Budget 2019: Shades of the GFC cash splash, Frydenberg makes emergency direct deposits

The headlines might look pretty, but there's little substance behind the government's core budget spends.

The headlines might look pretty, but there's little substance behind the government's core budget spends. Photos: Getty

Josh Frydenberg is walking in Wayne Swan’s shoes.

In an echo of Mr Swan’s GFC cash splash – the $900 cheques to keep Australia spending in an emergency – Mr Frydenberg is giving average Australians $1080 direct deposits in July-August.

The emergency this time is both political and economic.

Politically, the Coalition obviously wants to be re-elected next month so it’s pretty much matching the opposition’s tax cut offer. (Stand by for a higher bid from Labor.)

Economically, the government is acknowledging that consumer spending is stalling. And when the consumer stalls, the economy overall is in trouble.

So doubling the cash rebate that was promised by Scott Morrison in May is most welcome and absolutely necessary.

For someone with a taxable income of $60,000 (not far off the median income), it’s the equivalent of a pre-tax wage rise of 2.7 per cent.

If the latest wages index growth of 2.3 per cent is maintained (and that’s a considerable “if”), it means the median worker would get the equivalent of a 5 per cent wage rise in 2019-20 – the first increase in average, real, take-home pay in half a dozen years.

But now the bad news: That’s all there is.

Contrary to the budget speech rhetoric, there is no “plan” for strong, sustainable economic growth.

There’s no further tax relief envisaged for the majority of Australians over the next five years and the budget’s own figures point to real household disposable income again going backwards after this initial election sugar-hit.

Treasury’s budget papers forecast unemployment remaining stuck at 5 per cent. That’s in keeping with the latest NAB business conditions survey.

With no improvement in unemployment, the budget’s forecast of 3.25 per cent wages index growth in 2020-21 is pure fantasy – like all the forecasts of wages growth this decade.

Beyond the next two financial years, all the government’s figures are admitted to be fairy tales. As Treasury spells out in every budget, it only tries to forecast two years.

Beyond that lies “projections” built on the Goldilocks assumption the economy will absorb all excess capacity over five years. And we all live happily ever after.

Unfortunately, life and the wide wild world aren’t that simple.

Instead of any plan, heading out into that world, Mr Frydenberg only offered the regurgitated neoliberal dogma of trickle-down economics.

He could only assert that a further radical flattening of our progressive tax system to vastly favour the top quartile will somehow make the economy strong.

There’s no evidence that such dogma works.

In case you missed it (and it seems most of the immediate budget coverage did), the announced Morrison/Frydenberg core neoliberal goal is for a 30 per cent rate for all incomes of between $45,000 and $200,000.

According to the Treasury’s calculator, that would mean someone on $200,000 a year in 2025 would pay $11,640 less tax.

Someone on $60,000 a year would only get an extra $375 in 2025 on top of this budget’s $1080 relief.

(Remember here that people with “taxable incomes” of $200,000 tend to have substantially higher pre-tax income before their accountants get involved in minimising their exposure. People on median incomes tend not to have that benefit.)

Contrary to neoliberal dogma, it’s not the minority of people on six figures who really drive consumption and therefore see money “trickle down” to the masses.

It’s average Australians who buy most of the groceries and kids’ shoes and petrol and pay electricity bills. They’re the people behind the current consumption emergency – and there’s no plan for them beyond Mr Frydenberg’s emergency direct deposits.

Oh, the budget’s other headline? The supposed increase in infrastructure?

It’s a con, just an update of the smoke-and-mirrors trick that treasurer Morrison learnt from treasurer Hockey.

The big “$100 billion over 10 years” obviously is an average of $10 billion a year.

Joe Hockey’s 2014 budget promised $50 billion over six years – $8.3 billion a year.

By the middle of Mr Frydenberg’s grand decade – 2024 – the $10 billion spend will represent compound growth of 1.9 per cent over Mr Hockey’s $8.3 billion a decade earlier.

That’s about the inflation rate.

Mr Frydenberg is not promising any real growth in federal government infrastructure investment. He’s only going to stop cutting it the way Scott Morrison did.

And, by way of comparison, the New South Wales government alone is spending $90 billion on infrastructure over four years.

So, don’t be fooled.

There’s an emergency cash splash and a bunch of election campaign giveaways, but that’s it.

There’s no plan for sustained growth.

There’s no real increase in infrastructure investment.

There’s just an inane chanting about lower taxes, a chant that is an appeal to individuals’ greed and little else.

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