Never waste a good crisis is a good maxim. Tough times allow organisations to fundamentally re-engineer what they do. Many of our public and private companies understand that, and we’re seeing restructuring all over the place at the moment.
Paul Keating, probably the best treasurer Australia has ever had, recognised it in 1983. Peter Costello also recognised it in 1996. The combination of their two tenures set Australia up so that of all the OECD countries it is probably weathering the current crisis the best.
Yet Wayne Swan gets the “best” crisis since World War II, and instead of continuing the reform business, it is pretty much business as usual combined with a spending binge which, in the worst traditions of John Howard, appears designed for political, rather than economic, ends.
What should last night’s budget have done?
It should have continued the regimen which has seen the Australian economy become stripped-down and muscled. That means implementing measures to improve productivity and flexibility, allowing individuals to direct assets to areas of best return. It should also have embarked on the task of unwinding the one asset bubble that threatens our longterm economic health – housing.
Instead it used the crisis as an excuse to start fattening the economy up, a process which will inevitably lead to shifting more of the economy away from the private sector and to the government, which will limit the growth potential in the economy. We’re not artheriosclerotic yet, but we’re on the way.
There were some good points in the budget. Pensioners needed a catch-up to growth in the economy, although as Alan Kohler points out, this need was limited to single pensioners. Raising the pensionable age is also a good idea, although so far in the future that it will be left to the first Pyne government to introduce it!
The government might be preparing to move away from its ETS if the increase in funding for renewable energy projects is anything to go by, and this would be a good move on two counts. The ETS is a stinker, and we do need replacements for fossil fuels when they run out which may not be readily available if we rely only on market signals. So I’ll tick that one.
Changes to superannuation are also a step in the right direction. It’s one thing to have a compulsory savings scheme and give people some tax shelter as a “reward” for taking the burden off the taxpayer, but the super benefits long ago moved beyond that.
On the other hand the infrastructure projects seem quite misconceived. There’re train lines to everywhere apart from where they are really needed. The Melbourne to Brisbane inland line has always seemed like a good idea, but no mention of it here. Then there is the issue of being able to get coal to port in Queensland, and iron ore in W.A. Nothing there either. When the next minerals boom sets in we want to be able to get our minerals to market while the rest of the world is still trying to work out how to dig theirs up.
Innovation was also ignored, with the increase in payments to the education sector miniscule.
And the extension of the first home buyers grant will help to perpetuate the housing bubble we currently have. While house prices may be affordable at current interest rates, current interest rates will be heading up at some time in the near future, and the housing crisis will start again. Particularly for some of those currently being shoe-horned into mortgages by the firs home owners scheme.
The budget lives with the consequences of previous decisions. Spending $43B on broadband, which ships virtually nothing, and will be done more cheaply by private enterprise, is a complete diversion from the real infrastructure issues, while continued padding of the car industry “saves” jobs at the cost of destroying far more, misallocating resources and sending all the wrong messages.
This government was elected on the flimsiest of platforms. People voted for it because they either had tired of the previous government, and thought this one would be basically the same, but a little kinder; or because they thought that it had an agenda that would be quite different from the previous one, and would bring it out after the election. Both groups were wrong.
This government had a flimsy agenda because it had no other goal than to get elected. It still doesn’t. That’s the problem with this budget.