Paul Bongiorno: A budget to reset the big arguments

Dr Jim Chalmers has the challenging task of meeting community expectations in a high inflation environment.

Dr Jim Chalmers has the challenging task of meeting community expectations in a high inflation environment. Photo: TND

The Albanese government, about to unveil its first budget, tells us it has taken to heart the admonition that those who fail to learn from history are doomed to repeat it.

The Prime Minister told his caucus on Monday that “if you want to see how a new government shouldn’t do a budget, look no further than the United Kingdom”.

In this instance, Labor is claiming to have heeded some stark lessons from very recent history that led to the demise of the Truss Conservative government a little over a month after presenting its first fiscal prescriptions for the nation.

Massive unfunded tax cuts principally benefitting high-income earners and huge energy price relief for consumers were judged reckless by financial markets with dire economic and financial consequences.

One-time British chancellor Kwasi Kwarteng, with former PM Liz Truss, abandoned plans for high-end tax cuts. Photo: AP

Never mind that the Prime Minister and her Chancellor who proposed the plan were doing it to make Britain great again, according to an increasingly discredited economic formula.

As in Britain, the Australian government has a structural deficit, rising inflation and a slowing economy, though on all counts the ledgers in London are in a tattier state than the books in Canberra.

Budget repair

Treasurer Jim Chalmers is promising to deliver on campaign commitments while keeping spending under control and starting down “the long road of budget repair”.

This budget could well be a watershed in Australia’s political and economic direction on the role of government and the expectations Australians have, not only in these times of “extreme global volatility”.

Small government and the fetish of budget surpluses saw Medicare run down, while aged care and much of the service provision in disability care was privatised before the COVID-19 virus hit.

The virus of neoliberal economics was an earlier, no less dangerous, infection.

Its victims were those at the bottom of the heap waiting for the largesse that saw governments transfer even more wealth to those at the top to trickle down.

Governments that had directed billions to tax cuts, concessions, rebates and subsidies to preferred sectional interests did so at great cost not only in human service terms, but also for the broader national interest.

Opposition Leader Peter Dutton continues to ignore the Coalition’s record spending in government.

On Sunday Opposition Leader Peter Dutton was still singing from the old song sheet.

Dutton said: “Labor likes to tax and spend. We’ll see what surprises might be in store for Tuesday night.”

The gall of it is exceptional.

The record spenders were to be found in the government of which he was a senior member.

Lessons ignored

Chalmers and Finance Minister Katy Gallagher have identified $21 billion of this spending to attack.

Half will be directed to paying down debt and the rest to infrastructure projects “to better align the investment with construction market conditions”.

The real point is: What else is government about if it is not “taxing and spending?”

The small government champions didn’t cavil at spending billions on themselves and their mates, and they appear to have learned nothing from events in the Old Dart.

Shadow treasurer Angus Taylor couldn’t bring himself to agree with David Speers on Insiders that the billions of pounds worth of high-end tax cuts to be paid for with borrowed money by the Truss government was a lesson for conservatives in Australia.

The way to pay for government services apparently is to make sure economic growth outstrips spending, but Taylor doesn’t include funding tax cuts as spending.

Truss, he believes, was punished by the markets for her “extreme” spending on energy relief more than for the tax cuts.

The shadow treasurer went so far as to defend the stage-three tax cuts here – on the premise that by 2024-25 inflation would be more or less under control and stimulus would be needed even though the budget is projected to be still in deep deficit.

Balancing act

Although the Treasurer is signalling beyond his first budget, he will be leading a thorough examination of how the government can better balance the books while meeting community expectations.

How to do it in the highest inflationary context in 15 years will be very challenging, but Chalmers accepts cost-of-living relief is urgent.

In a little-noted answer in one of his four interviews on the TV networks at the weekend, the Treasurer said, “the stage-three tax cuts that come in in a couple of years’ time, they kick in at $45,000 and so they will provide some welcome tax relief”.

Hardly the comment of someone who is about to axe stage three, though he didn’t say at what rate the cuts might kick out.

In the meantime, the Treasurer is giving us plenty to argue about.

Paul Bongiorno AM is a veteran of the Canberra Press Gallery, with more than 40 years’ experience covering Australian politics

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