When you’ve simultaneously got an investment boom and a consumption slump there’s probably a half-decent case to be made for taking from companies and giving to “working families”, not that Julia Gillard and Wayne Swan are making that case.
Tuesday’s budget was merely an attempt to continue the process of setting up an election campaign based on the Occupy Wall Street narrative: you know, that the fat corporate cats of the city and their political wing are robbing the suburbs and towns blind.
They were already well into it before this week with Swan’s attack on the billionaires plus droning doorstops along similar lines. The 2012-13 budget just gave further expression to Labor’s hijacking of the “Occupy” theme – taxing companies and the rich and giving the money to “working families”.
That Wayne Swan did it while budgeting for a surplus was pretty remarkable. He achieved that with help from the Reserve Bank’s 3.25% GDP growth forecast (which will almost certainly turn out to be wrong), the carbon tax, spurious mining tax revenue forecasts, and pulling $2 billion of 2012-13 spending back into 2011-12 (I’ve never before seen a budget that increases spending so much in the year that has two months to run).
But credit where it’s due, it’s a surplus budget. Top stuff, Wayne.
It is also a stimulus budget, plonking another wodge of cash into peoples’ bank accounts, encouraging people over 50 to spend that $25,000 they were going to put into super for the extra tax deduction, rushing cash to local councils for them to spend fast and so on.
All pretence of long-term reform has been defenestrated. The Henry Tax Review has stopped twitching and is now a lifeless corpse and the government has even stopped talking about the great moral crusade/reform of our time – climate change. The carbon tax is still happening in six weeks, but you wouldn’t really know it, except by its budgeted cash ($4 billion in 2012-13).
The mining tax ($3.5 billion) is not expected to be paid by anyone, and is a grotesquely deformed version of what Ken Henry proposed, but that doesn’t matter – Treasury has modelled the number so therefore the treasurer can whack it in the budget.
The company tax cut that has been ditched was merely a nod in the direction of tax reform and was never going to make anyone vote Labor anyway, so – out it goes. Money to working families instead.
It is all Desperate Defence 101 from an embattled left of centre political party, trying to set up a bit of class warfare so as not to lose too many seats. Did anyone really expect them to continue tough economic reforms while sinking?
And after all, the investment boom is locked in; if anything there’s too much of it. Why encourage companies to invest more, when the real problem in the economy is a shortage of consumption, not investment?
Answer: because most consumers are employed in, or by, small businesses, and they’re in trouble.
They’re being buggered by banks, used by unions, lambasted by landlords and badgered by bureaucrats. The Schoolkids Bonus will be nice, as long as it’s not given to schools, but other than that, there’s nothing in the budget for them, not even that measly 1% company tax cut, which the vast majority of small businesses wouldn’t have got anyway because they don’t pay company tax.
This article first appeared on Business Spectator.