Budget '09 Roundup

Every year my best friend (who shall be, from here on, referred to as "C4") and I get together for a special event. One year, as there was no television at my house, he drove a television over to my house, in the car, especially.

No it's not the State Origin, or the World Cup (der, obviously - that's on every 4 years... isn't it?).

It's the budget. That's right, we get together... to watch... the budget.

As the major and most publicly anticipated political event of each year - we both find an embarrassed nerdy pleasure in making the time to watch it.

The main frustration in previous years has been wanting to comment in the middle of the speech - and rewind in order to catch details. This year (along with the beer, wine and cashews) I came to the party armed with note-pad and pen, so I could jot down points of interest without interrupting the flow of the speech. I needn't have bothered, however, as, low and behold, this year C4 brought his DVD recording system to the party so we could pause, discuss and rewind - what a revelation! Someone should tell someone... I don't know... maybe, sports fans, or something, might like this kind of thing too.

Every year I am inspired to write a roundup. So this year...

On top of this, however - C4 was kind enough to point out the discrepancy between the name of my blog and the regularity with which it's updated... perhaps my "ramblings" have not been quite as "incessant" as I would have hoped...

What better time to pick up the pace with my posts again!

So now, for the roundup:


The Roundup


Initial Thoughts

So - once you get past the contemporary need for a "catch phrase" or a sound bite:

"and tonight's budget is brought to you by the expression 'Nation Building for Recovery'"

the first issue with this budget is the fact that it was billed as a "tough budget". In his opening preamble, Wayne Swan says that "economic leadership is about making the tough decisions, no matter what the political consequences might be".

That may be so - but if it is, then this budget does nothing to prove Labor's commitment to economic leadership. Quite the opposite - they have obviously made some less "tough" decisions in order to minimise the political consequences in their most contested constituencies, and other "tough" decisions have been made precisely because there were no political consequences to speak of.

Yes of course - expecting politicians not to be political is like [insert drole comparison of two oxymoronic concepts here]. But still, to claim the actual decisions within this budget as anything approaching "tough" is simply taking the piss. Wayne Swan claimed that "We couldn't raise the pension without hard choices elsewhere" - but apparently... he has.


Pension Payments

• Increase in withdrawal rate
• Increase in qualifying age
• Decrease in super concessions (some temporary)
  

for pensioners; all of these things are savings. But they could hardly be defined as "tough" or "hard choices". All of them are outweighed by increased payments to singles and couples.

Now, don't get me wrong. I support all of these measures. All of them seem fair and right. Or, at least, more fair than the previous system. But none of them should be defined as "tough".


Paid Maternity Leave

All this talk brings me to one of major problems in this budget - the plans for paid maternity leave.

Let's look at some of the big numbers:

• $22 billion - Infrastructure
• $4.7 billion towards a $43 billion PPP Broadband Network
• $5.3 billion - Tertiary Education

Amongst all of this, the government has made one of their "tough" decisions regarding paid maternity leave and postponed it for 18 months.

Now the TOTAL spend over 5 years for the introduction of a Paid Parental Leave system is $731 million - and yet the government sees the need to postpone this until after the next election.

The savings are minimal, and yet the potential cultural benefit so great.

Lets make this clear - we are in a club of 2 (along with the US) as the ONLY OECD countries who have no paid maternity leave. If they were worried about the effect on job security, in a time of economic downturn - they could have found a little extra ($731 million isn't much compared to the rest of the budget) to compensate (small?) businesses for some of the extra costs involved in back-filling staff.

The last thing we want to encourage people to do right now, is to hold off on having more children - and yet that's what this decision does. It's a small price for a great gain - and there's no reason, in my mind, to hold a carrot to the electorate and say "vote for me again - or you might not get paid maternity". In fact I find that insulting.

Does the Rudd government believe in it as a policy or not? Not enough to introduce it - apparently.

You could imagine that this might push some of the Labor faithful towards voting Green... and amazingly enough, this shift is borne out in the latest poles - where Labor have lost 5 or 6 points, and the majority of them have been picked up by the Greens.

"But wait", I hear you cry, "didn't you say the problem was the budget isn't tough enough? Isn't that at least a small saving for tough times?"

And this brings me to to my comment for the budget as a whole.


The Big Problem

The problem with this budget is not the fact that it isn't a tough budget.

The problem for this budget is that it was sold as a tough budget.

In trying to come up with some good "tough" measures that the government could have introduced at this budget - I came up with nothing.

The problem is, anything broad-based enough, tough enough and big enough in total value, to actually be defined as "tough" is, at the same time, dangerously deflationary. And deflation isn't a game we want to risk getting into in this climate.

The truth of the matter is, we missed the opportunity to save as much money as we should have, under the last government. They gave it all back in tax cuts, which were an inflationary measure in boom times. Now we're stuck trying to avoid deflationary cuts in bad times.

It's much like the frustration with the first Swan budget.

There wasn't actually enough difference between the Rudd government's position and the Howard government's. While still in boom times, the Rudd government handed back most of the boom time money in personal tax cuts (only slightly less tax cuts than the Liberals wanted to introduce - but let's take a moment to imagine how much worse the current budget would look if we had introduced the Liberals tax cuts).

So... the problem isn't that this budget isn't tough enough - on the contrary... we need to admit that, what we don't need right now is a tough budget. We need to support spending in key areas - in order to avoid deflationary pressures. And we need to (which this budget does) plan to pull back on that accelerator once things are looking good again.

I actually support much of what this budget puts in motion.

After a period of short-term injections, we now need some medium-term plans to increase productivity and support jobs.

There's money for Health and Education and some areas of Social Security (interestingly not Unemployment or Single Parents).

But - in holding off on introducing the Paid Maternity Leave measures until after the next election, the Rudd government has snubbed its nose at its heart-land voters. The argument, presumably, is "well, who else are they going to vote for?".

The Greens? Well, again, Labor may be hoping that all those votes will come back to them in preferences. And they may well be correct.

But - after years of barracking for Kevin Rudd, in response to this (and his last) budget - my current hope for the next election is that we can find dense enough collections of "Left swinging" voters to make a real splash for the Greens.

For some reason (call me naive), I still believe the Greens will push through policies that represent their core constituencies, and not just the people who might be swayed at election time.

This wasn't an "election budget" - that's coming next time. Rudd will have to do a lot more "voter pleasing" next year. This was his opportunity to introduce some real and valuable "Labor style" policies - and, from my perspective, he missed it. I understand that you need to stay in power - but if you don't take the opportunity to introduce some strong policies when the opportunity is there, what's the point in being in power at all?

Unless of course, he thinks this is an election budget? Just how much does he predict we might be heading for a double dissolution...? Hmmmm...


References:

• Transcript of the 2009-10 Federal Budget, second reading