If the government can’t win an election with this cash splash, it should give up politics. This is the biggest budget splurge outside an economic crisis in history, with two $100 billion deficits in a row coming up despite unemployment expected to fall below 5%.
The deficit will still be over $50 billion in 2024-25, making this the first budget in history designed to buy two elections in a row. Josh Frydenberg has more than lived up to his commitment to abandon the return to fiscal discipline and keep spending money to push unemployment down as far as possible.
If we want to suspend political disbelief for a moment, you can see a policy justification for Josh Frydenberg’s determination to keep firing the cash cannons long after we’ve returned to our pre-pandemic levels of joblessness. The government’s forecasts for the Wage Price Index will barely shift even as unemployment reaches 4.5%: 1.5% growth next year, 2.25% in 2022-23, 2.5% in 2023-24, and 2.75% the following year.
That means minimal real wage rises for Australian workers over the forward estimates. That’s the sign of a broken labour market, in which workers lack the power to exploit low unemployment to demand better pay. But it also provides a political justification for the government to keep the fiscal taps open well into the mid-2020s.
The question then becomes about the quality of the spend: are taxpayers getting value for money from the huge debt the government is running up for them? The areas targeted are notoriously difficult to get right: aged care has proven problematic for multiple governments (which have all nickel-and-dimed the sector); mental health, which has endured multiple injections of funding for more than a decade; $1.9 billion to fix the vaccine rollout debacle; more money for first home buyers which will likely flow straight through to home owners.
For a government that has gained a reputation for being all about the announcement while going missing for the delivery, the only real political risk is that voters work out by the next election (watch the stories about a 2021 election return in coming weeks) that the big spending isn’t necessarily being delivered on the ground.
But the political damage is primarily on Labor. This is the kind of budget Labor would never deliver because it knows it wouldn’t be allowed to get away with it — pumping 5% of GDP into deficit spending when unemployment is already at 5.6%. It can only critique the quality of the spending — necessarily a long-term political project — or tell voters that if they want the real thing when it comes to better social services they should come to Labor.
The longer-term political question, one that goes beyond the next election or two and beyond the current prime minister and treasurer, is what will embracing big government do to the Liberal Party?
For decades, the Liberals have preached fiscal virtue and insisted they were the true party of fiscal discipline; that they alone understood that government money was taxpayer money to be used wisely.
They never practised what they preached: the Coalition has long been the big taxing, big-spending party of government, consistently delivering high levels of spending and tax, and the biggest rorter of taxpayer money. Now it has embraced the truth of who it really is: the Liberals are all about big spending and big government.
How comfortable are the remaining neoliberals of this government with their new status as the party of government intervention? Probably just fine if it gets them reelected.
Is this Government the most visionless ever?
Their foresight extends only to the next election. Even the budget is designed with the election in mind, not what the country needs.
A few hundred million here, a few billion there, an election win there. Not enough to paper the cracks in aged care. Absolutely f*ck all for the environment. Throw women’s health $352m but spend $500m on expanding the war memorial?
Everything they do, (or more accurately don’t do) is driven by winning the next election.
Watch the electorate eat up the “better economic managers” myth again.
Sad.
Believe this “new made-over” mob?
What this government does before an election and what it does after are two different things. For starters they don’t do “pleb empathy” – they do “scapegoats” instead – they have to be dragged to even look at it. This “change” won’t last long after the election.
After the trauma they’ve inflicted on so many sectors (aged care, mental health and tertiary education for starters) over years of stripping funding (to pad their bottom rhetorical “economical” line) – how much of what they’ve “robbed” goes back to those sectors? How long after being elected will they go back to milking them to pay this “largess” back?
“Is this government changing it’s spots?” or (to put it another way) “Are Scotty FM’s best mates, Stewie Robert, Gus Taylor, Spud Dutton, getting the boot?”
“… Tudge, Porter, Cash, Pitt, Fletcher, Price, Ruston, Hume, Sukka, Colbeck, Stoker? Say when …..”
Didn’t this coterie of liars tell us two years ago that they’d achieved budget surplus? We’ll be paying for tonight’s profligacy for generations to come. Really, people should stop making excuses for them. Including Crikey.
Does this budget:
increase real wages | raise some Aussies above the poverty line | make Australia’s economy stronger | make billionaires and big corporations pay their fair share | properly address climate change | address the lack of proper quarantine facilities – NO.
Is their childcare package as good as the oppositions – NO
Are they attempting to dismantle Medicare / NDIS – YES
Will this coalition government continue to tell Australia lies and rort the public purse – YES
What horrifies me about the LNP’s new found love of a deficit is the realisation that it’s their new strategy to deliver small government. Future governments will be so totally crippled by debt repayments that they won’t be able to provide any services at all. And, bonus, they get to rob the future to give to their rich mates now
Good point.
The merits of government spending on any particular programme is worth debate, but interest payments on bonds will never cripple this or a future government. The federal government issues the currency, and never faces any purely financial constraint, and hasn’t since the dollar was floated in the early 80s. The limit on spending is real resource capacity: trying to buy what isn’t available in sufficient quantity, or in other words, inflation.
It may suit the current government’s neoliberal purposes to pretend that their budget is like a household’s and that they have to “live within their means”, but their actions expose this for the lie that it is.