Budget 2017 – The big political sea change – May 2017

Filed under: Politics, Australian Politics, Budget, Social and Community, Health,

The overwhelming public and media reaction to this week’s Budget has been one of surprise – and mostly, of relief. Headlines such as ‘reset” and ‘fresh start’ have predominated.

The Budget has largely turned the political and economic world on its head, with those who are usually critics of the Government offering most praise, and usually reliable supporters ranging from shock to anger.

The business community – especially the banks who were slugged with a special $6 billion levy over four years – and the conservative media were especially unhappy.

Guardian Australia could barely contain its glee at how the Budget had discomforted the conservative press and its commentators, with an article on their Budget coverage headlined ‘Rightwing papers at sea over 'Morriswan' budget’.

“Despite the whiff of a welfare crackdown, Australia’s tabloids and rightwing press found themselves grappling with a slightly leftwing budget from a Liberal government,” it said. Pointing to the Daily Telegraph’s post-Budget front page depicting Scott Morrison as latter-day hippy surrounded by fairies at the bottom of the garden, it noted “Some of the resulting coverage was slightly … unhinged.”

Writing in The Australian Tony Abbott’s chief adviser Peta Credlin argued, “Last night, the Howard-Costello era ended. In its place, Malcolm Turnbull and Scott Morrison delivered a budget that owes more to the ghost of Labor leaders past than it does to Liberal fundamentals of debt reduction, prudent spending, lower taxes and smaller ­government.”

The Australian’s Paul Kelly was more measured and saw it as redefining Malcolm Turnbull’s leadership: “Malcolm Turnbull has finally decided what sort of PM he will be — a super pragmatist, unburdened by past orthodoxy, a problem solver and fixer. This budget creates a series of problems for Labor with the potential to change the political equation. The risk for Morrison lies in being too optimistic on the return to steady 3 per cent economic growth, thereby securing the surplus projection by 2020-21 — yet the estimates are defensible.”

One notable absence from the post-Budget commentary was that of the high-profile commentators of the major Fairfax newspapers, as a result of the week-long strike by journalists at The Sydney Morning Herald and The Age, in response to the papers’ decision to retrench 125 journalists on the eve of the Budget. Fairfax journalists returned to work on Thursday, coinciding with Opposition Leader Bill Shorten’s Budget Reply (See Shorten says, ‘That’s not fairness, this is fairness’).

Given the way the Budget has been received by the commentators – who are often accused of being out of touch with the electorate – there will more than usual interest in the first post-Budget Newspoll, which is expected to be published on Monday.

The Conversation’s Michelle Grattan warned however, “Budgets don’t usually produce poll bounces and indeed even what observers think in the first week may not be their later assessment. The Hockey 2014 budget received a better reaction initially than subsequently, when it came to be regarded as a horror, certainly in political terms.

“While budgets don’t usually push the polls up, Turnbull will be desperately hoping this one breaks the mould, because he needs an early boost for party morale. It’s been a confusing budget for Coalition backbenchers, with its dramatic repositioning – they just live in hope it will work.”

The Australian Financial Review’s Laura Tingle was positively effusive about the change that had occurred. “It seems a long time since we have had a week in politics that has been transformational because of a policy shift, rather than a personnel shift,” she wrote in her end-of-Budget-week commentary.

“The past few days have been extraordinary. The assessment of wiser heads on both sides of politics is that the 2017 budget is a platform that can start a comeback for the Coalition that would return it to power at the next election. It has also marked a profound shift in the positioning of the government as a party of the economic centre – if not the social centre.”

In her immediate post-Budget commentary Tingle also argued the Budget “has also reset the debate about the role of government: both our major political parties are riding the ideological pendulum back towards a more central position which embraces, and even advocates, a bigger role for government, both in terms of its fiscal position and its interventions in the economy, whether that be by building, owning and running airports or regulating product and labour markets.”

Former Prime Minister and Cabinet and Department of Finance head Michael Keating writing in John Menadue’s Pearls and Irritations newsletter argued, “This Budget represents a welcome change in direction. Forget the politics, it deserves to be supported. This latest Coalition Budget finally reflects a realistic appraisal of Australia’s fiscal needs.

“In a refreshing change in rhetoric, the Treasurer declares that this Budget is based on ‘the principles of fairness, security and opportunity’.

“But what has motivated this change in direction and what does it mean? First, and most importantly, the Government has recognised the reality that Australians actually demand the services and levels of assistance that are currently being provided. In addition, while no-one willingly wants to pay more tax, the evidence shows that faced with the choice, Australians would prefer to pay for these services rather than miss out. Nevertheless, and contrary to the view of some of the commentariat and the government’s backbench, this Budget is not an endorsement of ‘big government’. In fact, public expenditure in Australia will continue to be lower than in almost all other advanced economies. Thus this budget reflects a return to an older mainstream style of liberalism, as espoused by Menzies and Howard, that doesn’t rail against the ‘age of entitlement’. Instead, it recognises the principle that people are entitled to and should be supported to access essential services if we are really going to achieve fairness, opportunity and security across our society.

