This is a federal budget of no surprises – designed to be sober, to build trust in the hope of better things to come
The Albanese government has an unofficial mantra. No sudden movements. Don’t surprise the voters.
You can think of this as a special bequest from the artist formerly known as the prime minister of Great Britain, Liz Truss. In scary times (and the budget papers confirm scary are the times we live in) being crazy brave, or in the Truss case just plain crazy, can get you killed.
The first Labor budget in nine years models the in-house mantra. Most of the budget measures and forecasts were pre-briefed to the media in orderly fashion over a couple of weeks. One bauble was held back for budget night – a new housing policy commitment – but that leaked right at the last moment.
So, the no surprises government delivered the no surprises budget. The core of the strategy was simple. The Reserve Bank has a big job to do to subdue inflation. Stay out of the way.
Staying out of the way meant no cash handouts for people battling cost of living pressure. Applying the brakes to discretionary spending. Banking as much of the temporary revenue windfall as possible to hedge against things falling apart.
This budget is about a new government starting as it means to continue, then crossing its fingers and toes and touching wood and hoping that continuing like that is actually possible. Events have a habit of cruelling the best-laid plans.
When Jim Chalmers last sat in the treasurer’s office – as an adviser, not the front man – Labor won the election in 2007, and then set to work dealing with a much less serious inflation challenge that had emerged in the closing years of the Howard government.
Chalmers recounts this period in an engaging memoir published in 2013 called Glory Daze. Inflation was a genuine issue for the new Rudd government to manage, but it was also an excellent guardrail when it came to managing the ambitions of colleagues. As he recalls: “It was very useful to have a framework of fiscal constraint to ringfence the individually understandable but collectively ruinous ambitions of a new generation of ministers arriving in power with new spending priorities and the pent-up frustrations of eleven years on the opposition benches.”
This archival observation from Australia’s new treasurer brings us neatly to the main problem the new government faces – apart from those scary times arrayed in the commentary in budget paper number one. The main problem is the pandemic has reset expectations in Australia about what government is, and what government does, and it will fall to the Albanese government to work out a way to pay for the bigger, more empathetic government that Australians now expect.
The federal budget is in structural deficit. Ten years of Coalition governments resisting reality like their lives depended on it – be it the reality of the climate crisis and the inexorable energy transition, or the reality that the country doesn’t have enough affordable housing stock – has created profound unmet needs in this country. But politically, it is always easier for the Coalition to raise revenue and spend
money than it is for Labor to raise revenue and spend money.
If we return to Glory Daze for a minute, directly after Chalmers’ observation about inflation being a handy tool to temper the spending ambitions of colleagues back in 2007, our current treasurer makes the following observation about the higher bar Labor always faces in the court of public opinion: “Better to demonstrate that we could hold the line fiscally first and earn the credibility to spend wisely later.”
This observation is timeless enough to travel from 2007 to 2022 without losing its currency. So phase one, postelection, October 2022, is to build bona fides. Build trust. Produce an economic statement that makes good your election promises. Align fiscal policy and monetary policy as much as practicable. Bag your political opponents relentlessly for their fiscal profligacy (even when it was crisis Keynesianism) to better underscore your own sobriety. Then construct some signposts to the future, hoping that the future isn’t the future Labor faced in 2008 – constant crisis management as the global economy spiralled into deep recession.
One of the more interesting signposts to the future is the housing initiative. Bob Hawke, who started out as a firebrand before maturing into a consensus prophet, had the prices and incomes accord. Anthony Albanese, who has mirrored the Hawke trajectory, has a housing accord – a handshake between governments, investors and the property industry to build more affordable housing stock. The government wants to persuade super funds to bankroll new housing stock, and it thinks it can persuade the funds to do that by creating a taxpayer-funded income stream to cover the gap between market rents and subsidised rents.
Right now, this is a plan for a plan. The idea won’t start rolling until 2024, and it is entirely unclear whether the budget-night aspiration of a million new homes built between 2024 and 2029 can ever be realised given high inflation, acute labour shortages, and supply chain difficulties look like problems with a long tail.
It could all be pie in the sky. That seems entirely possible. But this model of policy-making – roll out the big things slowly and collaboratively – is how the Albanese government has started and means to continue.
Australia has big problems, and the new government wants to bring the institutions of the country to the table to start solving them. For a new Labor government, this model of policy-making has a couple of advantages. Building consensus constructs, like a housing accord, solidifies and extends the base for your progressivism. It embeds it rather than pits it against forces that would resist.
A Labor program is harder to demonise when some of the most powerful interests in the economy are at the table, working on solutions. That model of policy-making bought the Hawke and Keating government five terms in office.