true — one budget must be based on a lie but which one? Or are they both based on lies, just different lies!

Associated with that, they again rolled out, when interviewed after the budget, that they had inherited a $48 billion deficit (as I recall, it was $46 billion — I am not sure where the extra $2 billion has come from, other than the rubbery figures of Hockey-nomics). That figure has been disproven previously. The actual deficit at the time was $30 billion: the additional $18 billion (or a major 60% increase in the deficit) came from decisions made by the Abbott government after it came to office and before it issued the 2013 MYEFO. Their decisions also added to future deficits and debt by abandoning Labor’s revenue measures (see ‘Abbott continues to tell porkies’).

I will concede that on the ‘plus’ side, the government realised at last that the economy was faltering badly (that it wasn’t just Wayne Swan’s fault) and it needed to do something to stimulate it — hence the tax reduction and accelerated depreciation for small business. Unless the economy grows, and business invests and wages rise, the government’s revenue will remain in the doldrums. So on this side of the equation they have their new catch-cry: ‘have a go’. It should be noted, however, that one of the measures it had previously removed was Labor’s accelerated depreciation scheme: it wasn’t quite as generous as the current proposal but it was built into the system whereas Abbott and Hockey’s proposal is only for two years — what happens after that we don’t yet know. Might I suggest, however, that the $5 billion now for small business will become the same $5 billion for the child care package when it is introduced in two years’ time — that’s a neat trick if they can pull it off!

Now just a few figures (after all we are talking about a budget). First it is interesting that the main income figures are ‘cash accounting’ but the main spending figures are ‘accrual accounting’: there are tables that allow one to match the systems but why the main figures are done in two different ways I don’t know. (A clue to the two accounting methods in the budget documents is contained in the words: if it refers to ‘revenue’ and ‘expenses’, then it is accrual accounting, but if it refers to ‘receipts’ and ‘spending’ or ‘payments’, it is cash accounting.) Following my piece, ‘Are budgets worth the paper they’re written on?’, I will, for consistency, stick with accrual accounting figures.

For 2015-16 they are estimating revenue of $405.4 billion which is more than $21 billion above the estimate for this year: this year’s estimate has come down from $411.6 estimated in 2013-14, to $391.3 billion estimated in the original budget, to 385.9 billion in the MYEFO and now $384.1 billion. Revenue has come in below the budget night estimate every year since 2010-11, so why should revenue now jump by 5.5%? There is no apparent answer other than the government hoping it will based on a few ‘green shoots’ as Hockey called them. This positive approach seems to be a result of the government finally coming to the realisation that continued negativity, although perhaps good politics, was having an adverse impact on business and consumer confidence and thus also impacting the economy — so from a false sense of doom and gloom they have moved to a false sense of optimism after successfully creating doom and gloom.

Government expenditure for 2014-15 has also increased above the original budget night estimate: from $414.8 billion to $420.3 billion. No doubt that can be blamed on the Senate not passing all of their ‘savings’! Expenditure for 2015-16 increases to $434.5 billion, an increase greater than just the concessions for small business but in the budget they claim:

… new spending measures will be more than offset by reductions in spending elsewhere within the budget …
The final expenditure figure does not seem to justify that claim.

Their continued claim to be a low taxing government is also undermined by the fact that taxation revenue in 2013-14 was 21.4% of GDP but has risen to 21.9% in 2014-15, rises to 22.3% in 2015-16 and rises each year to reach 23.4% in 2018-19 (that is only taxation revenue). Total revenue rises from 23.5% of GDP in 2014-15 to 25.2% in 2018-19.

Overall, as Jonathon Green wrote:
There is a purity about the play of politics in this budget week. Nothing is, but what I say it is. I can be a big spending, big taxing government — verifiably so — and yet claim that the opposite qualities are in my very marrow.
It is very much a Humpty Dumpty budget because it does things that they say they do not do and it is tricky because even when they are doing something it is not what it appears.

What do you think?
Following the budget, the Fairfax-Ipsos poll put voting intention at 50‒50 although both Newspoll and Galaxy suggested the budget had not made any difference to the government vote. Do you think people have seen through the budget? Should the budget have done more to boost the economy? Or, as many commentators have suggested, was it just a ‘political’ budget?

Come back next week when 2353 considers the NAPLAN test run in our schools and asks whether it provides a guide to help teachers and schools or creates a competition between schools.

