Budget 2017: Morrison heads off the right with an appeal to altruism over self-interest



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Treasurer Scott Morrison’s budget is stressing the ‘potential for better days ahead’, and in that he is half-right.
AAP/Lukas Coch

Tony Walker, La Trobe University

Treasurer Scott Morrison has delivered a 2017-18 budget based on some heroic assumptions about a continued improvement in the international economy, and tethered firmly to concerns about the government’s own political vulnerability. The Conversation

In the process, Morrison has leapfrogged normal practice in the first budget after an election – traditionally an opportunity to tighten purse strings – by outlining free-spending government programs in health, education, housing affordability, assistance to seniors and a big down-payment on an ambitious suite of infrastructure projects.

With its eyes firmly on a populist challenge from the right, the government has projected some tough measures to bring the larger banks to heel by instituting a series of reforms that will seek to answer those concerns.

Banks will not be happy, nor will investors in those institutions whose share prices are likely to retreat once the impact of the proposed levy on profits is factored into market calculations.

Beyond all that, Morrison’s budget speech could be read in part as an electioneering document, as if the next election was just around the corner instead of two years away.

Theoretically, we are two budgets shy of the next election. But clearly Morrison and Prime Minister Malcolm Turnbull have resolved to move onto the offensive politically by bringing down a budget that is both populist and expansionary.

This is a budget that could easily have been delivered by a Labor treasurer.

What should be kept in mind is that the Turnbull government is clinging to the slenderest of parliamentary majorities, and therefore vulnerable to unforeseen developments, including health issues that may deprive it of that majority.

While it is premature to make such a judgement, the 2017-18 budget may well come to be regarded as the moment when Turnbull resolved to put a stake in the ground on issues that will define his tenure.

Thus, his decision to resurrect the Gonski needs-based funding program for schools, and his undertaking to fully fund the National Disability Insurance Scheme via an increased Medicare levy, are significant initiatives in the life of his prime ministership.

He is already getting pushback on the Gonski proposals from Catholic schools over a projected slowing in the growth of allocations to that sector.

Increases in the Medicare levy – in other words, an increased tax – will dismay some of those on the right.

Perhaps most pointedly, this budget represents a riposte to the 2014-15 budget from Joe Hockey in the Tony Abbott government, when a number of government programs were curtailed, raising questions about fairness.

Morrison and Turnbull have thrown that strategy into reverse. In the process, they have sought to market the budget as an attempt to rebalance the government’s relationship with an electorate that believed it was no longer being heeded, and certainly not being treated fairly.

It remains to be seen whether this approach will work, or whether it is too late for a conservative government to regain lost ground.

At his budget eve press conference, Morrison made a telling observation that appeared to anticipate criticism from the right.

“This is not a budget for ideologues,” he said. “This is a budget for a government elected to do its job.”

Morrison returned several times to the issue of sluggish wages growth in his remarks to the media, an indication that the government understands it is vulnerable to widespread disaffection over a lack of material improvement in people’s lives.

Now to the glass half full assumptions on which the 2017-18 budget is based, and more to the point Morrison’s insistence he had charted a clear path to a return to surplus in 2020-21.

His prediction that a deficit of A$29.4 billion in 2017-18 will return to a projected surplus of A$7.4 billion in 2020-21 rests on a continued strengthening in the global economy, and ongoing improvement in Australia’s own economic performance.

“The signs of an improving global economy are there to see,” he said in his budget speech. “There is clearly potential for better days ahead.”

Well, maybe!

Morrison is predicting a rebound in Australia’s real GDP growth to 3% 2018-19 from 2.75% in 2017-18, reflecting an improvement in global economic conditions.

Growth in 2016-17 is forecast to be a limp 1.75%.

The point is that Morrison and his Treasury advisers are banking on a fairly robust pick-up in Australian rates of growth to underpin ambitious new expenditures, and an earlier-than-anticipated return to surplus.

However, much depends, as always, on China preserving growth at around 6.5% per annum. Perhaps more importantly, it will also need to maintain its appetite for Australian commodities.

The Budget papers acknowledge the difficulties facing China in its efforts to accommodate slowing growth “amid structural shifts in the economy, a declining working age population and high levels of debt”.

In other words, China providing a continued “Band-aid fix’’ to Australia’s precarious budgetary situation cannot be taken for granted.

That said, it is true that the global economic environment has improved somewhat in the past 12 months. This means that some of the financial pressures on the Turnbull government have eased since its mid-year economic forecast in December projected a less buoyant outlook.

Morrison is half-right when he says there is “potential for better days ahead”.

But there is also plenty of scope for disappointment if a fragile global recovery falters. Or geopolitical upheavals weigh on confidence. Or if landmines in the banking sector lead to another financial crisis. Or if the world finds itself beset by events that no-one could possibly predict, such as a terrorist episode on the scale of the World Trade Centre attacks in 2001.

Morrison and Turnbull cannot afford to dwell on the negatives in their efforts to get a listing conservative ship-of-state back on course. In that regard, this budget represents something of a gamble on continued global growth, and a willingness of an Australian public to accept a further tax increase (via the increased Medicare levy) and little prospect of tax reductions in the next two years.

To that extent, this is a budget that appeals to altruism over self-interest. This is not necessarily a winning formula politically, but Turnbull might be given credit for trying something different.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. Read the original article.

Morrison’s fresh start budget comes with fresh pain


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Treasurer Scott Morrison explains the budget in the lock-up.
AAP/Lukas Coch

Michelle Grattan, University of Canberra

Scott Morrison has delivered a surprisingly big-taxing budget that pays for the last burial rites of the toxic Abbott legacy of 2014. The Conversation

The Medicare levy will be increased to fund the hyper-expensive NDIS, and Australia’s big banks are being slugged with a new tax. The public will feel some impact from the levy rise – by 0.5% to 2.5% – but Treasurer Scott Morrison is selling it as extra money for an “insurance” scheme.

Morrison’s insistence that the problem was not on the revenue side suddenly has become oh, so yesterday.

