View from The Hill: Frydenberg up to Bowen’s old tricks


Michelle Grattan, University of Canberra

Chris Bowen has unpleasantly vivid memories, from when he was treasurer during the 2013 election campaign, of attributing costings of opposition policy to the public service.

Bowen, at a joint news conference with Kevin Rudd and Penny Wong, claimed a $10 billion hole in Coalition savings, citing advice from Treasury, Finance and the Parliamentary Budget Office. Within hours they’d been rebuked by the heads of all three, who called out the government’s misuse of their material.

All these years later, Treasurer Josh Frydenberg has failed to learn from Bowen’s mistake. He has misused and verballed his department, and been caught out.

Treasury says it didn’t say what the Treasurer said it said.
Source: Commonwealth Treasury, letter from Philip Gaetjens letter to Chris Bowen

On Friday Bowen complained to the head of Treasury Phil Gaetjens and the secretary of the Prime Minister’s department Martin Parkinson about the government’s use of Treasury costings to claim Labor would impose a $387 billion tax burden over ten years.

The claim is based on adding the $230 billion cost of the second and third stages of the government’s income tax package – which have been rejected by the opposition – to the ALP’s announced tax hikes from its planned changes to negative gearing, franking credits arrangements, etc.

“Treasury costings indicate that Labor’s tax hit on the economy has almost doubled from their initial costings of around $200 billion to $387 billion,” Treasurer Josh Frydenberg trumpeted in the government’s first massive “scare” strike of the campaign.

“This is equivalent to an extra yearly household tax bill of $5,400 within a decade.”

The income tax cuts were announced in last week’s budget but they are not yet legislated.

The program’s first stage has bipartisan support (though Labor would augment it for low income earners) and so can be considered settled policy.

The second and third stages are way into the future. Their cost is mostly outside the forward estimates.

Both stages are to start after the election following this one – that is due in the first half of 2022. Stage 2 is set be begin in 2022-23 and stage 3 in 2024-25.

Former Liberal treasurer Peter Costello last week was scathing about the practice of making tax promises stretching into the never never.

“We’ve stopped promising things for the year ahead, we’ve stopped promising things for the next term, we’ve stopped promising things for the term after the term, even. We’re promising things in the term after the term after the term,” Costello said.

“The tax scales in 2024 won’t be decided in this election. They’ll be decided in the election after it and the election after that.”

These stages may or may not come to pass if Scott Morrison is re-elected. There’s no guarantee they’d be accepted by the Senate – and no knowing what the government’s attitude would be if they weren’t.

Remember what occurred with the long-term tax cuts for big business included in the wider company tax cut package the Turnbull government unveiled in the 2016 pre-election budget.

It couldn’t win Senate approval for them, although deals were done to pass the cuts for small and medium sized companies. Finally, last year the government dropped its commitment to give relief to large companies.

The Coalition in this instance is guilty of a try on, to inflate the size of the target in its tax scare against the ALP.

This comes ahead of what will be many scares from both sides. The media and the voting public should regard them sceptically – just as people should have been sceptical of Labor’s Mediscare last time.

Treasury as recently as last week told Senate estimates that it doesn’t cost opposition policies. But this can be got around by the government having the department cost an “alternative” policy, a distinction without a difference.

When questioned on Friday, Frydenberg invoked the precedent of former treasurer Wayne Swan doing such things. It is not often the Liberals lean on “Swannie” as a crutch.

Looked at any which way this is a very unfortunate use of Treasury.

Of course the very basic calculation could have been done in Frydenberg’s office. But being able to say it was a “Treasury” number gives the scare a more authoritative stamp.

The idea is to suggest it is a non-political calculation – when the whole thing is very political.

Reportedly Treasury was also asked to do some costings on Labor’s climate change policy – another scare which is still in the pipeline.

It would be interesting to know if there was any private push back from Treasury about the government’s requests.

The incident just reinforces Labor’s view about the government’s politicisation of Treasury.

In Labor’s opinion this reached a peak with the appointment of Phil Gaetjens- Morrison’s chief-of-staff when he was treasurer – as secretary of the department.

