The budget is always more political than economic – revealing what is the underlying philosophy of a government, why it is in power and what it wants to do.
The amazing thing is just how obvious this budget was about its purpose, and just how clearly it revealed the death throes of this government.
The answer from Tuesday’s budget was essentially: “Gee, I dunno … to give out some money … I guess … probably should have thought about those questions at some stage … oh well.”
Rare has been the budget that is forgotten by the time the treasurer finishes his speech, but so it was on Tuesday night.
The backbench mostly reached the conclusion of the speech with a realisation that, given he has stopped talking, I guess that means we applaud.
When the best you can get from the Australian is the headline “The cost of winning”, you have to know you failed even to meet your very low standards.
What was perhaps most surprising, but also to an extent quite pleasing, was just how little anyone cared about the budget balance.
In previous years it would have been headline news that the treasurer announced the budget balance had improved $20.9bn since the latest estimate just three months ago.
Now, meh!
The deficit remains massive and, even though the reduction is a larger one-year cut than previously experienced, so what?
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The pandemic has revealed that, when the manure hits the fan, people have realised you don’t eat a budget surplus. The budget surplus does not deliver healthcare or aid after a fire or flood, or keep you with an income when businesses around the nation are forced to close.
It also has revealed that we have worried far too much about the debt.
Even with the reduction in the budget deficit, our interest payments are set to remain below the level they were in the year before the pandemic until 2025-26:
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None this is to suggest that the government can spend what it likes. The cost-of-living measures including the halving of the fuel excise and the addition to the low- to middle-income tax offset are just panicked spending that does nothing to improve productivity or enlarge the capacity of the economy.
And as my colleague at the Centre for Future Work, Alison Pennington, noted: “If real wages had been growing, you would not need these one-off boosts to deal with rising petrol prices.”
But when you spend your time in office actively working to keep wages growth down, that tends to come back to bite you when you are trying to convince voters that their standard of living is better than it was the last time they voted.
Vote buying of course is not new but the slapdash nature of this is such that you almost wonder if they even bothered with the back of an envelope.
Consider the $420 addition to the low- and middle-income tax offset – a figure transparently picked to get the overall LMITO maximum to a nice round $1,500.
But the original offset maximum of $1,080 was tapered from those earning $90,000 down to zero for those earning $126,000. This is how most tax offset and government payments work. It means someone on $125,900 would have originally received an offset of just $3.
This ensures you don’t actually lose out by earning more money.
But the bonus to the LMITO is a flat $420 for everyone right up until $125,999. You earn that much – you get the $420 offset; earn $1 more and you get $0!
It means every accountant this year will first and foremost be ensuring they get the taxable income of their high-paid clients below $126,000:
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It also means that people earning from $112,000 to $125,999 will receive a bigger tax cut from the extra offset than from the original LMITO. That’s some special level of “targeted” assistance!
Of course, those on low incomes didn’t miss out. People on welfare payments are to receives a one-off $250, helpfully timed to arrive just as the election campaign is in full swing. And yet it really only serves to highlight how meagre the assistance is to those on jobseeker, for example.
During the pandemic, the government boosted jobseeker because the politics of an extra million people suddenly realising what it is like to live in poverty was unpalatable.
But such concerns are now gone and so too is the hope of getting through the week if you are on jobseeker.
The extra $4.80 a week of this $250 effectively takes the jobseeker rate from being about 43.9% below the poverty line to being just 43.1% below – and only for this financial year:
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But someone on $120,000 will be getting an extra $420 a year, and because of the political impossibility of removing the LMITO, that will continue on – or at least until the stage three tax cuts kick in, bringing another $1,875 tax cut.
But then perhaps this budget really has answered the question of who the government is – one that rushes to put a Band-Aid over long-term problems like real wage stagnation and when it thinks about providing relief to low-middle income earners it favours people earning $120,000 rather than someone on a payment of just $16,710.
Greg Jericho writes on economics for Guardian Australia