Ordinary people will feel little sympathy for the major banks bearing extra impost, although some of the new levy on them, raising more than A$6 billion over the forward estimates, will likely flow through to customers. If the banks squeal, the government has the comeback: if we are voted out you’ll get a royal commission from Labor.

The assorted so-called “zombie measures” that have been hanging around unable to pass the Senate have finally been abandoned. “We have decided to reset the budget by reversing these measures at a cost of A$13 billion,” Morrison said.

Indeed, “reset” could be a theme song for this budget, although the government prefers “fairness, security, and opportunity”.

Malcolm Turnbull and his treasurer are looking for fresh starts in all sorts of areas.

Morrison’s messages are that the government has noted people’s pain, with slow wages growth resulting in the frustration of those “not getting ahead”. He is optimistic about the future. “We are now moving towards the end of this difficult period”, he said, and with signs of an improving international economy “there is clearly the potential for better days ahead”.

As expected, bandages have been applied to health and housing affordability.

“We will legislate to guarantee Medicare,” Morrison said. A Medicare Guarantee Fund will be set up to pay for the expenses on the Medicare Benefit Schedule and Pharmaceutical Benefits Scheme.

Proceeds from part of the Medicare levy plus the amount of other income tax revenue needed to cover the costs will be paid into the fund. It’s more of a gesture than a real “guarantee”, but it reflects how frightened the government still is about last election’s “Mediscare”.

The housing package is an assortment of targeted measures, including a tax break for young savers, help for older downsizers, and initiatives on rental and low-cost housing. The government has preserved negative gearing but has cracked down on concessions associated with investment housing. It has also tightened arrangements for foreign investors.

Turnbull’s radical change of direction on schools, funded in the budget, was unveiled earlier and is already contested, with a strongly negative reaction from the Catholic sector. The prime minister would be heartened that Tony Abbott’s party-room criticism (just hours before the budget) wasn’t taken up by many colleagues, although this could still be a slow-burn issue.

As in all Coalition budgets, those on welfare get something of a kicking. Perennially, the government announces “crackdowns”. This time it proposes a drug testing trial for 5,000 new welfare recipients, and will deny the disability support pension for a disability caused solely by a person’s own substance abuse.

Somewhere along the line the Coalition has moved from a preoccupation with small government to an embrace of expansive government. This is on two fronts. It has become much more sympathetic to people’s attachment to services. In the budget lock-up, Morrison explained this by saying the fact people’s wages hadn’t been growing made their reliance on services that much greater.

On a second front, the government has become increasingly enthusiastic about investing in nation building. Abbott might have wanted to become the “infrastructure prime minister”, but Turnbull and Morrison are committing public equity dollars to big schemes: the Melbourne to Brisbane freight rail and Sydney’s second airport, among others. They’d also like to buy out the states’ shares of the Snowy Hydro.

In the run-up to the budget, Morrison made much of “good debt” and “bad debt”. He’s sticking with the distinction, but being more nuanced in his language. The budget says that the government will no longer be borrowing to pay for “everyday expenses” – recurrent costs – from 2018-19. This makes an uncomfortable overall debt situation perhaps sound better, although it doesn’t change its reality.

The budget is still projected to reach balance in 2020-21, going from a forecast deficit of $29.4 billion in 2017-18 to a projected surplus of $7.4 billion in 2020-21, a little larger than the previous forecast.

The government hopes the rating agencies will be convinced by its numbers – despite what looks an optimistic forecast for wages growth, on which depends income tax revenue – and by its wiping the slate clean of measures that were never going to jump the parliamentary hurdle.

“This is a practical budget,” Morrison said. “We are a practical government.” It was not, he said “a budget for ideologues”.

Turnbull desperately needs it to be a budget that the public accept, weighing its mixture of optimism, reassurance and initiatives as worth more than some unexpected imposts.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Treasurer Scott Morrison’s 2017-18 budget speech, annotated by experts



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What was between the lines of Scott Morrison’s budget speech?
AAP/Mick Tsikas

Tom Clark, Victoria University; Annabelle Lukin, Macquarie University, and Danielle Wood, Grattan Institute

In his speech to the House of Representatives tonight, Treasurer Scott Morrison claimed the 2017-18 budget was a “fair and responsible path back to a balanced budget”. The Conversation

The Conversation asked three experts – political speech expert Tom Clark, linguist Annabelle Lukin, and economist Danielle Wood – to closely watch the treasurer’s budget speech, which you can read in full here. We’ve collected their live tweets of the speech in Storify below, and a selection of their best tweets and annotations is to come.


I know this has put real pressure on Australians and on their families. Terribly, this has meant some families have even broken apart. – Treasurer Scott Morrison

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This paragraph is the treasurer’s signal to his base: they should regard the 2017 contribution as a “family values” budget.

In giving an address to the Australian Christian Lobby 2016 National Conference, just over a week before his 2016 budget speech, Morrison reminded people that his core constituency is among conservative protestants in the newer congregations and mega-churches. His compact with them is that he will always put family interests at the heart of his policy outlook.

He does not often express it in overtly religious terms, but he always makes it the dramatic (or melodramatic) core of his policy narratives. – Tom Clark, Victoria University


We cannot agree with those who say there is nothing that the government can do. And we must choose to ensure the government lives within its means. – Treasurer Scott Morrison

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This is where the treasurer tries to communicate his government’s change of direction without losing the confidence of conservative supporters.

This government has very often in the recent past agreed with people who say it can and should do less. It has very stridently insisted that spending less money on programs is preferable to raising more for them.

Now the government needs to relent on that logic, so the 2017 budget speech needs to balance competing political agendas.

