FOR ONCE, GOOD POLITICS AND POLICY
FOR once, something that makes for good politics might also make for good policy.
The centrepiece of Josh Frydenberg’s first Budget – and a desperate attempt to try to ensure it isn’t also his last – is the $19.5 billion of tax cuts.
Critically, unlike conventional tax cuts which are usually spread in pay packets week by week over a full year, they are front-end loaded to deliver a multibillion dollar ‘cash splash’ in the September quarter.
Indeed, if taxpayers get their tax returns in quickly, they can get their ‘splash’ immediately in July.
This is because up to $1080 for singles and $2160 for couples can be claimed off 2018-19 tax bills as soon as you file your tax return for that year, which of course is about to end.
Now I wrote good politics, not ‘better’ or indeed even ‘best’ politics.
Those payments will start to flow after July; the election is about to be called for May. It can‘t be postponed, even if prime minister ScoMo would desperately want to do that.
It would obviously have been politically better – and arguably even in policy terms, which we’ll come to – if the money had been put into wallets, purses and bank accounts before the election. As it could have been.
But that, you see, would have created a little problem. It would have meant reporting on Tuesday night a deficit for the 2018-19 year of not $4.2 billion but something over $8 billion.
That’s the year of actual Budget outcomes not future promises. And that might have been just a tiny bit inconvenient to the broader message that PM ScoMo and Treasurer Frydenberg $370 billion budget).
And this fiscally miraculous turnaround was supposed to come from a then current year deficit of a whopping $44.4 billion!
Ask yourself, which is more fiscally credible?
Swan claiming he could shift from a $44.4 billion deficit to a $1.5 billion surplus in a single year?
Or Frydenberg claiming to be able to go from a $4.2 billion deficit to a $7.1 billion surplus?
Of course, as it turned out we didn’t get Swan’s
$1.5 billion surplus in 2012-13 but another $I9 billion deficit (followed by another one and another one, into and all the way through the Abbott and Turnbull Coalition governments).
Now, in 2019, where good politics and good policy intersect is that just such a cash splash – both in size and timing – could be exactly what the economy needs. Not too much, not too little: Goldilocks just right.
The ‘death’ of the economy based on those weak December quarter GDP figures has, like Mark Twain’s alleged passing, been wildly overstated.
That said, there’s no question that household spending – in the context of big mortgages and at the very least ‘nervousness’ over the value of the biggest household asset, the family home – could be well helped by some cash-in-pocket.
More broadly, a few billion spend in this focused way by government – targeted right at middleincome Australia – would work with laser-focus.
Now indeed, arguably it would have been better (policy, along with politics) to have splashed the cash into and through the election campaign.
But, it is what it is.