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24/05/2015Ken Again, you have exposed the deceit and duplicity of the Abbott/Hockey/Cormann budget. Although it is obviously so to those who look carefully at it, they work on the premise that few will notice their mendaciousness, and will simply swallow their three word laden rhetoric. They bank on the electorate’s poor memory, or no memory at all, or its forgetfulness. They base their strategy on the belief that so long as some goodies seem to be in the offing, the inbuilt nasties will not be seen, or will be overlooked. They are deliberately misleading the electorate in as cynical a political exercise as we have seen for a long while. Your use of the Humpty Dumpty metaphor is apt. To Abbott, Hockey and Cormann, words mean exactly what they want them to mean, no more, no less. Should the electorate become aware of the fraud they are perpetuating, they will be sent to political jail for a long while. It is up to the Fifth Estate to ensure the fraud is exposed. Your piece is a sterling contribution to that end.


24/05/2015Thanks for your well written and easy to understand explanation of the budget trickery Ken. It was good to hear the comments from the "Insiders" this morning on the future necessity to change the treatment of superannuation income. The Libs are really digging themselves a hole with their comments and will in the future be forced to break another promise with the projections of costs escalating over the next few years.


25/05/2015Ad I agree that Abbott and co. really do operate on the principle that 'voters don't remember'. As I have pointed out previously, he has done that continuously with the claim about the size of the Labor deficit even though his claim was refuted by commentators when it was first made. So when claims are shown to be false but are persisted with, that is just blatant lies, which is where this government has ended up. Doodle Poodle Thank you for your kind comment. The Libs are locking themselves into an untenable position on superannuation by saying they will not change it. They have just announced changes to the pension which they claim are fair because they are removing the pension from those who are better off (by reducing the asset limit) but, for some reason, do not want to see that a similar approach can, and should, be applied to superannuation. Superannuation tax concessions cost the government over $120 billion each year (more than enough to wipe out the deficit). As I pointed out in 'Abbott continues to tell porkies', it would be counter-productive to completely eliminate all concessions for superannuation but there is certainly scope to make the system 'fairer' and save the government some money. David Richards Thank yo for your comment. I am well aware of the psychological power of 'three' but the Libs have overdone it and turned it to a source of ridicule. When commentators can regularly refer to 'three word slogans' then three is losing its power. And I said it was a fixation in reference to what appeared to be a three-part plan. Plans don't necessarily have to be three-part (a good plan can have many parts) but they are so obsessed by the 'power of three' that it even flows into their planning. So while 'three' may be powerful, the Libs have managed to turn it to farce.

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26/05/2015Patriciawa Having now recovered from the throes of moving house, I’m catching up on a comment you made on the last post, which included your delightful poem: [b]Does Practice Make Perfect?[/b] A big ditto from me To feedback from [b]TT[/b], An enormous hug too To you - all here'll know who - Yes, dearest [b]Ad Astra[/b], Our [i]nonpareil[/i] blog master! Thank you for your generous compliment. As we are of similar age, and blog-daughter is therefore an inappropriate designation, why don’t we use the tag: ‘blog-mates’.


26/05/2015 [b]To Ad Astra - Re Your Proposal[/b]. I accept your kind proposal That I should now become your 'mate'. Here I am - at your disposal, As always, writing on your blog. An offer? No proposition? Implicit a pledge you will not flog? Without that, fierce opposition Will be expressed as I lose hope, Forced to answer, [b]"Nope! Nope!! Nope!!!"[/b] PS to Talk Turkey. I can't seem to remember, or now find, the rule for placement of punctuation marks inside or out of direct quotes. I was trying to find some way to say 'God Forbid I should ever quote that idiot Abbott!' Maybe you could have a go and show me how. Could another few lines shape it into sonnet form?


26/05/2015Maybe Talk Turkey has already caught up with my error of ommission of a fourth line up there which was meant to be about that being [i]truly a delightful fate[/i], or there being some. [i]answers which I still await[/i]. Proves that old proverb about 'more haste, less speed' I suppose. But it's a long time since I've had a proposal, or a proposition for that matter! I was in a real rush to accept!. As sedately as a lady could, of course! Or should.......particularly since I am sitting down, though not medicated, so not sedated......