On the one hand, moderates and centrists need to know that Morrison “buries the ghosts of 2014” (which was a hardline budget that deeply shook this government’s credibility). On the other, conservatives need to know the Liberal Party will still tax and spend less than Labor would. – Tom Clark, Victoria University


I can confirm tonight that the budget is projected to return to balance in 2020–21 and remain in surplus over the medium term. – Treasurer Scott Morrison

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The budget position is forecast to improve from a deficit of A$37.6 billion this year to a surplus of $7.4 billion in 2021. This is now the eight budget is which the government has claimed that we will back to surplus (or close to it) over the four-year forward estimates.

In reality, the deficit has sat stubbornly at around 2% of GDP. Underpinning these hopes is strong projected growth in income tax collections as wages are forecast to rise from 2.1% to 3.75% in 2021, which looks very optimistic. – Danielle Wood, Grattan Institute


To respect future taxpayers, this everyday spending should be funded from the first dollar we receive in taxes, not debt. – Treasurer Scott Morrison

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This is a big-taxing, big-spending budget. Almost all the budget repair “work” in this budget comes from higher revenues. Revenues are forecast to increase from 23.2% to 25.4% GDP between 2017 and 2021.

Spending is forecast to fall marginally from 25.2% to 25% GDP. And most of the revenue increases are from personal income tax – because of the increase in the Medicare levy and bracket creep from strong forecast wage growth. – Danielle Wood, Grattan Institute


The Snowy Mountains Scheme is the benchmark for nation-building infrastructure. – Treasurer Scott Morrison

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Government will be equity holder in these projects. These equity injections don’t factor into the budget balance numbers. This is the same treatment as the National Broadband Network. This has allowed the government to announce a sizeable program of infrastructure spending (western Sydney airport, Snowy Hydro, inland rail) without finding the money to pay for it.

Unless these projects generate a commercial return they will cost taxpayers down the track. – Danielle Wood, Grattan Institute


**Mr Speaker, in this budget we have chosen to place downward pressure on rising costs of living. – Treasurer Scott Morrison

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This marks the beginning of a long tail of the speech. I have tweeted it is the “we are listening” section.

The government is relenting on its resistance to banking reform, on its apparent indifference to Australia’s brewing crisis of energy supply, and on its insistence that remedies to rising house prices are worse than the problem they seek to fix.

Here are some of the biggest ideological about-turns from this government, so perhaps it is no surprise that Morrison comes to these details near the end of his speech. Along with many other elements, it points to a speech more carefully planned and drafted than his 2016 effort. – Tom Clark, Victoria University


The speech in tweets

Tom Clark, Associate Professor, College of Arts, Victoria University; Annabelle Lukin, Associate Professor in Linguistics, Macquarie University, and Danielle Wood, Fellow, Australian Perspectives, Grattan Institute

This article was originally published on The Conversation. Read the original article.

Government out of touch on housing policies ahead of budget: poll


Ben Phillips, Australian National University

Australians are concerned about housing affordability, so much so that 45.4% say they would be willing to see the value of their home stop growing to improve the situation, only 31.8% of those polled wouldn’t. An ANU poll shows 51.7% of Australians are also in favour of removing tax concessions like negative gearing. The Conversation

The poll surveyed 2,513 people (representative of the population) and found 63.6% were willing to see an increase in supply of public housing. Only 32.3% are opposed to relaxing planning restrictions.

With these numbers in mind, it is perhaps surprising that state and federal governments have done so little of any substance in housing policy for decades, if anything they’ve contributed to the problem rather than improved the situation.

Potential policy changes that many believe will improve housing affordability, including removing or reducing tax incentives such as the capital gains tax discount or removing supply impediments, have all been considered too politically difficult by the current government.

The government has justified this by playing to the fear that the value of people’s home may decline or that more liberal planning arrangements may mean that new buildings may spoil the look and feel of local neighbourhoods.

The latest ANUpoll shows Australians are very concerned that future generations may be locked out of home ownership. Three quarters believe home ownership is part of the Australian way of life.

In terms of their own investments we found that nearly 68% of homeowners cite emotional security, stability and belonging as a reason for becoming a homeowner. In terms of security factors, 51% cite financial security, 42% refer to “renting is dead money” and 41% cite security of tenure and being able to “bang nails in the wall”.

Of those families who have an investment property (17% in this poll) the primary motivation for the investment was a “secure place to store money” (27.4%) closely followed by rental income (24.3%). Only 11.9% cited negative gearing as the primary motivator and 13.7% were motivated primarily by the capital gains discount.

Housing remains easily the most popular investment vehicle, with 30% saying their preferred investment for spare cash would be an investment property, followed by 18.5% preferring to upgrade their own home. Only 12.6% preferred shares as an investment.

In spite of recent talk of a housing bubble the general population is not particularly concerned with immediate price drops, with 85% expecting house prices to rise over the coming five years. Only 5.4% expect prices to fall and just 1.7% expect prices to decrease a lot.

If interest rates were to increase by 2 percentage points, 6.4% of mortgage holders expected to be in “a lot” of financial difficulty and 16.7% in “quite a bit”. Only 27.9% would be in no difficulty. While financial difficulty does not mean default, in mortgage markets it may not take a large share of loans to default to cause financial problems for an economy.

As pointed out earlier negative gearing was the least cited reason for property investment which suggests removing the incentive would at least not make a dramatic difference to the level of housing investment in Australia.

The ANUpoll shows that the public are concerned about housing affordability and where policy is directed at improving affordability they are likely to be supportive. The policy options, be they demand side – reducing tax incentives, or supply side – building more dwellings and/or relaxing planning restrictions, are available, but greater political nerve may be required to undertake such options.

Ben Phillips, Associate professor, Centre for Social Research and Methods (CSRM), Australian National University

This article was originally published on The Conversation. Read the original article.

How the politics of the budget might play out for a government in trouble



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This budget, led by Scott Morrison and Malcolm Turnbull, will form part of the government’s repositioning as an advocate of equal opportunity and fairness.
AAP/Mick Tsikas

Carol Johnson, University of Adelaide

Given months of polls that show Labor ahead and damaging internal disunity, the politics of this budget are extremely tricky for the government to manage. The Conversation

It is not just that Tony Abbott’s sniping is causing political headaches for Prime Minister Malcolm Turnbull. Some of the government’s budget problems go back to the 2013 election.