Labor has already flagged that it would remove Gaetjens if it wins the election, if he didn’t resign first.

In response to the Bowen complaint, Gaetjens wrote back on Friday, saying Treasury had responded to requests before the “caretaker” period from the Treasurer’s office “outlining a number of policies to be costed with details and specifications also provided” – these “made no reference to the Opposition”.

“We were not asked to cost another party’s policies and would not do so,” he wrote.

Treasury did the costings but did not take account of the interactions between the individual policies, so didn’t provide a total, Gaetjens said.

But Frydenberg did give a total – and attributed that total to Treasury.

Bowen seized on this to lambast the government, and promise a Labor one would restore Treasury “to its rightful place as the nation’s pre-eminent economic agency”.

Incidentally the tax costings row has a nice twist. One of those who put Bowen in his place in 2013 was Martin Parkinson, then secretary of Treasury, a recipients of a Bowen letter on Friday.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Bowen says Labor would have lower tax take than under Howard years


Michelle Grattan, University of Canberra

Shadow treasurer Chris Bowen on Wednesday will seek to counter the Coalition’s attack on Labor as high-taxing by saying a Shorten government would have a lower tax take as a proportion of the economy than under the Howard years.

Delivering his post-budget address at the National Press Club, Bowen will point to an analysis released by KPMG last week estimating that by the end of the forward estimates Labor’s tax-to-GDP ratio would be just over 24%.

“If the Liberal party want to attack us for that, they’d be attacking one of their own.

“Tax-to-GDP was at or above 24% of GDP five times during the Howard years. That is, for roughly half their time in office. And it was 24.3% in two of those years.

“Far from being high-taxing, based on KPMG’s analysis we’d have a lower tax take as a proportion of the economy than under the Howard years,” Bowen says in his speech, released ahead of delivery.

“Under a Labor government, Australia would have a lower tax take than Japan, New Zealand, Canada, United Kingdom, Germany, Netherlands and most other OECD economies. In fact, we would remain in the bottom third of all comparable OECD economies”.

Bowen condemns the proposed second and third stage of the budget’s tax cuts as “fiscal recklessness on an unprecedented scale”.

They are regressive “and the claim they can be afforded is based on dodgy accounting,” he says.

“If the government is planning on paying for these tax cuts with spending cuts they should outline those spending cuts before an election – not afterwards like they normally do,” he says.

Labor has adopted the first stage of the tax cuts, and improved on it for low income earners, but rejected the other stages. The tax package had not yet been legislated.

The budget provides that from 2022-23 the top threshold of the 19% tax bracket will be increased from $41,000 to $45,000 and the low income tax offset from $645 to $700. From 2024-25 the 32.5% rate would be reduced to 30%.

Bowen says it will be 18 months before the assumptions underpinning the projected 2019-20 surplus can be fully assessed, and he questions the budget’s projections in the out years.

“The budget surplus in 2022-23 is projected to be a thin $9 billion, just 0.4% GDP.

“A surplus that wouldn’t be there were it not for the government apparently spending $12 billion less than it anticipated just six months ago at MYEFO [the budget update].

“What Government decisions have led to this significant reduction in government spending?”

Bowen says information from Senate Estimates indicated there had been no such decisions.

“The Department of Finance told the Senate that there was a ‘methodology change’.

“A methodology change that boosted the bottom line in that year by $7.8 billion. We have a surplus by methodology,” Bowen says.

“More miraculously, under the government’s assumptions, payments to GDP free fall from close to 25% GDP this year – the average level under the Coalition government – to around 23.6% of GDP by the end of the decade, well below historical averages.

“The size of government magically shrinks over time. If they are going to cut government services they should outline what they are”.

The Grattan Institute had called out this claimed reduction in spending in its analysis, Bowen says.

He says bigger surpluses are needed and a Labor government would deliver them.

“Based on the budget figures presented by the government last week, at the election we’ll present a fiscal plan with bigger budget surpluses and one that pays down more debt”.

Highlighting that Labor would take a very experienced team into office Bowen says: “If Labor forms a government, sixteen out of 21 of us in the cabinet would have served at the cabinet level before. I can’t begin to tell you what a difference this would make, making us a better government for it.