“Apart from the decision to finally consider tax increases, the decisions on education are probably the most significant in this Budget. Most importantly, Australia is set to achieve a ‘needs-based’ schools funding system. This is a critically important reform,” he argued.

The Conversation’s Michelle Grattan argued, “A self-styled whatever-it-takes budget has been all about a government that’s galvanised by the spectre of defeat acknowledging realities and switching tack. No good railing any more about the Senate refusing to pass savings. ‘We can’t whine and whinge about that … Let’s be honest about it. Rule a line. Move on, apply a solution,’ said Morrison.

“In 2001, John Howard, in as deep a hole as Malcolm Turnbull is now, ruled lines and moved on. His budget was part of resetting and regrouping and it worked a treat. Turnbull needs the 2017 budget to play the same role for him. Whether it will is quite another matter.

“The public could respond in one of two ways. They could accept the government’s turnaround and indeed see it as the re-emergence of “the real Malcolm” – which it might be – the centrist and pragmatic Malcolm. Or they could be sceptical, regarding the drastic makeover as just another example of politicians being expedient. There is a third possibility – that voters have switched off.

“It will be a while before we get an accurate reading.

Former Kevin Rudd and Julia Gillard adviser Sean Kelly writing in The Monthly’s daily edition saw it as a “defensive budget. Not entirely, but mostly. Malcolm Turnbull and Scott Morrison have decided to cut off almost every avenue of attack Labor has had at its disposal for the past few years. The Mediscare attack will be difficult to revive. Labor will keep talking about the fact that they’d give schools more, but the government can at least point to the extra cash it’s putting in. Turnbull can’t be accused of holding the National Disability Insurance Scheme hostage, because he’s funding it from a guaranteed tax. And he’s no longer propping up the horror show of Tony Abbott’s 2014 budget, having let go of the “zombie savings” that were still floating around.

“Turnbull can now get on with formulating and announcing his own policies, without having to worry about parrying attacks with years of weight behind them. It frees his hands.

“Just as excitingly for the country, it means that Labor can no longer rely on the old faithfuls it’s been leaning on. Its precious toys have been taken away. But this doesn’t have to be bad for Labor. Bill Shorten’s biggest leap in credibility came after he announced policies on negative gearing and superannuation, getting out way in front of the Coalition. Since then – and that was a long time ago now – Labor hasn’t had to use much ammunition, because the government kept shooting itself in the foot. Labor still has negative gearing on its side – the government’s housing package was pitiful – but now it will have to add to it.

“In other words, we might get a genuine policy race.”

Kelly also argued “Budgets are politically received on two levels. There’s the general impression, the wash of things in the day or two afterwards. On this Turnbull has done very well: the messages of fairness and of a political reset are clear. This broad wash matters, but it matters most of all if it is awful. Otherwise, for most voters, it is merely a glancing impression, a front page spied here or there. The second level can be far more important, and that level lies in specific measures with tangible effects on people’s lives and incomes.

“Here I think it is difficult to say where this budget will finally land. Morrison announced a massive levy on the banks. The banks are unpopular, and most people won’t have a problem with the concept. But every indication is that the banks will pass on these costs to customers. Morrison has ensured customers will know if the banks do so, by ordering the ACCC to make it clear. But that seems to be a fairly dumb decision – why would Morrison want all the blame?”

Former Age economics editor Tim Colebatch writing in Inside Story noted the dramatic change in economic strategy in the Budget: “If you want a very short summary of yesterday’s budget, try two numbers at the back of budget paper 1. On the budget’s estimates, by 2020–21 today’s big deficit will have been turned into a slim budget surplus. To get there, spending will have been cut by just 0.1 per cent of gross domestic product while revenue will have shot up by 2.2 per cent of GDP.”

He argued that “It probably won’t happen; both numbers rest on optimistic assumptions. But they imply that if this budget works as intended, 95 per cent of the job of turning our deficit to surplus will be achieved by Australians paying higher taxes, and only 5 per cent by spending cuts.

“And this is a Coalition budget. The economics of this budget are not bad; the politics are quite extraordinary,” he wrote.

The Australian Financial Review’s Laura Tingle argued the change in the Government has thrown up a wicked problem for Labor. “Bill Shorten and his shadow cabinet now have a lot of decisions to make about how they respond: not just the ones about individual budget measures that the Opposition Leader must clarify in his budget reply, but in how he responds to the shift in political style to a less ideological, confrontational approach.

“Does Labor join the government at the centre, or shift to the left? Does it quietly let most of the budget through and focus its attention on policy issues where it knows Malcolm Turnbull is hemmed in or compromised, like climate change?”

She argued, “All Labor's big spending policies are now the preserve of the Coalition, being used collectively against the Opposition. You want funding for the NDIS? Well you have to agree to an increase in the Medicare levy.”

Further Reading