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Amid confusion over forward estimates, the budget is as much about promised economic planning as it is an election pitch. By Karen Middleton.

Malcolm Turnbull’s budget grab bag to prime election

In a week that was all about money, an intriguing story emerged in parliament about a former prime minister and an envelope full of cash.

On Wednesday night, as the last of 20 retiring parliamentarians gave their farewell speeches, joined by a few more who aren’t sure their constituents will return them, former prime minister Tony Abbott quietly rose to honour some of his departing colleagues.

Acknowledging his friend Senator Bill Heffernan, who leaves politics after 20 years, Abbott said the farmer from Junee in country New South Wales was unique among politicians.

“He is the only member of this parliament I have ever met who never sought promotion,” Abbott told the house. “That has made him, over a very long period of time, the one person you could always trust on everything.” 

To illustrate his point, Abbott described having once been invited, not long after he was first elected, for a pre-Christmas drink with a “well-known millionaire”.

“As I was leaving he gave me an envelope and said, ‘That’s your Christmas present,’ ” Abbott said. “When I opened it up, it contained $5000 in cash. I can tell you, the Abbott family in those days could have used that money. But it did not feel right.”

He rang Bill Heffernan for advice. “He said: ‘Once bought, always bought. Give it back.’” 

Heffernan told Abbott to suggest that the donor “write out a cheque” for the Liberal Party campaign.

With this week’s federal budget being brought down in the shadow of a federal election, the question of what money can buy is very present. 

And as the budget now makes way for an election campaign, other questions become equally potent: How close will this election result now be? And what will Abbott do?

Former prime minister John Howard is confident Abbott will play a constructive role.

“I think what happened to Tony is bruising,” Howard told a post-budget breakfast in Brisbane on Wednesday. “It was personally humiliating, but of course that happens. It’s part of the game. But he stayed in and he wants to make a contribution and I think when he said the other day he wants to work hard to help Turnbull, I think he means that.”

Ahead of his trip to Yarralumla, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison spent the week hard-selling a budget whose totality is about to fade beneath the campaign din.

In the course of spruiking, Turnbull has acknowledged almost inadvertently that the focus is now on his own personal credibility as much as the credibility of the numbers in that document.

When Turnbull was interviewed on Triple M radio’s Hot Breakfast program on Thursday, one of the hosts, Luke Darcy, asked a question ostensibly about the rise of presumptive United States Republican Party presidential nominee Donald Trump. But it was really about something else.

“Does it not ring true that our politicians, and perhaps you included, to get to power have to have so many deals done behind the scenes that perhaps don’t represent [their] true thoughts?” Darcy asked. “If we sat down and had a beer with you, Malcolm might be the sort of person that you are, that I think might appeal to a lot more people. Whereas Trump for all of his lunacy at times – the one thing you know is that he isn’t beholden to anyone. Is that not more the message?”

Turnbull responded: “That may be part of it. I think authenticity is always important.”

Authenticity and credibility are twin tests heading into a campaign in which both major party leaders are first-timers.

It has not gone smoothly so far, for either. 

Labor opposition leader Bill Shorten faced merciless Coalition ridiculing in parliament over a $20 billion “black hole” – a sizeable discrepancy in Labor’s estimated revenue from an annual 12.5 per cent increase in tobacco excise to 2020.

The independent Parliamentary Budget Office had prepared the costings at Labor’s request, based on a Treasury estimate of the number of people who were likely to cut back or give up smoking as the tax on tobacco increased. 

But a document leaked to the Nine Network’s political editor, Laurie Oakes, revealed Treasury’s estimate had changed since the costing was prepared late last year, leaving Labor’s figuring of a $47.7 billion revenue increase over a decade out by $20 billion.

Senior Labor sources are suspicious about the change.

They point to another set of costings on the Labor policy that Liberal Democrat senator David Leyonhjelm commissioned – also from the Parliamentary Budget Office – 11 weeks ago. In between the two, Treasury published its midyear economic and fiscal outlook, the budget update that comes halfway through the financial year.

The PBO bases its costings on whatever are the most recent Treasury estimates. 

Leyonhjelm says his costings match the Labor ones, meaning the estimates from Treasury on the impact of an excise rise on smokers’ behaviour changed some time since then, in the past 11 weeks, during which time the government also decided to adopt the excise-rise proposal in its own budget.

Tuesday night’s budget confirmed the move, unveiling an identical continuation of tobacco excise rises. 

Oakes reported the leaked document revealing the Labor costings’ discrepancy on Monday night, ensuring it wasn’t swamped by the budget. 

The opposition has now asked the PBO to redo its costings, based on the new Treasury estimate. 

Shorten insists the expected $20 billion downward revision of estimated revenue will not leave Labor’s calculations in the red, arguing it had already nominated tens of billions of dollars in savings elsewhere.

But the episode left the opposition red-faced on the eve of the election campaign.

The government is also off to an ignominious start on the maths of its own budget program.

It became embroiled in its own costings row after Turnbull could not answer a question from Sky News’ David Speers on the cost of the budget’s centrepiece 10-year “enterprise tax plan”, which gradually lowers the company tax rate for small businesses and expands eligibility beyond the current $2 million annual turnover to $10 million and eventually $1 billion. 