In that campaign, Abbott suggested the budget deficit problems would be easily fixed by simply getting rid of Labor, and the government could somehow do so painlessly without cutting health, education or pensions.

However, as then-treasurer Wayne Swan had noted, Australian budget deficit problems were very complex and included substantial falls in government revenue due to the global financial crisis and the end of the mining boom. They weren’t just due to government spending.

Opponents criticised the size of the Rudd government’s expenditure, including its economic stimulus package designed to counter the GFC. Nonetheless, Kevin Rudd argued that Australian government debt was in fact relatively small compared with many other Western countries in a post-GFC world.

Once he won office, Abbott had to face the difficult realities involved in reducing the deficit. The substantial 2014 budget cuts, including to areas Abbott said would be protected, infuriated many voters and contributed to his poor polls and political demise.

The Abbott government’s woes went beyond the failure to fix a difficult budget situation. Other than attacking Labor, it wasn’t clear what its positive vision for the Australian economy was in terms of how to transition after the mining boom, and how to develop new jobs and new industries at a time of rapid economic and technological change.

Tony Abbott’s sniping continues to cause headaches for Malcolm Turnbull.
AAP/Sam Mooy

Replacing Abbott with Turnbull was meant to provide us with such a positive economic vision. However, Turnbull’s mantra of living in innovative and “exciting times” failed to convince many voters. As one anonymous Liberal MP noted, it actually made some voters highly nervous about what was going to happen to their jobs.

Hence Turnbull turned to promising “jobs and growth” during the 2016 election campaign.

However, the Coalition’s narrow win suggested many voters still weren’t convinced the government knew how to ensure job security and a good standard of living in challenging times. In particular, many voters remained unconvinced that substantial business tax cuts would drive the economic growth and improved government revenues that were promised.

Given current levels of underemployment, unusually low wages growth and with inequality increasing, they had reason to be concerned. There is also international research suggesting that corporate tax cuts don’t have the beneficial results claimed.

Fast forward to the 2017 budget, and the Liberals are desperately trying to develop a more convincing economic narrative around good economic management, nation-building, and fairness.

Despite their attempts to blame past Labor policy and more recent Labor intransigence at passing budget cuts in the Senate, Liberal ministers are still having trouble explaining how government debt has increased from A$270 billion under Labor to some $480 billion under the Coalition.

Fortunately for them, Treasurer Scott Morrison now argues there is “good debt” and “bad debt”. Good debt covers areas such as infrastructure that assists economic growth. Bad debt apparently covers areas such as welfare.

Morrison is partly belatedly accepting advice on infrastructure-funding debt from bodies such as the International Monetary Fund, while trying to argue that the government’s new debt policies will be very different from past Labor economic stimulus ones.

Needless to say, these areas of “good” and “bad” debt aren’t quite as simple to define as Morrison suggests. Furthermore, so called nation-building infrastructure spending is sometimes more electoral pork barrelling than economic necessity. Doubts have already been raised over the economic, rather than political, benefits of a second Sydney airport and inter-capital city rail links.

The NBN: ‘good debt’ or ‘bad debt’?
AAP/Mick Tsikas

Meanwhile, Turnbull struggled to explain whether Labor’s National Broadband Network was good or bad debt in terms of building necessary infrastructure.

Australian businesses that are struggling with Turnbull’s cheaper version, with its continuing use of 19th century derived copper wire technology or 1990s pay-TV-derived hybrid fibre coaxial cable technology may be wondering whether the Coalition should have discovered “good” infrastructure debt earlier and supported Labor’s more expensive fibre-optic to-the-premises model.

After all, under Rudd, the NBN was meant to be the nation-building 21st century equivalent of 19th-century government infrastructural expenditure on building railways.

Consequently, the government faces questions about whether its economic policy positions have been consistent, particularly given past Coalition rhetoric about debts and deficits.

Furthermore, while Morrison apparently characterises it as bad debt, providing temporary welfare benefits for those who lose their jobs because of economic downturns or restructuring helps keep up consumption levels. This in turn means it potentially has flow-on benefits for the private sector, as well as the individuals concerned.

It is a central lesson of the Keynesian economics that Robert Menzies’ Liberal Party embraced at its foundation, but was rejected under John Howard in the 1980s.

Does all of this mean that Turnbull is now acknowledging a lesson of the 2016 election: that neoliberalism is harder to sell than it used to be? Are his backdowns on “small-l” liberal values now being combined with back-downs on some of his long-held free-market values?

That seems to be going too far at present, especially given the government’s continued belief in the “trickle-down” benefits of corporate tax cuts and attacks on welfare expenditure.

However, there is some nuancing taking place as Turnbull tries to throw off the image of “Mr Harbourside Mansion” who loves hobnobbing with bright young technology entrepreneurs, and instead stress he is in touch with the concerns of ordinary voters.

Consequently, and much to Labor’s outrage, the government has now repositioned itself as an advocate of equal opportunity and fairness that supports a Gonski-lite needs-based education funding model.

While the government’s cuts to higher education will still have a negative impact on universities, and particularly students, the measures are less harsh than those in the 2014 budget.

It seems likely there will be some attempt in the budget to assist first home buyers. Various options have been canvassed.

Turnbull has already tried to position himself as taking action on household energy costs by criticising renewable energy costs and ensuring gas reserves. Meanwhile, there are suggestions the government will improve Medicare benefits in an attempt to counter Labor’s controversial “Mediscare” campaign at the last election.

All budgets are about politics, not just economics. But this budget will be even more so. Not all the measures are working out politically. Abbott is already threatening dissension over the impact of the education measures on Catholic schools.

This is a government in trouble. On one side it faces internal disunity and pressure from Labor’s emphasis on reducing inequality and fostering “inclusive growth”. On the other it has One Nation’s mobilisation of race and protectionism to appeal to the economically marginalised.

