This budget is designed to signal better times ahead without overly contributing to their arrival. This is predominantly a budget that makes you wonder just what the Abbott and Turnbull governments have been up to for the last four years. It is a budget most notable for trying to sweep aside, or under the carpet, the policy missteps and blunders of those four years. It has been called a step to the left. In fact, it is really a stumble rather than a step, although I think the government thinks it is more a redemption song. It seems to achieve that end by jettisoning the surviving remnants of the infamous Abbott-Hockey budget of 2014. That document is now officially dead, buried and cremated and, with it, the Prime Minister no doubt hopes, the political aspirations of its surviving co-executor, the member for Warringah.
This is a budget where climate change, cost-of-living pressures, innovation in housing affordability policy, falling real wages and lack of job opportunities are either ignored altogether or left swinging in the breeze. This is a budget that, apart from a few eye-catching initiatives like the bank tax, is about hoping the patient will not expire while the government waits for its luck to improve. Most of the modestly rosy forecasts, including a return to real GDP growth rates of around three per cent and nominal wages growth of 3.75 per cent in three years time, rest on expected improvements in the world economy or on major indices returning to trend.
Additional infrastructure spending has been either mooted or identified, but, as the member for Grayndler has noted, that will not kick in until many years down the track. Disappointingly, some major projects, such as the rail line to the Badgerys Creek second Sydney airport, still have a far-from-certain future. This significantly affects the quality of life of many in my electorate and ignores most of the value-capture opportunities. However, it is a budget that capped a couple of weeks where this government finally realised that, if it was to have any hope of recovering public approval, it would have to start addressing the issues that most matter to people.
The budget, in a sense, caps one of the most brazen pieces of political shapeshifting in living memory. In quick succession, there was a deathbed-like recognition that energy security and pricing policies have been teetering on a precipice. There was recognition, after many years of denial, that not all government debt is bad for the economy. We saw a bold, if highly skeletal plan, for Snowy 2.0 wheeled out as a thought bubble, and there were encouraging noises that the government might finally want to face up to the housing affordability crisis that has fuelled record levels of household debt. The government even appeared to become, in extremis, more or less agnostic on the question of public ownership. It even trumpeted a re-embrace of needs based school funding.
Again, one wondered a little why the government had taken so long to find its political courage. The rhetoric looked promising, but it was only rhetoric—and, mostly, it still is. A paraphrasing of an old song keeps coming to my mind: not signed, not sealed and certainly not delivered. Budget night came and went and the picture was further muddied by government announcements that many commentators saw as 'Labor lite'. In the process, the government revealed that the true cost of the first 10 years of its 'locked in forever' tax cuts to business and multinationals was $65 billion—a mere $15 billion higher than was consistently touted during the budget week.
I react to that term 'Labor lite' the same way that many journalists do to the expression of 'fake news'—that is, with considerable scepticism and some distaste. Although, while I think the term 'Abbott lite' is not nearer the mark either, it does at least have a certain irony to it. My objection to the term 'Labor lite' is that it portrays that Labor is the party of fixed policy positions rather than one of consistent values. This is an important distinction which I think our leader, Bill Shorten, made very well in his budget reply but which some commentators missed or misconstrued.
Labor and the coalition each have their own values and priorities, but it does not follow that they are wedded to a particular approach to problem-solving or policymaking. Let's be clear: neither side of politics are strangers to pragmatism nor, in the main, the enemies of moderation. It is the norm. It is only when either side of politics is captured by those at the extreme that we enter dangerous times, and that is when governments lose sight of the common good and common sense and things start going off the rails.
The problem with the 2014 budget was not just that it was unfair or broke numerous election commitments. Its enduring weakness, which has continued for the last three years, has been its unrestrained embrace of ideological spin. Claims such as 'Governments don't have a revenue problem; they have a spending problem' come to mind. 'Lifters and leaners' is another one. If this budget allows Labor to claim a small victory because the government has been forced into adopting a more measured and pragmatic mindset, that is fine by me. But I think it is more accurate to say that there is now a wider taste for moderation and even-handedness out there in the electorates. The smarties advising the government—people such as Mark Textor—know that the days of ideological indulgence for this government are over if it is going to survive.
We now see a Treasurer, in his words, reaching across the aisle, just getting on with things and being results focused. He even came to my electorate to claim he had a comprehensive policy on housing affordability. Of course, it was nothing of the sort. Yes, I can see positives in this budget that Labor want to acknowledge and may want to build on when we are in government. Jettisoning the so-called zombie measures from the 2014 budget allows this place and policymakers to have a sensible and more productive discussion about budget repair. Recognising the distinction between good and bad debt, although adopted for reasons that might not entirely spring from rational disinterest, makes some sense too. Hopefully there is also some recognition that the economy is functioning below full capacity and that bringing it up to speed ultimately will be good for the budget bottom line. There is also a somewhat shy acknowledgement from the government that tax increases and levies are legitimate policy tools. This is simply a sensible but tentative return to policy orthodoxy. The budget too is less blinkered on the provision of public goods, public services and even public ownership. And, yes, as Labor has always intended, the temporary freeze on Medicare rebates is finally being lifted, but far too slowly. Medicare bulk-billing rates are still going down, and for many people it is impossible to get in to see specialists. This government intends to cling on to the last elements of the extended rebate freeze until July 2020.