“The Treasury has not identified the dollar cost of that particular item,” Turnbull said initially. Asked again, he then said: “Treasury has modelled that and set out in the budget the medium-term outcome.”

The budget papers contain the estimated cost over the four-year forward estimates but not beyond.

Asked repeatedly for a 10-year figure, Turnbull declined to provide one.

When it was put to him that Deloitte Access Economics economist Chris Richardson had estimated it would cost about $55 billion, Turnbull said: “He may well be right.”

The real state of the government coffers will be revealed within a fortnight in the shape of the pre-election economic and fiscal outlook. The Charter of Budget Honesty Act requires the secretaries of the Treasury and Finance departments to release an update on the economic and financial information within 10 days of the writs being issued for an election. They are expected to be issued on Monday.

Shadow treasurer Chris Bowen went into parliament to condemn Turnbull and label the budget “a fraud on the Australian people”.

Trying to clean up the mess, Morrison rang Melbourne’s Radio 3AW and said: “This is completely within the affordability mark that we have set.”

He denied the cost was $55 billion. But he couldn’t answer the question either.

On Friday, Treasury confirmed corporate tax cuts will cost the budget at least $48.2 billion over 10 years.

The confusion fuelled what some Coalition backbenchers were saying privately – that the “economic plan for jobs and growth” was really a grab bag of measures grouped as much for electoral value as economic. 

In that regard, it was not much different from other budgets and, if anything, its proximity to the election made it more similar. 

One such measure is the government’s decision to forgo $163 million of revenue over the next four years by giving commercial broadcasters a 25 per cent discount on their licence fees, starting immediately. The government argues broadcasters wanted more and that it has some sympathy with the argument that they are struggling in the new world of Apple TV and Netflix. They also report the news during election campaigns.

The budget’s youth training scheme to pay employers $1000 to hire young interns to fill genuine job vacancies and pay the interns $200 a week on top of their benefits has received praise from some quarters – including from shadow assistant treasurer Andrew Leigh – for being an innovative solution to the persistent problem of youth unemployment. The unions remain worried it will herald a cut-price youth wage.

Parents’ concerns over future opportunities for their children were behind the move, which was made after analysis of previous schemes found they didn’t work.

Morrison gave an example of this kind of scheme in operation in his own electorate, which he said had helped establish a homeless young man with work, a house and a productive life. 

“Small business growing, backing young people, giving them the chance – everybody wins,” Morrison told the National Press Club on Wednesday. “Everybody wins. That’s who the winners are – all of us. When you see a young person get in a job and stick in a job and stay in a job, welfare can’t buy that.”

On to tax cuts: Morrison has been criticised for not offering tax relief to those earning less than $80,000 a year.

Coalition sources say the decision to move the middle-income tax bracket threshold up so taxpayers only pay the top rate on income above $87,000, instead of $80,000 – giving 500,000 people a small effective tax cut – was a down payment on future tax cuts or a declaration of intent.

Changes to superannuation affecting the top and bottom earners – mirroring Labor proposals – were both for reasons of revenue and fairness. 

There will now be a cap of $1.6 million on untaxed super contributions and people earning more than $250,000 a year would pay 30 cents in the dollar on their super, not 15 cents.

And the government is reintroducing a low-income superannuation tax offset to help the lowest earners put more away.

Multinational corporations shifting profits offshore will face a 40 per cent tax burden if they are caught. The government is funding more staff for the Australian Tax Office to make that happen.

A crackdown on the way the aged are assessed for care subsidies was driven by a cost blowout and concern that some providers are assessing people as requiring a higher level of care than they actually need, in order to qualify for a higher subsidy.

Among the measures indicating a shift in emphasis after the leadership change from Abbott to Turnbull are some funding allocations in the immigration portfolio.

The government is maintaining its unwavering stance against bringing to Australia any asylum seekers or refugees who arrived, unauthorised, by boat, and is understood to be talking to another of its Asian neighbours about relocating those from Manus Island in the wake of the Papua New Guinea Supreme Court ruling. 

It has revealed in the budget that it is quietly mothballing the main detention centre on Christmas Island. The two smaller camps on the island had already been moved to “contingency” status and on Tuesday night the large, high-security facility joined them.

But the government also allocated $11 million to help humanitarian migrants’ “sense of belonging” in Australia and almost $40 million to help support asylum seekers waiting for a ruling on refugee status – but not those deemed “illegal maritime arrivals”.

Sources say these moves are designed to address the rising concern among Australians that the treatment of asylum seekers lacks compassion, and also to counter the resentment within the Muslim community over the Abbott government’s “Team Australia” approach.

On environmental funding, $27 million is being saved through cuts to the carbon capture and storage program and the national low emissions coal initiative, both part of the Abbott government’s preferred approach to climate change. 

The government has dumped a couple of moves from the unpopular 2014 budget – abandoning the deregulation of university fees, which the senate rejected, and reinstating provisions to backdate veterans’ disability claims that were abolished to treat them the same way as other social security payments.