“Bill Shorten will be the first Labor prime minister elected from opposition since Andrew Fisher who has previous ministerial experience.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Labor would deliver bigger surpluses than the Coalition: Bowen


Michelle Grattan, University of Canberra

Shadow treasurer Chris Bowen on Wednesday will promise a Labor government would deliver bigger cumulative budget surpluses than the government over the forward estimates and substantially bigger surpluses over a decade.

Outlining the fiscal parameters the opposition will take to the election, Bowen will repeat that the ALP would achieve budget balance in the same year as the government – 2019-20.

He will also undertake that the majority of the savings raised from the ALP’s revenue measures over a decade would go to budget repair and paying off debt.

Bowen will insert a qualifier, saying that the pledges are on the basis of the budget figures released last week. If the government announced “a new secret policy that is fundamentally unfair and is an attack on working people, then we reserve the right to address that”.

Detailed figures of the full impact of Labor policies would be announced before the election, “but we are announcing today that the net result of those policies will be a better budget bottom line in the short term and bigger surpluses in the long term,” Bowen will tell the National Press Club.

He will also say that until a Labor government achieved a strong surplus it would be guided by the principles of

… repairing in the budget in a way that was fair, and did not place the heaviest burden on the vulnerable;

… more than offsetting new spending with savings and revenue measures;

… putting to the budget bottom line any positive changes in revenue and spending that resulted from economic changes.

Bowen will attack the government for not budgeting for larger surpluses.

“The whiff of a surplus, not reaching at least 1% of GDP until 2026-27, does not adequately protect Australia against the potential roiling seas of international uncertainty. Australia needs bigger surpluses, sooner than the government is scheduling,” he will say.

“We can’t afford to let the next four years go to waste in the efforts for a healthier, safer budget surplus”. He will point to the Coalition’s 2013 commitment to a surplus of at least 1% of GDP by 2023-24, criticising the the government for its having “watered down their fiscal rigour with regular monotony”.

Bowen will also emphasise the long term risks of the government’s seven year tax package.

“The government has the most expensive and growing component of their tax package coming in in six years’ time, based on the assumption the good times roll on for another decade.” This was “a budget that bakes in future tax cuts in six years’ time worth tens of billions of dollars, when the revenue may not turn up to fund them”.

Bowen will say that by making a series of tough decisions on revenue measures as well as opposing the corporate tax cuts, Labor is setting out to deal faster than the government with debt and deficit and to fund policies that are important for economic growth, including investment in education.

The ConversationHe will also announce a panel to review Labor’s costings, which have been done by the Parliamentary Budget Office. Its members are Bob Officer, emeritus professor at Melbourne University; Mike Keating, former head of the finance and prime minister’s departments, and James Mackenzie, a fellow of the Institute of Chartered Accountants and the Institute of Company Directors. These three undertook a similar task before the 2016 election.

Michelle Grattan, Professorial Fellow, University of Canberra

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

Politics podcast: Chris Bowen on the budget and Labor’s policies


Michelle Grattan, University of Canberra

Ahead of Tuesday’s budget that will unveil the goverment’s tax cut plans, the Coalition is painting Labor as the big taxing party, while the ALP is attacking the government’s push to cut company tax for big business. Meanwhile the Business Council of Australia is taking its message to the public with a grassroots campaign.

Shadow treasurer Chris Bowen tells The Conversation he accepts that big business will “lobby on their own path”. “Clearly we have a difference of view with the Business Council,” he says, though not with every member of it. “Some members of the Business Council say they don’t see the business tax cut as a business priority.”

The ConversationOn budget repair, Bowen he says that “getting back to budget balance is very, very important, and not just budget balance but a good healthy budget surplus of at least 1% of GDP.”

Michelle Grattan, Professorial Fellow, University of Canberra

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

Failure to curb tax concessions will put increasing burden on ordinary workers: Bowen


Michelle Grattan, University of Canberra

Shadow Treasurer Chris Bowen will target tax loopholes and concessions in a speech on Monday, arguing that the economic case for budget repair has never been stronger.

