Coalition banks on infrastructure
“Scott’s giving it his best shot.” That was the generous assessment of one of the prime minister’s troops, who voted for him reluctantly in last year’s leadership coup. The prompt for the observation was the Morrison government’s first budget, a budget with a $100 billion infrastructure spend that could also be dubbed “the Coalition’s marginal seats campaign”. Morrison’s best shot it may be, but even as his treasurer unveiled the Coalition’s recovery plan it is still a very long shot.
At the outset of the election campaign – and make no mistake, Tuesday night was the real starter’s gun – it is well to remember just how hard an ask it will be for the Liberals to hold on to even minority government. The electoral maths is diabolical.
A majority in the 151-seat house of representatives is 76. The redistribution added an extra seat in Canberra, which is a Labor stronghold. Dunkley in Victoria is now notionally Labor on its new boundaries and Corangamite in the same state has been made ultra-marginal for the Liberals’ Sarah Henderson. So the incumbent government has no majority to give it a buffer against losses. It starts off with 73 seats to Labor’s 71. Overlaying all of that is 50 consecutive Newspoll losses since the cliffhanger 2016 election.
Consolidated Newspolls show a swing against the Coalition in every state. What that amounts to is a government on track to lose seats, not win them. Polling analyst Andrew Catsaras says: “It’s all over, it’s just a matter of the margin.” Fellow polling soothsayer William Bowe, in his latest “BludgerTrack”, has Labor set to win 18 seats. Government MPs are hoping that the budget will give them some momentum to save them, but that is optimistic.
It is true that the polls tend to tighten once the campaign is launched. However, as one nervous Liberal says, “It’s a very loose bridle.” The Labor camp is nervous, too, but as one of their senior strategists says, their biggest worry is that “we don’t fuck it up”. Party president Wayne Swan says one of the good things about the New South Wales election result, which saw the return of the Berejiklian Liberal–National government, is that it shakes any complacency “on the part of our people”.
The NSW election seared into Labor’s brain the reality that a campaign can go pear-shaped very quickly, especially in the last week. But Bill Shorten is no neophyte leader; he has already been through the cauldron of the 2016 campaign, where he confounded his critics and opponents. As shadow treasurer Chris Bowen kept reminding interviewers this week: “We’re a united team, we’ve been doing the work and we’re ready to govern.”
Shorten seized the opportunity of his prime-time half-hour budget reply on Thursday to set the political agenda more to Labor’s liking, making a major health announcement with a specific focus on cancer. While the government is keen to make the election a referendum on the economy and tax, Shorten didn’t shirk from the fight. He matched and bettered the government’s attempt to gazump him on tax relief for low- and middle-income earners.
Labor accused the government of playing catch-up over the treatment of the 10 million taxpayers singled out for tax relief. “Imitation is the sincerest form of flattery,” was Shorten’s view. Immediately after the budget speech, Bowen told Leigh Sales there was one big exception in the Liberals’ plan: the two million Australians earning $40,000 or less. There was no boost to the low-income tax offset for them. Shorten fixed that in his reply.
Also embarrassing for Treasurer Josh Frydenberg was that he didn’t include in his one-off energy payment – of $75 for singles and $125 for couples – the unemployed on Newstart and a range of others, including students and widows. Before Labor could amend it in the one piece of budget tax legislation introduced to the parliament on Wednesday, Frydenberg changed his position.
Both instances suggested a government not on top of its own budget. Bowen claims this had more to do with a government that “never misses an opportunity to treat … the lowest income earners in our society with great contempt”.
There is evidence Labor is more in tune with voters’ worries. Journalists who write for the News Corp papers were recently briefed that their readers were most exercised about wages, electricity prices and climate change. Regional readers put petrol prices right up there. One country MP says higher petrol prices hit hardest in the bush, where incomes are often lower and people must travel for longer distances. It amounts to a real cut in disposable income, creating an intolerable cost-of-living burden. Neither side is promising to do much about it. The problem for Morrison is that voters tend to blame the incumbent government for their pain.
Shorten’s mantra – that people are finding “everything is going up except their wages” – taps into frustrations that have forced people to dip into their savings to make ends meet. The budget papers are not foreshadowing any early resolution of this situation. They are forecasting slowing wage growth, lower economic growth and slower consumption growth.
What we do have at this election is a stark choice between the Liberals’ approach and Labor’s. Shorten and Bowen have eschewed the neoliberal economic orthodoxy that has been bipartisan for almost three decades. The Liberals are still wedded to “trickle down” economics, while Labor has come around to “trickle up”. Although the government has matched Labor with immediate tax relief for low- and middle-income earners, its $158 billion tax plan is a monument to Donald Trump-like unfairness for its generosity to high-income earners.
A former treasury economist now working for Industry Super Australia, Stephen Anthony, says the assumptions for being able to deliver a less progressive income tax system with massive rewards for the top end “are just fanciful”. They assume declining government payments and historically high wage growth. Any attempt to introduce a three-rate system with 70 per cent of taxpayers earning between $45,001 and $200,000 paying 30 cents in the dollar would plunge the budget into deficit. Other options would be to severely trim or scrap tax concessions such as negative gearing, or to slash social security and other outlays.
The government’s own tables spell out the point: under the proposed scheme, in 2024-25 a cleaner on a taxable income of $30,000 will get tax relief of $255. An executive on $200,000 will get $11,640. That’s nearly 46 times more.
In his budget speech, Frydenberg mentioned tax 43 times. Nine times he emphasised that he was doing everything without raising taxes. In the budget lock-up, Finance Minister Mathias Cormann asked rhetorically, “Who do you trust to lower taxes?” Morrison accused Labor of big taxing and spending. He nominated a $220 billion tax grab – an aggregated figure over 10 years from trimming tax concessions. What they are all attacking is the sort of tax reform former Liberal treasurer Joe Hockey said was needed in his valedictory speech.
Technically, the budget treats concessions such as those for negative gearing, dividend imputation and capital gains tax as a “payment” or “spending”. By trimming them, money is saved in the budget, money the government collects from taxpayers in the first place. Labor is planning to use these savings to give low- and middle-income tax relief, fund bigger health and education spending, and pay down debt. Bowen claims he’ll have bigger surpluses over the forward estimates than the Liberals.
Listening to Morrison and Frydenberg, you would think their spending is funded by a money tree rather than by taxing businesses and individuals. Bernard Keane in Crikey cites the Reserve Bank analysis that income taxes have risen far more quickly than usual in recent years. Shorten says this government has collected $126 billion more than Labor did in 2013. He says they have collected more taxes than any government in Australian history. And they have done it as a higher percentage of gross domestic product than Labor. Economist Richard Denniss says this election will pass democratic judgement on competing ideas of revenue collection.
A legacy of the unbridgeable divide in the Coalition over climate and energy is the fact the budget scarcely mentioned it. The treasurer even cut the government’s main policy to deliver pollution reduction targets, seen already as pathetically weak. The $2 billion for the Emissions Reduction Fund will be over 15 years instead of the 10 years announced in February.
The climate and energy divide will spook the Morrison campaign much like the ghosts of leaders past, particularly Malcolm Turnbull. The government’s third treasurer in six years, Frydenberg doesn’t want to know about it. He says he’s looking to the future not the past.
The third prime minister for the period says the choice at the election will be “between Bill Shorten and I”. His problem is, last time the choice was between Shorten and Turnbull. Shorten is now in his sixth year as leader; the unexpected Morrison is in his ninth month and hoping for a miracle.
This article was first published in the print edition of The Saturday Paper on Apr 6, 2019 as "They're off". Subscribe here.