There are changes to the rules for repaying HECS loans, with the income of the whole household to be counted towards the repayment threshold, meaning loans will have to start being repaid sooner. 

The carers’ allowance – another Abbott favourite – had previously been exempt from the no-backdating provision but has now gone the other way. Like other payments, it will now not be backdated, saving $108 million over four years.

The biggest savings are being found in another crackdown on the disability pension – and abolition of carbon-tax compensation for new welfare recipients, saving a total of $2 billion, to be reinvested in the National Disability Insurance Scheme.

There are also savings in health, with some no-change decisions meaning higher costs to individuals. The current freeze on the level of rebate for all items on the Medicare Benefits Schedule is being extended until 2020. That means if doctors’ fees rise, and the Australian Medical Association has suggested they will, the rebate won’t, leaving patients paying more.

On Wednesday, Morrison was asked on 3AW what he expected doctors to do. “I would expect them to continue to do what they have been doing because this is a continued pause,” he said.

There are other decisions the government has taken that it won’t yet disclose. The budget papers indicate it has measures in train to save another $100 million this financial year.

And despite the treasurer telling parliament as he unveiled his budget that this “is not a time to be splashing money around”, he has allocated another $1.6 billion in spending for the next three years on measures as yet undisclosed.

After that, there is a secret savings measure cutting a whopping $2 billion in a single year, 2019-20. The undisclosed measures are understood to include those outlined in the budget papers without costings attached, due to being deemed commercial-in-confidence.

Turnbull believes he and Morrison have done enough to be given their own mandate to govern.

“I am quietly confident that the Australian people will give us another term in government,” Turnbull told the Nine Network’s Today show. “But you can’t take anything for granted and it is a two-horse race and it’s a choice. It’s a choice between me and Bill Shorten.”

Shorten’s budget reply was framed to address Labor’s long-held reputation as the higher-spending party, unveiling what he said were $60 billion in savings over a decade.

To avoid being accused of being anti-business, Labor is not opposing the proposed company tax cut in its entirety. Instead, it is supporting lowering the rate to 27.5 per cent for small businesses but wants the definition to remain where it is – at a turnover of $2 million and not higher.

And it is proposing a loan cap on fees for private vocational colleges in a sector facing allegations of widespread rorting – a move it estimates would save $7 billion over a decade.

Labor is already fighting as if it’s in a class war. In question time ahead of the budget’s unveiling on Tuesday, Labor MPs referred repeatedly to Malcolm Turnbull’s home suburb of Point Piper, which sits on Sydney Harbour, within Australia’s richest postcode. 

It’s not a pitch the opposition used against Tony Abbott. Each leader is accusing the other of being “out of touch”.

Abbott’s intervention in budget week was muted.

Under previous circumstances, on the Wednesday night between the budget and reply, he would have been at the end of a long day of media interviews, spruiking his treasurer’s work and preparing to head off around the country explaining the intricacies to all of Australia.

He was, instead, cutting a somewhat lonely figure on the house floor, farewelling Heffernan along with former ministers from the Abbott government who Turnbull dumped and who are leaving politics while Abbott stays. Abbott highlighted their contributions and, by implication, his own.

He noted the departure of Victorian senator Michael Ronaldson, whose legacy he said was the under-construction Sir John Monash Centre, the Australian museum on the French World War I battlefields at Villers-Bretonneux. 

A previous budget line-item, the centre is controversial for its cost, prompting some veterans’ groups to argue the money might have been better spent on helping those damaged by their service. 

Abbott also acknowledged former resources and industry minister Ian Macfarlane, whose anger after Turnbull dumped him prompted a failed attempt to switch to the Nationals and ended a long career. 

Abbott credited Macfarlane with scrapping “the job-destroying, investment-killing” mining tax – the same tax that barely earned anything – for which he intimated the mining industry should be grateful enough to find a job for him.

“I hope this sector will acknowledge and demonstrate their gratitude to him in his years of retirement from this place,” he said.

Abbott praised former small business minister Bruce Billson, calling him an “evangelist” and “the messiah for small business”.

“He authored the small business tax cut and the small business $20,000 instant asset writeoff, which were at the heart of last year’s budget and, expanded, were at the heart of this year’s budget, too.” 

Farewelling former parliamentary secretary Bob Baldwin, he called him “one of our parliament’s greatest advocates for tourism” – an interesting choice among Baldwin’s notable credentials, given Treasurer Morrison’s fondness for spruiking the virtues of tourism, as a former head of Tourism Australia. 

Abbott also described Baldwin as “a deft judge of the right balance between our economy and our environment”, perhaps implying the balance was not necessarily being maintained.

And following the parting shot from former speaker Bronwyn Bishop, who used her own valedictory speech to declare she had been asked to quit to protect him, Abbott hit back by failing to acknowledge her at all. 

In the eight long weeks leading to polling day, as Turnbull and Shorten go head to head, that gesture reveals the extent of Abbott’s possible influence on the course of the unfolding campaign. It will be as much about what he doesn’t say as what he does.

This article was first published in the print edition of The Saturday Paper on May 7, 2016 as "Turnbull grab bag to prime election". Subscribe here.

Karen Middleton
is The Saturday Paper’s chief political correspondent.