Countering government criticism of Labor’s proposed crackdown on concessions, Bowen will say an important part of sensible fiscal strategy is to identify tax concessions that “eat away at the revenue base” and reform or abolish them, so as “to underpin both budget repair and the funding of new initiatives”.

The opposition has announced moves that would hit negative gearing, capital gains discounts, and trusts.

Bowen says in his speech to the Per Capita think tank – released ahead of delivery – that failure to reform negative gearing and family trusts will put increasing tax pressure on low- and middle-income earners.

He says analysis by the Parliamentary Budget Office shows that for the middle income quintile, with people earning A$46,000, average tax rates are set to rise more strongly than for any other group.

“Every dollar not recouped through winding back these loopholes and concessions is another dollar that Australian workers will have to shoulder.”

Bowen says that instead of closing loopholes and strengthening the tax base, the government would prefer to increase income taxes by $44 billion, hitting all workers earning more than $21,000.

“At a time when wages are growing at record low rates this is a tax hit that will see someone earning $70,000 with $350 less in their pocket from next year.

“Meanwhile the tax base remains full of holes and tax concessions and other loopholes go unreformed,” he says.

“Using an infamous metaphor of the treasurer’s, the government has barely even taken a scalpel to tax concessions which largely accrue to wealthier Australians”.

Half of all the benefits of negative gearing accrue to the top 10% of income earners, as do 80% of the benefits of capital gains, and trusts are used as income-splitting tools by high-income earners, Bowen says.

Labor’s planned negative gearing reform would be good for the budget as well as for first home buyers, he says. By the end of decade Labor’s negative gearing and capital gains tax reforms would together be adding $8 billion annually to the budget.

Bowen attacks Treasurer Scott Morrison over the “ridiculous argument” that the company tax cuts are funded because they are in the budget.

“Simply ensuring that the budget bottom line reflects the cost of the tax cuts does not mean they are funded. The fact is that the budget would be $65 billion better off over the decade if the [company] tax cuts weren’t proceeded with.”

Bowen says Morrison undermines his own argument that Labor did not fund the NDIS. “Of course NDIS and the Gonski schools funded model were both reflected in Labor’s budgets. Putting aside the fact that Labor in government made other cuts and revenue decisions to fund both initiatives, even if we hadn’t, by the treasurer’s logic, they were funded because the budget bottom line reflected them.

“The treasurer has killed his own scare campaign on NDIS funding.”

This $65 billion tax cut “puts the medium term budget at risk”, Bowen says. At the end of the plan’s proposed ten years, the tax cut would be costing an annual $15 billion. “It is a fiscal ram-raid.”

So far the government has only been able to legislate the cut for firms with annual turnovers up to $50 million. The Senate has not agreed to the reduction for big companies. Labor has said it accepts the cut for firms with turnovers up to $2 million but has not announced yet what it would do about the legislated cut for firms with turnovers between $2 million and $50 million.

“Labor believes in strong fiscal policy and return to surplus and we are prepared to make the tough decisions to do it,” Bowen says.

“I believe in the return to surplus when conditions allow because locking in the AAA rating reduces borrowing costs and gives more room to fund important social initiatives.

“The progressive case for return to surplus also recognises that this would give me and future treasurers more room to move if we face another global downturn.

“The economic case for budget repair has simply never been stronger.”

Bowen says Labor’s policy work has been thorough and he promises “more detailed policy announcements” to come.

“We’ll continue to outline our plans from opposition, seeking a mandate and the moral authority in government to do big and important things.”

UPDATE

Malcolm Turnbull’s lead over Bill Shorten as better prime minister has narrowed to two points in Monday’s Newspoll in The Australian.

In mid-February Turnbull led 40-33% on this measure; now he is ahead by just 37-35%. In face of continuing bad polls, the Liberals have always taken heart that Turnbull does better than his opponent in the head-to-head comparison, so the tighter margin will inevitably be of concern to them.

The ConversationLabor’s 53-47% two-party lead is unchanged.

Michelle Grattan, Professorial Fellow, University of Canberra

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