27/05/2015Patricia I think it might be beyond me to make your pome into a sonnet. Sonnet: "A poem of fourteen lines using any of a number of formal rhyme schemes, in English typically having ten syllables per line." Although sonnets are not absolutely hog-tied to an exact form they always have 14 lines (which wouldn't be so hard) but it would be difficult to make iambic pentameters to cover each of your inimitable lines! I've never understood why it is such a desirable form anyway. A bit like haikus that way. It's only like a template, not really made in heaven. If Shakespeare hadn't used it so much it probly wouldn't be a Thing at all Ithink. Just write pomes eh but check that you haven't left out lines! :-)


28/05/2015Ken, There isn't a lot to say about what you've written. The whole Abborrrttian Government is beyond tricky, it is an ongoing campaign of obfuscation, misrepresentation and denial of truth. It reminds me all too acutely of the scene in Nineteen Eighty Four where O'Brien of the Thought Police is re-brainwashing the anti-hero Winston Smith. Winston is under the delusion that four must always be four, but O'Brien is able to show him that it may be five, of three, or anything the Party says it is. [The following reference to that passage has as its background M.C.Escher's amazing tessellation of Lizards which interconnect in wonderful ways.]


28/05/2015TT Yes, the Abbortians are all of those things. Although they may have conned a few people with this 'generous' budget, I think many others are just left wondering wtf! Two so very different budgets with two so very different accompanying messages have I think undone some of the remnants of credibility of Abbott and Hockey. Even if people didn't like it, they may have respected a more consistent message (a la Howard) but Abbott has undone himself. They will do their best to prove two equals three (I do have an equation about that, that I can lend them) but whether they can convince the electorate remains to be seen. It does make for some interesting times ahead.


28/05/2015Ken, Comrades, At my first Philosophy lecture (I didn't manage many) the aweful Dean, Prof Smart, first thing he did was to say, [i] I want you to consider the proposition that one might not necessarily always be one. Put up your hand if you think that there might be universes where one could equal two? Or any other number?[i/] Well some thought no, some thought yes, hands went up uncertainly, I couldn't think of how it could be other than one, but anyway there was Prof Sharp scribbling away on the blackboard (yes BLACKboard!) and I don't remember any of his lines of reasoning but it started Let 1= 2 and in a few lines it ended up Therefore Prof Smart is a Wombat! I think that grounded us good and proper.


29/05/2015A #Budget2015 for the true believers Craig Emerson. May 26, 2015 This Budget is for the true believers, the Liberal Party base that has stuck with Tony Abbott through thick and thin but was threatening to desert him for Julie Bishop, Scott Morrison or, if they could stomach his belief in global warming, Malcolm Turnbull. Among these true believers are good, hard-working people who have taken risks and reaped their deserved rewards. But they also include believers that taxation is theft, that they are the lifters who are coerced by the state into paying taxes to fund the lifestyles of leaners such as mothers whose partners have deserted them and children who refuse to rise above the noise and violence in overcrowded houses to do their homework and excel at school.


29/05/2015TT Philosophers and philosophy students aren't mathematicians. While I said I do have an equation proving the same thing, I don't have it readily to hand. But I first came across it when I was about 16 or 17 and showed my maths teacher. To reach the conclusion that 1 = 2 it had actually, somewhere in the process, effectively multiplied something by '0' which in maths is not a valid procedure (it wasn't apparent that it was '0' because it was done in algebraic terms). If that was allowed, you could prove all sorts of things because basically everything would come back to being '0'. So in all those mathematical 'tricks', there is usually a mathematical flaw. Unsurprisingly, the same could be said of the Abbott and Hockey approach.


29/05/2015TT PS: I didn't forget that it was 'proved' that Professor Smart was a wombat but wanted to make the methematical point and its relevance to Abbott and Hockey. As to philosophy I am reminded of the words of Bod Hudson's song 'Jonathon Livingstone Budgerigar' (a parody of course): [i]Jonathon Livingstone Budgerigar Who the bloody hell do you think you are? I told you your philosophy wouldn't get you far To get on in this world, you've got to be a galah.[/i] Perhaps that also applies to Abbott!


29/05/2015Something like this Ken? Let a = b. Then a² = ab a² + a² = a² + ab 2a² = a² + ab 2a² - 2ab = a² + ab - 2ab 2a² - 2ab = a² - ab 2(a² - ab) = 1(a² - ab) dividing both sides by (a² - ab) Gives 2 = 1. The fallacy though is that a² - ab = 0. In mathematics, dividing by zero is undefined or, if you look at the preceding step, we have: 2x0 = 1x0 which is always true, but certainly doesn't mean 2 = 1.


