By Dr Scott Brenton. Melbourne School of Government, University of Melbourne; author of The Politics of Budgetary Surplus
In case you’ve missed the three-word slogan, “jobs and growth” is the central message of the Coalition’s 2016 Budget, released just two months out from the federal election.
The Treasurer Scott Morrison mentioned it 13 times in his budget speech, and it is emblazoned on the government’s budget website and related publications. I can confidently predict that members of the government will be saying ‘jobs and growth’ ad nauseum.
It could be about Coalition MPs’ jobs, given how close the election is.
This has probably been the Coalition government’s best budget politically, although that is hardly a great achievement. It is also quite typical of election-year budgets, despite the Treasurer’s claim that is it ‘not just another budget’ and that these are ‘extraordinary times’.
Actual cost vs political cost
Election-year budgets often rely on a simple formula: political cost equals the actual cost of policy change, divided by voter value.
A voter’s value is primarily based on where they live (i.e. in a marginal seat) and whether they are a swinging voter.
If a voter has a high value, expensive policy can be tolerated if they are politically popular. Anything that costs voters becomes a negative value, in every sense of the word.
The billions of dollars spent on things like submarines in South Australia, offshore immigration detention centres and subsidies to polluting industries have low political costs.
The Coalition probably won’t have lost many higher-income voters, because while there are some changes to generous superannuation concessions, higher income earners benefit from the end of the temporary budget repair levy (despite continuing large budget deficits), and a tax cut for the top quarter of taxpayers earning more the $80,000 a year.
There are many people who will have to pay more, but they are among the groups that are generally less likely to vote for the Coalition, or even vote at all. Smokers and university students fall into this category.
Cuts from earlier budgets affecting the wider community are still part of the government’s plan, but they have been deferred until after the election. While they are hidden, no doubt the government will claim a mandate to implement them if they are re-elected.
There are also measures that are effectively cuts, such as pausing the indexation of Medicare benefits. While health care costs grow, the government subsidy remains the same, meaning that patients will probably have to cover the difference.
Budget won’t change many votes
The loss of benefits or the increase in user fees for public services can lead to the loss of support for governments, as with the 2014 budget. Otherwise, most people have other concerns in their lives and will not follow the budget coverage closely. At best, they will receive a few key messages through media or other avenues.
One of those messages is that the government finally has an economic plan, after months of promising one. Or at least they have called a largely unfunded company tax rate reduction an economic plan. It is supposedly to make Australia more competitive, even though businesses have never previously been deterred from remaining or trading in this country due to the tax rate.
Many companies already minimise their tax anyway, regardless of the rate, as the government acknowledges with the establishment of a new tax avoidance tax taskforce. A partial reversal of the years of cuts to the Australian Tax Office.
Business leaders and associated interest groups (many of whom have Liberal connections) will be out spruiking the benefits. The government will be hoping that their positivity overshadows the Reserve Bank’s concerns about the state of the economy, with a cut to interest rates to combat deflation.
Budget is not locked in
Whatever the election result, the budget outcome will change. A change of government to Labor could lead to a mini-budget later in the year, in which they reprioritise spending.
Even if the Coalition retains government they will also have to make changes. While they may want growth, their projections in their previous budgets have been overly optimistic and have constantly been revised downwards. The projections in this budget will likely be as well.
As for the security of Scott Morrison’s job and growth of the Coalition’s vote, the current odds are this will be his first and only budget.
His performance has not been as bad as some of the previous three treasurers over the last few years (although he has struggled a few times in knowing when the budget would actually be delivered). But for Morrison to keep his job the Coalition would have to win the election and Malcolm Turnbull would have to reappoint him.
That is probably as optimistic as the economic growth figures.
Dr Brenton is author of The Politics of Budgetary Surplus