Nonetheless, this budget is flawed and will make little real difference to the majority of Australians. The budget's failings can be grouped under four headings: missing inner connections; proceeding on outmoded assumptions; letting prejudice and populism overrule logic; and fighting the wrong battles. Apart from its failing on health policy, which I will leave for another time, the greatest failure of this budget is in the area of housing affordability and taxation policy. For the last four years, the government has persisted with policies that have simultaneously fuelled runaway house prices on much of the east coast, added between $10 billion and $12 billion annually to the federal budget deficit, reduced homeownership rates and helped push private debt to Australian and near-world record levels, both as a percentage of individual income and GDP. It has fuelled a speculative bubble and exacerbated inequality. As the shadow Treasurer has noted, 70 per cent of the tax concessions that fuel this speculation go to the top 10 per cent of income earners. The government quite simply refuses to recognise the connection between limitless negative gearing concessions, concessional capital gains taxes and historically low interest rates. That is why the measures contained in this budget are the equivalent of trying to defuse a time bomb with a toothpick. The best that can be said is that most of the small measures it has put in place might help a little bit at the margins and probably will not make matters worse, except for one thing. That is the first home super saver scheme, which will, in all probability, simply add to the already overheated demand and force up prices further. If this scheme has any saving grace, it is that the take-up is likely to be very small.
Although I do applaud the government for making permanent Commonwealth funding on homelessness to the states and also for focusing more on supporting victims of family violence, more could be done. The effect of excessive home loan borrowing on general household debt levels also gives increasing cause for concern. It is time that the coalition paid far more attention to private debt levels and focused less extensively on government debt, as has been the case for many years. Public gross debt levels are high by Australian standards but are relatively modest compared with those elsewhere. Private debt however is at historic highs, both as a proportion of household disposable income and as a proportion of GDP. Private debt levels are primed for catastrophe.
One wonders if anyone in government is also mapping the cumulative effects of budget measures on millennials and, more generally, Australians under 35. This budget, if anything, makes life harder for young people. House ownership amongst 25- to 35-year-olds is in freefall, and rates of unemployment are stuck at over five per cent and, for those aged 15 to 24, above 13 per cent. About a million Australians who are in work cannot get enough hours. The 15 to 24 years age group has consistently had the highest underemployment rate. This has risen from May 2008, when it was 11 per cent, now to 17.4 per cent in November 2016. This is an evolving Australian tragedy. Wages are also stagnant and penalty rates are under threat. The proposed further increase to the Medicare levy and to university fees will make a not atypical graduate, currently on around $50,000 a year, about $1,250 worse off. For those without a job, the Newstart allowance remains entirely inadequate. Instead, the government has ramped up its rhetoric against the unemployed and instituted yet another 'crackdown' on welfare and pensioners. The so-called 'wee for the dole' program is a poor attempt to treat a medical problem as a social security problem. It is discriminatory. We are told that it is not going to check for alcohol, the drug that causes the most social dysfunction. It is thought-bubble policy of the poorest level, and I condemn it.
Another area where the government needs to revisit some fundamental assumptions is in regard to tertiary fees. The latest round of proposed HECS changes and tertiary funding changes represent a very poor deal for students. Funding to the tertiary sector will be cut by around $3.8 billion over the next five years. To someone of my generation, who had free university fees and no problems with job availability, this is an anathema. The government has done very little to address this. For someone of my generation, it is very difficult to look at this with our own children. In short, students are paying more and more for the cost of degrees, which are, in many cases, providing ever diminishing rates of return. In many fields of study—the humanities, law and economics—the government is now providing much less than 50 per cent of the cost of the degree. Are there better times ahead? Clearly not if you are a student, a young person looking for a job or house or both.
This is the budget of a government that knows it has just about burned its bridges with a rightly disappointed and despondent nation. Even though it has been called a step or a stumble to the left, there are clearly ideologues in this government that continue with an ideology of punishment of those who are most vulnerable and little understanding of how difficult it is for average people to live their lives. The pity is that after four years this government has left the economy ill equipped and exposed to forces that may now prove to be beyond anyone's control.
This Friday, 26 May, is the 50th anniversary of the release of Sgt. Pepper's Lonely Hearts Club Band. Anyone of my generation would find it hard to believe that it is 50 years since the release of this album! This budget needs, to paraphrase the Beatles, more than a little help from its friends. Lucy may well be in the sky with diamonds, but the economy is not getting better. It is not fixing a hole. She is not leaving home, because she cannot afford it.