Then there is Cory Bernardi, the Greens, Nick Xenophon and a host of independents and other groups to consider.

After all, the budget is only the beginning. The next test is getting key measures through the Senate, perhaps even wedging Labor by deals with the Greens, so that the Coalition is in a stronger position to face the next election.

Carol Johnson, Professor of Politics, University of Adelaide

This article was originally published on The Conversation. Read the original article.

Turnbull government aims to distance itself from its predecessor with the 2017-18 budget


Saul Eslake, University of Tasmania

One of the primary objectives of the 2017-18 budget is likely to be to put some distance – politically and in terms of economic policy – between the Turnbull government and its predecessor, that of former Prime Minister Tony Abbott. The Conversation

The Abbott government came to office with a view that any and all public debt was “bad”, and that returning the budget to surplus as quickly as possible was a political and economic imperative. Hence, its first budget emphasised cuts in government spending, including in areas where it had previously promised there would be no cuts.

And it increased taxes, despite having previously promised there would be no tax increases under a Coalition government. The political legacy of those broken promises – and the widespread (and largely justified) perception that those measures were manifestly unfair – contributed to Malcolm Turnbull’s near-death experience at last July’s federal election.

The first budget of the returned Turnbull government will be largely about burying the legacy of its predecessor.

Treasurer Scott Morrison will pronounce the death rites for the so-called “zombie” spending cuts left over from the 2014 budget, which the Senate has refused to pass. According to the Parliamentary Budget Office, these are still contributing almost A$8.5 billion to the improvement in the budget bottom line over the four years to 2019-20 (forecast in last year’s MYEFO). It’s also contributing almost A$43 billion of projected savings over the ten years to 2026-27.

The government will of course be seeking savings from the same areas as were to be affected by these zombie measures. But, as we have seen with the announcements last week regarding universities and schools, the savings sought will be smaller.

In addition, greater attention will be paid to perceptions of “fairness” than was the case with the “zombie” measures. The same is likely to be the case with regard to the health measures to be announced in the budget itself.

The budget will also confirm that the so-called “temporary deficit repair levy” will lapse on 1 July. This was the 2% surcharge on the top marginal personal income tax rate which was the only significant taxation measure actually implemented by the Abbott government.

The foreshadowed distinction between “good” and “bad” debt is another element of the budget’s effort to distance the Turnbull government from its predecessor. For all of Tony Abbott’s efforts to portray himself as the infrastructure prime minister, public infrastructure spending actually declined on his watch.

That partly reflected the Abbott government’s unwillingness to accept the advice of then RBA governor Glenn Stevens, the IMF, the OECD and others, that government borrowing, especially at record low interest rates, to fund well-targeted infrastructure investment was a good thing.

In this year’s budget, the government will foreshadow additional borrowing in order to finance additional infrastructure spending. Some of this will be on projects that would clearly meet Glenn Stevens’ criteria of “appropriate governance” and “appropriate pricing” – such as a second Sydney Airport. Some of it will be on projects which, more likely than not, would not pass those tests.

But the government will seek to quarantine this “good” debt from detracting from its policy and political goal of returning the budget to surplus. It will do this by focusing attention on the net operating balance or difference between revenues and operating expenses – as state and territory governments and the New Zealand government have done in their budgets for decades.

Indeed, by focusing on this measure, the budget might be able to proclaim a return to surplus in 2019-20, a year earlier than projected for the underlying cash balance.

Such an achievement would perhaps allow the government to gloss over the fact that the budget will do far less to address the on-going deterioration in housing affordability, than it had foreshadowed earlier this year.

The proposed bond aggregator will provide a vehicle for community and not-for-profit providers of affordable rental housing to borrow larger sums, for longer terms and at lower interest rates, from the bond markets. This is a welcome initiative for a sector of the housing market that has for too long received too little attention from governments.

But the government is clearly unwilling to contemplate any measures that might reduce the competition which low-income renters increasingly face from middle-income households who are no longer able to afford to become home-owners. That’s in no small part because of the competition which they in turn face from investors who enjoy tax concessions more favourable than in almost any other “advanced” economy.

This competition has seen the share of housing loans going to investors rise from less than 20% twenty-five years ago to almost 50% in recent years.

The only measure which the budget is likely to include as a form of purported assistance to would-be home-buyers – a mooted plan to allow prospective first-time buyers to make pre-tax contributions to a dedicated savings account from which they could later withdraw in order to fund a deposit. It’s only marginally less worse than the idea of allowing would-be home-buyers to draw down their superannuation savings in order to enhance their deposits.

This was a proposal which Prime Minister Turnbull rightly described as “thoroughly bad”. But as a piece of product differentiation from the Abbott government, which did absolutely nothing in the housing arena, it fits with what is likely to be the most important theme of this week’s budget.

Saul Eslake, Vice-Chancellor’s Fellow, University of Tasmania

This article was originally published on The Conversation. Read the original article.

Abbott questions Turnbull’s schools plan


Michelle Grattan, University of Canberra

Former prime minister Tony Abbott has taken a swipe at Malcolm Turnbull’s schools plan, pointing out it did not go to the Coalition party oom and predicting it will be “pretty vigorously debated” there when parliament resumes next week. The Conversation

In provocative comments on the government’s major attempt to neutralise Labor’s advantage on education, Abbott said it was a “a very big change of policy that the prime minister announced”.

The government on Tuesday committed to an extra A$18.6 billion in funding to Australian schools over the next decade, including more than $2.2 billion in this budget for the first four years.

“I note that at this stage it’s hard to see that any of this extra funding is specifically tied to better academic outcomes and better student performance,” Abbott said.

“I’ve always thought that the problem with our school system is not so much lack of funding, because there’s been very big increases in education funding over the last decade without a commensurate increase in outcomes.

“The problem is that we need better teachers not just more teachers.

“We need much more academic rigour in the curriculum, we need much more principal autonomy and we need much more parental involvement. That’s what we need in schools,” he said on 2GB.

