Despite the hand-wringing from many business leaders and conservative commentators, the Senate is set to actually save the government tens of billions of dollars. Indeed, it is likely that a diverse Senate will be more concerned with the budget bottom line than the pre-election Liberal strategists were. While an eight-week election campaign was not enough to force an answer out of the Coalition about how their $48 billion tax cuts would be funded, no doubt an eight-day Senate inquiry inevitably will.
Last week, credit rating agencies rushed to make a judgement on the election before the results were even known. But this arrogance — from the very same agencies that certified the stability of the banks that crashed and caused the GFC, meant a much bigger point was missed. When it comes to the revenue side of the budget, many of the crossbench parties, Labor and the Greens come bearing cash.
[Morrison can run but can’t hide from S&P]
Analysis from Australia Institute released today on the likely fate in the Senate of key Turnbull government policies — and the budget impact of these policies — finds there is at least $100 billion worth of revenue gains to be made with the support of Labor and new crossbenchers.
Business leaders and the ratings agencies should be urging the government to work with, rather than against, the new Senate on key revenue matters.
The key choice for Malcolm Turnbull is whether or not he will repeat the populist mistake made by Tony Abbott. On taking office, Abbott prioritised the passage of the tax cuts he had foreshadowed ahead of introducing the spending cuts that he had kept up his sleeve. Abbott bet, wrongly, that the Senate would have no choice but to pass the unpopular spending cuts after they had passed his popular tax cuts. He was wrong, and the Coalition’s economic credibility is yet to recover.
[Are conservatives better economic managers?]
Abbott’s repeal of the carbon price and his retention of the compensation measures cost the budget around $7 billion per year. He then blamed the Senate for failing to pass big cuts to health and education that he had promised not to make. If Turnbull wants to restore the Coalition’s credibility when it comes to managing the budget and show that he can make an “unworkable” Parliament work, he will need to tackle the revenue side of the budget first. Luckily for him the Senate looks willing.
Bringing forward legislation to increase the tax on the superannuation of the very wealthy and abandoning the unpopular proposal to cut tax for big business will boost both the budget bottom line and the Prime Minister’s authority. Delivering promised reform and avoiding inevitable defeat will deliver more for his government, and the economy, than chest-beating and blaming the crossbench.
Successful governments work with the Senate, not against it. The constitution made it deliberately hard to pass laws. This is not chaos; it actually provides stability.
The new Senate is obviously complicated, but bringing on revenue measures, while abandoning other expensive measures like the company tax cuts, could lead to workable and positive economic outcomes.
The $100 billion of revenue gain identified by the Australia Institute is just the beginning for a government that is determined not to just repair the budget but also repair the public’s faith that political parties can work together when they share similar ideas. The government should embrace Labor’s capital gains tax policy, for example, a policy even the BCA supports, and he could significantly reduce the deficit or spend new money to prove the sincerity of his commitment to Medicare. Such reform to capital gains tax is widely supported by economists and was recommended by the Henry tax review.
[Company tax: the Four Rentseekers sing a song of bullshit]
On the spending front, cuts to renewable energy or Gonksi education spending are likely to face a chilly reception in both the community and in the Senate.
If government genuinely wants more “jaw-jaw and less war-war”, as Arthur Sinodinos said yesterday, other Coalition positions need to be abandoned. Further changes to the Clean Energy Finance Corporation or cuts to renewable funding or attacks on environment groups would likely only enrage key parts of the Senate. It would seem wise to abandon these unpopular and largely ideological legacies from the Abbott period.
Our research shows plenty of potential common ground in the new Senate but also reveals a number of policies that are unlikely to pass the upper house. A smart new Turnbull government would recognise this early and adapt. Tony Abbott chose instead to charge full steam ahead. Time will tell if Turnbull is really more agile than his predecessor.
Please Crikey, something a little more balanced? This is just propaganda from the Australia Institute, the adolescent version of the pre-pubescent Get-Up. I don’t expect middle of the road just your usual sensible left-lane approach. Cheers, M
I think AI’s suggestions are middle of the road. The Coalitions are clearly aimed helping the big end of town, AI suggests closing ‘loop holes’, that we’ve given to ourselves, and ‘filling in’ this budget deficit created by Howard’s tax cuts/handouts.
So, having defeated the ALP for government, you propose that the coalition should adopt the ALPs policies and govern just like the ALP, delivering an ALP-Green wet dream of policies.
Uh…can we have some responsible journalism, by real adults please, rather than this shallow tripe.
In some areas the ALP’s policies would have been the government’s policy, except that Labor announced them first, so they had to be opposed.
Things such as negative gearing.
I see the election result has taught you nothing. The expected make-up of the new Senate WILL NOT PASS most of the measures proposed by the Coalition. So what do you suggest the government does about it?
Either they bang their collective heads against a brick wall for the next ?3 years…or they adopt some of the Labor policies, such as adequate funding for education and health, action on climate change and renewables, SSM WITHOUT the plebiscite and a host of other sensible alternatives that the people want.
Having said that…Talcum will do none of those things, because the RWNJs in his own party won’t allow it! Never mind that the election was virtually a dead-heat.
So much for ‘the people have spoken’!!
My comments above are directed to Michael James.
I am with you CML, Mr James is as thick as two short ones and very unlikely to adopt a sensible viewpoint.
Once upon a time governments issued money and promised to allow people to pay their taxes with the money they issued.
Issuing money creates credit or the promise to repay. Money in Australian dollars is the Australian communities credit as the community agrees to pay its taxes using the money.
Governments for various reasons have outsourced (privatised) the creation of credit to the banks. Instead of governments issuing credit on our behalf, they license the banks to do it. The banks take the profits and are supposed to take the risks. But, all banks are not allowed to fail and so governments end up taking the risks. If banks fail then the community pays. Banks can still issue private debt but not government debt.
Going into debt to a third party is a bad deal for any community, particularly when the money is borrowed from overseas entities.
We used to do things differently. The Commonwealth Bank had an initial capital allocation of 10,000 pounds. It set about financing the First World War and infrastructure throughout Australia. The Australian community went into debt to itself. This was OK.
We got into trouble when Sir Denison Miller died in 1923 and the Commonwealth went into debt to the British Bankers who somehow persuaded the Australian government to take out loans in British Money. Australia was dragged into the 1930’s depression because of these debts.
We do not have to continue down the same path 100 years later. We can go into debt to ourselves and promise to repay with our taxes. We can pay off all the overseas loans and balance the budget. We issue loans to ourselves to build and repair our public infrastructure including hospitals, schools, roads, urban transport, and the NBN. We make sure that entities and individuals who operate in Australia pay their fair share of taxes to repay the money created to fuel the economy.
It is easy to do if we have the political will.
KevH – unarguable except for the kicker at the end “if we have the political will.“.
We, the People, or at current figures about a third of Us, have the will but the politicians do not, will not heed our wishes.
If the definition of an honest politician ( yeah, oxymoron I know) is one who stays bought then ours are exemplars of the species.
They dance to their Masters’ tune, not ours.
..oops, sorry Kevin COX.