Expect a Seinfeld election after this year’s timid budget

By Peter van Onselen From: The Australian  May 16, 2015 12:00AM









Illustration: Eric Lobbecke Source: Supplied

The next election is shaping up as a Seinfeld election: about nothing. This will certainly be the case if it is called early, with minimal time for either of the main parties to put in place serious responses to tax and federation reform.

The budget contained none of it, the budget in reply even less.

Tweedledee will be taking on Tweedledum, and the only people with a serious interest in the ­outcome will be the players ­themselves.

The Coalition’s capitulation in the budget in the wake of last year’s problems has drawn the conservatives closer to Labor when it comes to budget positioning. And there is little for Aus­tralians to rejoice in.

Rather than using his second budget to muscle up to the Senate and the opposition, Joe Hockey has effectively thrown his hands up in the air and walked away from the few tough measures that were included in budget No 1.

It all became too hard because of Tony Abbott’s pre-election commitments stifling the ­Coalition’s capacity to legislate necessary fiscal consolidation.

A trust deficit has set in.

Even if the election goes ahead as planned in the second half of 2016, it will still be a Seinfeld-like election about nothing.

This year’s budget had the sniff of an election-year budget — high spending with little by way of fiscal consolidation (other than bracket creep).

But if the Treasurer crafted it that way simply to keep the government’s options open regarding election timing, next year’s budget is hardly going to be dominated by tough decisions on the eve of what will be a difficult poll.

We will have had three budgets in this term of government — the first a disaster, with its core elements blocked, delayed or scrapped. The second and third budgets will have been defined by politics, with one eye on the polls.

That’s hardly a script for solving national problems, including the rising proportion of debt to gross domestic product. It is no way to run a government.

Gone are the days of the political class being prepared to crash or crash through. Rather, survival is the strategy the modern political class adopts.

Where is the serious debate about industrial relations reform? Or tax reform, especially with respect to the GST? The Coalition isn’t prepared to touch these political hot potatoes and the Labor Party continues to lurch to the left on economic matters, concerned about its left flank in the wake of the rise and rise of the Greens in the inner cities of our capitals.

It is a sad state of affairs.

Bill Shorten’s budget reply speech may have broken this nexus to some extent, but for all the wrong reasons. He has drawn out differences between the government and the opposition, but in ways that do Labor no credit.

To return to government so soon after the Rudd and Gillard years, Shorten needs to develop a stronger economic narrative for the Labor Party.

He is yet to do so, and Thursday evening’s budget reply speech raised more doubts than answers. This is Labor’s electoral liability, despite the Prime Minister’s unpopularity.

Few would be prepared to argue against Shorten’s sizeable cut to small business company tax rates, or the value in cutting the Higher Education Contributions Scheme for science students, for example, but paying for such measures is another matter entirely. Where are the funds going to come from?

The risk for Shorten (and by extension Labor more generally) is that so soon after the Rudd and Gillard years, only a minority of Australians are prepared to re-elect Labor following such a disastrous period of debt and deficit blowouts.

It is one thing for polls to reflect mid-term blues for Abbott; it is another thing entirely for them to register the sort or discontent that would vote the Coalition out of office after just one term.

For Australia to remain internationally competitive, we need to embrace all manner of economic reforms, not all of which will be popular.

These may include federation reforms, which Abbott spruiked in his book Battlelines, before editions published during his leadership scaled back ambitions.

There is no avoiding the need for such reforms now, even if our politicians have lost their collective nerve.

I was at a breakfast analysing the federal budget during the week where former prime minister John Howard highlighted the need for the current political class to step into the reforming space previous administrations (including his own) once occupied.

Yet it is hard to get excited about this prospect eventuating, or indeed the likelihood of the political class pursuing reforms that might include a political cost for parties.

Modern Australia needs tax reform that gives governments the funds they need to implement further reforms to the operation of services, but that will happen only when the political class is prepared to stake its future on reform.

Elements of the parties fall into this category, but not nearly enough. Generation Next inside the Liberal Party appears to be ­reform-minded, but its members are constrained by the timidity of the older generations.

The question is: will they start to advocate reforms as the need to do so becomes more obvious, or will they choose to keep their heads down and seek promotion rather than policy outcomes?

While the budget handed down on Tuesday generally has been condemned for its failure to match the rhetoric ­Abbott and Hockey served up pre-election, this is the least of its problems.

It did not solve the problems of how to return the budget to surplus without depending exclusively on bracket creep. It also overestimated growth targets in the forward estimates, along with wages growth.

The small-business tax write-off is open to rorting, especially in the context of small-business people eligible to take out loans accessing funds that they can thereafter write down. This may well be an unintended consequence of the package.

Besides, its two-year life expectancy ensures the policy is seen as little more than a short-term sugar hit, rather than the first step in longer-term structural reform.

Ultimately, what Australia needs is an opposition prepared to come up with a range of initiatives the government can take or leave, alongside an open-minded government focused on adopting best policy rather than seeking partisan advantage.

On the few occasions this does happen, too little is done to prepare the nation for the challenges of ageing or an expansion of the welfare state (consider the cost of the National Disability Insurance Scheme), or how to make retraining attractive to those without a job who need one.

Australia is at a crossroads, yet the political class continues to play positional politics rather than ­address the need for major reform to set up future prosperity.

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