Abbott did not mention the inquiry to be done by David Gonski – who prepared the 2011 report on which the funding commitments are based – into how the money can be invested to get better student outcomes. This review was announced as part of Tuesday’s plan. It is to report in December, and the government wants the recommended reforms tied to the states’ funding.

Under the government’s plan, a handful of wealthy non-government schools stand to lose some money. Asked whether he would be speaking up for two schools in his electorate that would go backwards, Abbott said he would not flag what may or may not be said in the partyroom.

“I just know that it’s been almost an article of faith in our party since the time of Menzies that we were the party that promoted parental choice in education, we were the party that promoted choice in health care, and I think it’s very important that we maintain our traditional position as the party which respects freedom of choice in both education and health,” he said.

The Greens on Wednesday signalled they are open to negotiations to pass the government’s schools package through the Senate.

As Labor, the states, and Catholic schools authorities attacked the plan, Greens leader Richard Di Natale said that while it was “early days”, the government’s announcement “puts the issue of needs-based funding firmly on the national agenda” and “we are open to a conversation about it”.

If the government got support from the Greens it would require just one additional vote in the Senate.

Nick Xenophon, who commands three Senate votes, said his team needed to get a full briefing. He said that in getting Gonski to give his imprimatur, the government had “pulled a rabbit out of the hat”.

The announcement was certainly an improvement on the government’s earlier position, Xenophon said. Gonski’s statements would carry “a fair degree of weight, but that’s not the only consideration”. “We will sit down constructively with the government and engage with other stakeholders,” he said.

https://www.podbean.com/media/player/tjvzn-6a63d0?from=yiiadmin

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

History can provide many lessons for Turnbull as he prepares for Trump meeting



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EPA/Pete Marovich

Tony Walker, La Trobe University

Here’s some advice for Malcolm Turnbull as he prepares for his first face-to-face meeting with US President Donald Trump: reflect on how his predecessors as prime minister have performed in their interactions with a great and powerful friend. The Conversation

Turnbull can choose from various examples that have reflected well – or poorly, as the case may be – on Australia’s sovereignty and independence of thought and action.

There are too many examples of poor judgement to ignore. They are born, unfortunately, from the sort of clichéd definitions of the relationship that inevitably surface at times like these.

In that regard, Turnbull’s speechwriters might give the first world war’s Battle of Hamel – in which Australian troops under the command of Sir John Monash prevailed with the help of a small number of Americans – a rest.

The Hamel connection – American involvement was scaled back by its commander – is exaggerated for reasons that have less to do with its importance in the scheme of things than it does with an Australian desire to remind the US of its ongoing security obligations.

Let’s go back to John Curtin in 1942, when he requested American assistance in waters to Australia’s immediate north in defence of what is now Papua New Guinea. This came after Winston Churchill – under enormous pressure at home – could not answer the call. Bear in mind the might of the British Navy in the Pacific had been decimated when, on December 10, 1941 – three days after Pearl Harbour – the battleship Prince of Wales and battlecruiser Repulse were sunk in a few short hours.

The US responded without delay to Curtin’s pleas, and joined the Battle of the Coral Sea. Australian and US naval forces combined to defeat a Japanese naval armada. Australia’s security policy was redefined in the process.

From that moment, Australia would look not to Britain – which no longer ruled the waves – but across the Pacific to the US as its principal security guarantor. The ANZUS Treaty giving effect to that alliance was signed in 1951.

The Battle of the Coral Sea between May 4 and May 8, 1942 – whose 75th anniversary will be marked on board the aircraft carrier USS Intrepid in New York this week – is an event in Australian diplomatic and security history whose importance cannot be overstated.

Curtin died in office prematurely. His Labor successor, Ben Chifley, presided over a continued strengthening of security ties as the allies pushed the Japanese from their Pacific strongholds until the war ended in 1945.

Robert Menzies built on these security foundations during his long reign as prime minister from 1949 to 1966 – even though his heart remained in Westminster.

Here begin the teaching moments for Turnbull.

Menzies mistakenly aligned Australian policy with the US on recognition of the reality in China after the Nationalists were expelled to Taiwan in 1949. Here he might have been better off following the UK’s example. Britain under a Clement Attlee-led Labour government was one of the first to recognise the People’s Republic of China.

Australia would not do so until the Whitlam government of 1972, 23 years after Mao Zedong prevailed.

Australia persisted in the fiction that the Nationalists on Taiwan were China’s legitimate government, and thus entitled to its seat on the Security Council – even as US President Richard Nixon and his national security adviser, Henry Kissinger, were reaching out secretly to the communists in Beijing.

When this secret diplomacy was revealed, Gough Whitlam – who had visited China as opposition leader in 1971 for a meeting with Mao amid a welter of criticism from government ministers – was handed a propaganda windfall.

But back to Menzies as an example of risk and reward in the US relationship. This has relevance today, as pressures on Australia will surely ebb and flow to support US initiatives that will have a military component.

In 1965, Menzies committed Australian troops to Vietnam against Labor opposition. Labor leader Arthur Calwell’s speech in the House of Representatives opposing the commitment was almost certainly his finest hour. Seven years later, 500 Australian troops had been killed, as had many thousands more Americans. Saigon was subsequently renamed Ho Chi Minh City.

Argument will persist as to whether US engagement in Indochina gave nascent states in a post-colonial era in Asia breathing space to resist China’s attempts to spread its revolution. But proponents of this point of view are hard put to justify material losses and the Vietnam debacle’s impact on US self-confidence.

From an Australian perspective, Vietnam produced some of the more dispiriting moments in our diplomatic history – from Harold Holt’s “all the way with LBJ” to describe Australia’s fealty to the alliance, to John Gorton’s “we’ll go a Waltzing Matilda with you”.

Then came Whitlam. His relations with Nixon were so bad that speculation has persisted to this day – without credible evidence, it must be said – that the CIA played a role in his downfall.

