Opinion/Comment, Politics

Don’t be fooled by the spin – tonight’s budget will be political and ideologically driven

Scott Morrison is the type of politician who talks a lot about being pragmatic, and then invariably finds a solution that fosters his ideological agenda.

By Greg Jericho

‘Scott Morrison and his government have been hyper-ideological throughout the response to the coronavirus … This Tuesday will be very political.’ Photograph: Dean Lewins/AAP

This Tuesday’s budget will as ever be a very political document. Yes some economics will be used to frame the spin, and there will even be some attempt at modelling, but overall it will be a document of politics and ideology.

Scott Morrison and his government have been hyper-ideological throughout the response to the coronavirus. This, of course, is no real shock because Scott Morrison has been hyper-ideological ever since he took over the prime ministership.

He is the type of politician who talks a lot about being pragmatic, and then invariably finds a pragmatic solution that involves fostering his ideological agenda.

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The response to the crisis has seen this ideology shifted into overdrive.

They resisted providing a wage guarantee through jobkeeper (something it now takes full credit for) and then ensured universities (public ones at least) were ineligible – even amended legislation to ensure universities missed out.

The assistance to the arts sector was dragged out. They cut the jobseeker payment even while Victoria was still operating under lockdown measures and shifted quickly back to talk about unemployed not wanting to work. They undermined the superannuation industry and shifted the burden of the pandemic onto young people though allowing access to superannuation, stacked the Covid coordination commission with business and fossil fuel executives and then adopted a “gas-led” recovery strategy.

Universities, arts, unemployed, superannuation and climate change. Slap, slap, slap, slap, slap.

And now we will hear talk of jobs.

There will be all manner of guff about manufacturing designed to distract the easily fooled.

As The Monthly’s Nick Feik noted this week, the government loves to make almost monthly announcements about how it is assisting the manufacturing sector, including this week’s one that it was going to “transform” Australian manufacturing.

Wow. Transforming an industry that has an annual output of around $105bn? How will this massive undertaking be done?

Well the government has allocated $1.5bn … over four years. So $375m a year.

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Small beer. And even smaller when you compare it to what will likely be the centrepiece of the budget – the bringing forward of the tax cuts currently legislated to occur in 2022 and 2024.

See interactive graph here; https://datawrapper.dwcdn.net/XNe2J/3/

These cuts are known as stage 2 and 3 of the government’s tax plan.

Stage 2 involves increasing the top threshold of the 19% tax bracket from $41,000 to $45,000, increasing the low income tax offset from $645 to $700 and then increasing to the top threshold of the 32.5% tax bracket from $90,000 to $120,000.

Those changes will provide a 0.5% tax cut to someone earning $45,000, and 1.9% to someone on $120,000.

Not bad for someone earning double the median taxable income, I guess they are doing it tough. Such pragmatism.

The Parliamentary Budget Office has estimated this stage will cost around $27bn in the first two years.

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Even worse will occur should the government decide to bring forward the stage 3 cuts, which will reduce the 32.5% marginal rate to 30% and lower the threshold from $120,000 to $45,000 and increase the top threshold from $180,000 to $200,000.

Such a move, the PBO has estimated, would reduce annual government revenue by around $26bn by the end of this decade.

And it would deliver an absolute motza to the wealthy – a 4.5% tax cut to someone earning $200,000.

So massive is the benefit to high-income earners, that despite only accounting for around 5% of all taxpayers, the PBO has estimate stage those earning over $180,000 will receive around 31% of that $26bn a year.

Feel the pragmatism.

People with such wealth will largely save the money, use it to increase their wealth but do little extra spending that would improve economic growth or the wealth of anyone else.

Such tax cuts are not done for economic reasons but ideology – the ideology of benefiting the wealthy and pushing for a smaller government.

And the government is now able to use the pandemic as a cover for the fact it had never actually budgeted for the drop in revenue that the tax cuts will drive. It can also use the ongoing cuts to revenue to justify cuts to services and benefits once the pandemic clears.

Just more pragmatism, I guess.

This Tuesday will be very political and, if the past year has been anything to go by, ideologically driven. Don’t be fooled by the spin and talk of economics.


First published at The Guardian Australia – Sunday October 5 2020. See; https://www.theguardian.com/business/grogonomics/2020/oct/04/dont-be-fooled-by-the-spin-tuesdays-budget-will-be-political-and-ideologically-driven

Greg Jericho writes on economics for Guardian Australia and is the author of the celebrated Grogs Gamut blog. He is a former public servant and author of the book The Rise of the Fifth Estate: Social Media and Blogging in Australian Politics.

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