Heather Ridout was asked to give the Budget a mark out of ten on the radio today. She gave it 8/10. As I said to some colleagues today, I’d like to have been in her class. The two most long-standing governments since Menzies absolutely ripped into outlays in their first budgets – and raised a bit of tax. In fact strong fiscal contraction was more clearly what the doctor ordered in this budget than certainly in Howard’s first budget and arguably in Hawke’s, though with hindsight the latter worked out very well. (With hindsight Howard’s first budget was too tight.)
I think this government may rue the day it didn’t cut harder. That’s if things don’t turn out well – which is to say if the economy keeps booming and rates keep rising, it would have been better to have cut harder. The additional benefit of cutting harder is not just the dollars that it puts in the bank, but the added cred that you bank, and the way in which old habits are blown away and a new set of expectations hastily cobbled together by the assembled mendicants.
Still, beggars can’t be choosers. I am still reminding myself how bad the last lot were. That’s not an ideological statement I hasten to add. It’s a professional one. The last lot had given up on the substance some time ago – was it when the ever reliable Arthur Sinodinus left the PM’s office? When Peter Costello noticed that we had managed to get an economy with twelve noughts in its annual GDP and that, accordingly it had become a ‘formula one’ racing car that only he could drive?
Here was I thinking I’d reached some middle of the ideological road, being equally irritated by excesses of left and right, when an old bit of Labor propaganda crept up on me, and I couldn’t deny its apparent truth. Though there’ve been some exceptions, the Liberals don’t seem to give much of a bugger about good policy. That’s certainly the impression given towards the end.
Anyway, Alan Kohler helped me remember all that and put it in perspective – From yesterday’s Crikey! over the fold. My guess is that he’s a 7/10 man:
This is more Lindsay Tanners budget than Wayne Swans or Kevin Rudds.
There are no new spending measures, only new savings, and remarkably the Finance Minister has found $2 billion more in savings than Swan and Rudd are spending.
The first Swan/Tanner budget actually reconciles the irreconcilable: the need for fiscal restraint to fight inflation while fulfilling the Governments election promises and not crunching the economy so hard that it risks exacerbating the coming slowdown.
And it had been done simply by carving into middle-class welfare and cutting out the fat left by John Howards profligacy.
When the former Treasurer Peter Costello said at a remarkable doorstop press conference this morning that Wayne Swan is the luckiest new Treasurer in history, he was absolutely right but not for the reason he meant. Its because there was so much fat left in Government expenditures that could be painlessly cut away.
The Government, meanwhile, is playing down the centrepiece of its first budget. It is not mentioned at all in Wayne Swans budget speech; he just sums up all the nice things that have previously been announced.
The core of the budget what its really all about – is contained at the back of budget paper No.2 – from page 361 to p.427. Here you will find 66 pages detailing 134 new savings measures, on top of the 46 cuts announced during the election campaign, totalling $1.6 billion in 2008-09.
The new savings total $5.7 billion in 2008-09, 11 dozen of them big ones, small ones: nip cut slash.
The big picture of this budget is that the Rudd Government has announced $5.3 billion worth of new spending for 2008-09 leading up to it, and has now announced savings of $7.3 billion, increasing the surplus by $2 billion.
In addition to that there are a total of $5.4 billion in unexpected increases in tax receipts and other windfalls since the pre-election fiscal outlook (PEFO) that was issued by Treasury during the election campaign last year.
As a result the $14.3 billion surplus forecast in the PEFO has now turned into a $21.7 billion surplus ($14.3 billion plus $2 billion plus $5.4 billion).
So whereas the Howard Government spent every cent of the commodities boom windfall, the new Government has so far put it all into the bank, and added another $2 billion to it by cancelling some of its predecessors spending.
Even Kevin Rudds tax cuts actually represent a saving. The PEFO surplus estimate of $14.3 billion included the tax cuts announced by Howard Government; Rudd announced identical tax cuts but dropped them after 2009-10 for people earning more than $180,000.
That produces no savings in 2008-09 against PEFO, but provides $5.3 billion in savings over the following three years.
One of the big savings measures is a bit of a fiddle though. The cancellation of the $959 million Australia Connected fund that was awarded to Singtel Optus and Elders has been counted as a saving, but the $4.7 billion National Broadband Network amount that replaces it is not counted as an expense because it hasnt been spent yet and is not detailed in the forward estimates.
But on the whole this budget is a remarkable achievement. The Governments net financial worth goes from -$25.8 billion to -$3.6 billion in one year, with the unfunded superannuation liability of $112 billion now almost entirely offset by investments.
Sometime in 2009-10 the Government will have a positive net worth, probably for the first time.