Prime ministers Malcolm Fraser, Bob Hawke and Paul Keating maintained what might be regarded as fairly conventional relationships with the US during the Jimmy Carter, Ronald Reagan and George H. W. Bush presidencies. This included Australia’s naval support for the US in the first Gulf War.

Then came John Howard, and the fateful events of September 11, 2001. But even before 9/11 Howard had reverted – if we can put it that way – to some of the clichés that had bedevilled ties with the US in earlier years.

His description of Australia’s relations with the US as that of a “deputy sheriff” in Asia was unfortunate. And it was compounded, it might be said, by him joining George W. Bush’s other amigos – Britain’s Tony Blair and Spain’s Jose Maria Aznar – building the case for the rush to war in Iraq.

If there is a recent indelible teaching moment for Turnbull it is the rushed invasion of Iraq, which has cost the US in excess of US$2 trillion and counting, and helped destabilise the Middle East. Turnbull would be wise to resist pressure to commit Australian ground troops to combat in the Middle East under present circumstances.

Labor prime ministers Kevin Rudd and Julia Gillard avoided, for the most part, mistakes of some of their predecessors – although Gillard’s cloying speech to the US Congress in 2011 might have been avoided. This ended with a lachrymose prime minister talking about her belief the US could “do anything” after viewing the moon landing.

Rudd should be given credit for his efforts in pushing for the establishment of the G20, and then its important role in combating a global financial crisis in 2007-08.

Tony Abbott made no secret of his belief that a Barack Obama presidency was not sufficiently forward-leaning in its efforts to contain Islamic State, and its reluctance to exercise a more muscular approach to its security obligations more generally.

This brings us back to Turnbull and his meeting with Trump.

Turnbull has not been short of advice from former ambassadors, commentators and virtually anyone else with access to a media megaphone. But he should disregard the sort of advice that suggests he might seek to pander to a US president like no other in recent memory.

What Turnbull needs to do in his private meetings with Trump and his advisers is assert Australia’s belief in the need for a continued – possibly expanded – US presence in the Indo-Pacific, and the absolute requirement for the administration to manage its relationship with China effectively.

Concerns about North Korean adventurism might be an immediate preoccupation. But, in the longer term, nothing is more important from an Australian perspective than continued US engagement in Asia, and thus its ability to manage a relationship with a rising power.

History confers on Turnbull an obligation to get the balance right between Australia’s economic and security interests.

He should also be mindful of a shift in Australian domestic opinion regarding the US relationship, and take it upon himself to acknowledge it is better if alliance policy rests on a bipartisan consensus.

Calls by prominent Labor figures, including former prime minister Paul Keating and former foreign minister Gareth Evans, for Australia to be less “reflexive” in its dealings with the US – as Evans put it – represent significant viewpoints in the centre and on the left of Australian politics. But Turnbull should resist the temptation of his predecessors – notably Howard in particular – to deploy differences that might exist in Australia about the alliance as a wedge issue.

Most of all, Turnbull needs to define Australia’s relationship with the US as partner not supplicant.

Whatever judgements might be made about Trump – good, bad and indifferent – what is clear is he is above all else a transactional player. In other words, what value might he place on the US relationship with Australia and his own personal relations with Turnbull?

Turnbull might look to Canada’s Justin Trudeau for guidance in getting the tone right – not too hot, not too cold, and certainly not too mushy.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. Read the original article.

Turnbull announces schools funding and a new Gonski review


Michelle Grattan, University of Canberra

The Turnbull government is seeking to seize the political initiative on schools, with a substantial funding injection and the appointment of David Gonski – who delivered the 2011 landmark schools report – to chair a “Gonski 2.0” review on how to improve the results of Australian students. The Conversation

A day after announcing university students will pay more for their education, Turnbull unveiled an extra A$18.6 billion in funding to Australian schools over the next decade, including more than $2.2 billion in this budget for the first four years.

Turnbull said that, under the government’s plan, “every school will receive Commonwealth funding on a genuine needs basis”.

At a joint news conference with Turnbull and Education Minister Simon Birmingham, Gonski – who is a personal friend of Turnbull’s – said he was very pleased the government accepted the fundamental recommendations of the 2011 report, particularly the needs basis. The proposed injection of money was “substantial”, he said.

Turnbull and Birmingham said the plan would ensure all schools and states moved to an equal Commonwealth share of the Gonski-recommended Schooling Resource Standard in a decade. The federal government would meet a 20% share of the standard for government schools, up from 17% this year, and 80% for non-government schools (currently 77%).

Birmingham said 24 non-government schools stood to lose money (there would be some transition money for a couple of these schools with a large number of students with special needs). They are among some 353 presently over-funded schools which will be worse-off under the plan than they would otherwise have been. Australia has more than 9,000 schools in total across the government, Catholic and independent sectors.

Pete Goss, the school education program director at the Grattan Institute, said: “We still need to understand all the details but the overall shape of the package is very encouraging.

“The minister has set a clear 10-year goal of getting every school funded consistently by the Commonwealth. The additional funding will help ease that transition.

“Some schools that have been on a great wicket for a long time will lose out – and so they should. This is a gutsy call and it is the right call.”

Goss said he understood there had been “an internal debate” in the government to arrive at this plan.

The announcement is a substantial turnaround for the government, which had previously planned more modest funding, and refused to embrace the final two years of Gonski.

But Turnbull was in full Gonski mode on Tuesday: “This reform will finally deliver on David Gonski’s vision, six years ago, after his landmark review of Australian school education,” he said.

Turnbull is trying to take some of the shine off Labor’s political advantage on education which, with health, was at the heart of its 2016 election campaign. Next week’s budget will attempt to neutralise some of the Coalition’s problems on health, which saw Labor run its “Mediscare” at the election.

Birmingham said that over the next four years there would be growth in Commonwealth funding of some 4.2% per student across Australia – “importantly, most of it geared into the government sector where need is greater and the gap to close in terms of Commonwealth share is larger”.