29/05/2015Bacchus Yes, something very like that. I still have it here -- somewhere in my study!! Unless one understands some of the basic rules of maths, it can be easy to be hoodwinked: I think some salesmen know some of those tricks.


29/05/2015Actually, mathematicians figured out how to avoid those kinds of problems. The only operation defined is multiplication. There is no "division". What is defined is a "multiplicative inverse" for every number except 0. So a number , "a", has an inverse say, a-inverse, such that a* a-inverse = 1. Ergo, division by zero does not exist. I won't bore you all further, but think about the set of numbers where the equation x-squared = -1 has a solution. I mention in passing that this sort of stuff is essential if you want an easy way to study alternating currents, communication theory using electromagnetic radiation as a carrier, or quantum mechanics. Enjoy the rest of your day!


29/05/2015Arrrgggghh totaram - now I'll be having nightmares involving, Laplace, Fourier and Z transforms that I thought I had finally overcome decades ago!


30/05/20151. What the latest capital expenditure figures tell us about the economy Tim Robinson. 29 May 2015, 6.13am AEST The latest Australian Bureau of Statistics (ABS) Capital Expenditure Survey revealed that business investment is likely to have fallen significantly in the March quarter, which has caused some alarm among commentators. 2. FactCheck: Is BHP Billiton Australia's largest taxpayer, averaging $8-10b in tax a year? Roman Lanis, 29 May 2015 BHP Billiton's Andrew Mackenzie says his firm is Australia's largest taxpayer, pays an average of $8 - $10 billion of tax in Australia every year and has an effective tax rate of 45%. Is that right? 3. Hockey's changed song on budget Sophie Morris. May 23, 2015 From ‘debt and deficit disaster’ to ‘go out and spend’, is the government playing a reckless game with the national economy? Roll up, roll up, for Tony’s tradies budget bonanza. 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. 4. Richard Di Natale’s plans to reboot the Australian Greens Sophie Morris. May 30, 2015 The Greens’ new leader has a fresh vision for the third-force party: transparent, consultative and mainstream. 5. Every world in a grain of sand: John Nash's astonishing geometry Daniel Mathews 27 May 2015 John Nash is best known for his contributions to game theory, but he will also be remembered for his pioneering work in geometry. Apart from game theory, Nash worked in fields as diverse as algebraic geometry, topology, partial differential equations and cryptography. But perhaps Nash’s most spectacular results were in geometry. To honour Nash’s life, I would like to try to give a flavour of some of this work. 6. That's One for Bill John Kelly. May 29, 2015 Whatever the outcome of Bill Shorten's surprise move this week, he has caught Tony Abbott on the hop and executed one very successful wedge. Nice one, Bill. The Irish vote for marriage equality has turned the issue on its head in Australia and one can be confident there is no going back now. Abbott can no longer hold back the tide. Shorten might have been playing politics announcing that he would introduce a private member’s bill to legalise same sex marriage, but so what? 7. You've got to hand it to Abbott (citizenship, that is) Ross Jones 29 May 2015, The public groundswell on social media following's petition requesting Tony Abbott prove he's renounced his British citizenship continues unabated — despite Labor's indifference and a p*** weak media.. YOU'VE GOT to hand it to Abbott, he’s a cunning little bastard. A stunt, you might say. He is also a flake who sometimes forgets to do stuff on the list: • do anything for power (tick), • destroy the joint for the IPA (tick), • renounce British citizenship (d’oh).,7768 8. The Courage of Migrants George Packer. May 27, 2015 But in addition to being desperate, these new boat people are courageous, and not just physically. They have the heart to leave everything they know behind, to make themselves anew somewhere else. In this sense, they’re better than most of us. They deserve that recognition, if not a home as well. 9. Tony Abbott: A question of incompetence Bob Ellis 27 May 2015, 10:00am It will be remarked by historians how incompetent Abbott was at tyranny. He claimed he had "stopped the boats" and, when thousands of stateless Rohingyas were found floating off Malaysia, he continued to claim he had; refused, moreover, to obey the UN and the Pope, and take some of them in.,7760 10. Citizenship: no time for mixed messages Michael Gordon. May 30, 2015 - 8:28AM The government sees political advantage in talking tough on terrorism. Tony Abbott was saved from himself by cabinet colleagues this week, just as he moved to respond to what he calls the increasing threat from "those, including those in our midst, who would do us harm".
T-w-o take away o-n-e equals?