He said the government would legislate the decade-long program, and impose conditions to ensure states did not lower their funding. “We will be expecting states to at least maintain their real funding,” he said. “This is about real extra money to help Australian schools and students.”

What Turnbull dubbed the “Gonski 2.0” review will recommend on “the most effective teaching and learning strategies to reverse declining results, and seek to raise the performance of schools and students”.

It will advise on how the extra Commonwealth funding “should be used by Australian schools to improve student achievement and school performance”, Turnbull and Birmingham said in a statement.

Another member of the original Gonski panel, Ken Boston, will also be on the review, which will report to Turnbull in December.

The government says its new arrangements will replace the patchwork of agreements left by Labor.

But Labor’s education spokeswoman Tanya Plibersek said this was “a smoke and mirrors, pea and thimble effort to hide the fact that instead of cutting $30 billion from schools over the decade, this government will cut $22 billion from schools over the decade”.

“The big picture here is that in the 2014 budget, Tony Abbott promised a $30 billion cut to our schools and in the 2017 budget, Malcolm Turnbull wants a big pat on the back for changing that cut to a $22 billion cut,” she said.

“A week out from the federal budget this is taking out the trash,” she said. “They want clear air on budget night.”

https://www.podbean.com/media/player/yzp4x-6a4d89?from=yiiadmin

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Merged minor parties chase votes on the right as identity crisis grips Coalition



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Cory Bernardi’s Australian Conservatives party has amalgamated with Family First, which shares similar social conservative values.
AAP/Lukas Coch

Zareh Ghazarian, Monash University

Cory Bernardi entered a new phase of his political career by announcing this week that his nascent Australian Conservatives party was to merge with Family First. The Conversation

The merger makes sense. Both parties advance a socially conservative agenda; both have origins in South Australia. And the merger is a savvy response to the changes to the Senate voting system that were introduced in 2016.

Benefits of minor parties merging

The changes to the Senate voting system abolished the group voting ticket. So, parties can no longer make the same preference deals they had in the past.

Merging, however, will provide like-minded minor parties with benefits.

First, they will be able to consolidate their human and financial resources for election campaigns and the party’s day-to-day operations.

Second, by merging into a “super” minor party, they maximise their chances of winning Senate representation: they pool their electoral support.

This sense of electoral fragmentation has been a greater problem for minor parties on the right of the political spectrum. The Greens, after decades of evolution, appear to have consolidated their role as the lightning rod for voters from the left who are unhappy with the choices provided by the major parties.

No such party, however, exists on the right, where myriad minor parties with competing agendas are clamouring for attention.

Social conservatism

The Australian Conservatives and Family First shared similar policies on a range of issues. In particular, they opposed same-sex marriage and abortion, and expressed deep suspicion about the role humans have played in climate change.

Both parties also sought to advance “traditional” family values and have been sceptical of the socially progressive policies promoted by the likes of the Greens.

But their opposition to same-sex marriage contrasts with others on the right of political spectrum – such as Liberal Democrat senator David Leyonhjelm, who supports it.

In 2016, Family First won a national primary vote in the Senate of 1.38%. Its best performance was in South Australia, where Bob Day – who is to be replaced in the Senate by Lucy Gichuhi – won a seat after polling 2.87% of the statewide primary vote. Gichuhi, however, will sit as an independent – not as an Australian Conservatives senator.

Race and immigration

Pauline Hanson’s One Nation made a remarkable return to the Senate in 2016, almost 20 years after it first emerged. Reflecting an approach common to right-populist parties in other liberal democracies, One Nation was deeply concerned about race, migration and religion.

Led by the charismatic Hanson, the party sought to advance the interests of “ordinary” Australians in a political system that it believed was over-run by professional politicians and political elites.

At the 2016 election, One Nation won a national primary vote in the Senate of 4.29%. Its best performance was in Queensland, where 9.2% of the statewide vote garnered it two Senate seats. It holds four seats in the Senate.

Libertarian

In 2013, Leyonhjelm led the Liberal Democrats to an unexpected triumph when he won the party’s first seat in the Senate. Since then, he has built a high public profile by advancing his party’s agenda, which focuses on individual liberties and freedoms.

The Liberal Democrats advance free trade, freedom of choice, and winding back the welfare state. The party supports euthanasia, the use of cannabis, and same-sex marriage.

It is also in favour of citizens having the right to own firearms as well as ending prosecutions for victimless crimes, which it describes as illegal but not threatening the rights of anyone else. These include “crimes” such as abortion, public nudity and the consumption of pornography.

However, Leyonhjelm differs from One Nation’s positions on some economic issues. For example, he supports cuts to weekend penalty rates and the privatisation of state assets – in contrast to One Nation’s opposition to both of these measures.

In 2016, the Liberal Democrats won 2.17% of the national vote in the Senate. Leyonhjelm held onto his seat after winning 3.1% of the statewide vote in New South Wales.

Liberal-National Coalition

While the minor parties mentioned above are advancing specific policy agendas, the major right-of-centre force appears to be grappling with internal divisions about the direction of its policies.

The belief that One Nation, Family First and the Liberal Democrats are chipping support off the Coalition has prompted some MPs to agitate for the party to promote more socially conservative policies. Former prime minister Tony Abbott has continued to advocate for the Liberal Party to shift to the right.

As a major right-of-centre force, however, the Liberal Party risks alienating socially progressive voters who have supported the party in the past. And the sense of a growing threat from minor parties on the right may be overstated.

As the electoral performances demonstrate, these minor parties were successful in 2016 thanks primarily to the double-dissolution election making it easier to win seats in the Senate. These parties would struggle to have as much success under the new electoral system at an ordinary half-Senate election.

Notwithstanding these elements, Prime Minister Malcolm Turnbull’s recent announcements of changes to citizenship laws suggest the Coalition leadership is responding to demands of the right from within the partyroom. Whether these will be enough to placate those seeking greater shifts to the right remains to be seen.

Zareh Ghazarian, Lecturer, School of Social Sciences, Monash University

This article was originally published on The Conversation. Read the original article.