Kevin Rudd’s proposed Resource Super Profits Tax on mining companies would raise $12 billion over the next four years, most of it in the fourth year. Pretty handy for a deficit-ravaged bottom-line but its true value is between now and the election. In other words, it’s political.
Wayne Swan’s third Budget and Tony Abbott’s only (he will be either PM or toast) Budget Reply have laid certain things bare.
First, that the Government is back arguing its claim to being fiscally conservative after a damaging, if economically successful multi-billion dollar foray into recession-proofing.
Second, that a Government, which has been pretty ratshit generally at communicating complex ideas, as shown with its emissions trading scheme, has a long way to go to convince people that its new super profits tax is sound policy. Even punters, whom Labor imagined would jump at a new slug on greedy corporations at the big end of town, appear sceptical.
Third, that Tony Abbott is as punchy as a prize-fighter and still knows just one mode: aggression.
Fourth, that for all his team-inspiring bravado, Mr Abbott has a credibility deficit of his own when it comes to detailed economic management.
And fifth, that Labor’s restraint has forced the Opposition to drop its strongest attack line, the charge that the Government had no path out of debt and deficit. The infamous `debt truck’ has been quietly garaged.
These are the rudiments of the coming election.
As recently as five or six months ago, there seemed little doubt it would be fought on the Government’s chosen ground of the environment. Since then, health has been pushed the fore and education as always is a safe bet for Labor.
Now it is clear the economy will be centre-stage.
The Budget was the last big set-piece for the year after the Inter-Generational Report on population, the politically charged COAG meeting over health and hospitals reform, two important state elections, and the Henry Review of taxation.
Now, there may now be as few as six parliamentary sitting weeks before the starter’s gun is fired.
The Government is pinning its hopes on fiscal rectitude, while the Opposition is committed to disproving it. The election will turn on which side prosecutes its most convincingly.
Profound economic reforms in the Hawke/Keating period notwithstanding, the Coalition has long held the edge with voters on economic management. This is why Peter Costello never stopped reminding voters about about Labor’s $10 billion ``black hole’’ and the $96 billion debt left on the books in 1996.
So deeply ingrained was the message that Mark Latham surrendered the economic fight in 2004 concluding he simply could not win on this ground. Wiser heads prevailed in 2007 but the taint of profligacy saw Kevin Rudd go to extraordinary lengths to neutralise the problem.
He wasn’t just proud to be an economic conservative, he bluffed John Howard to out-bribe him in the campaign and then declared ``this reckless spending must stop’‘. Sound familiar?
This reverse auction was a rarity in Australian politics but it’s back already in 2010. Messrs Rudd and Swan are asking voters to note the conspicuous absence of new spending and its corollary, the quick path back to surplus. Just over $2.5 billion in new spending in this pre-election Budget compares very favourably to nearly $25 billion in Mr Costello’s 2007 final effort. Mind you, one has no money while the other had an embarrassment of riches. Either way, in the wake of the bungled home insulation scheme, and wastage in the school halls program, voters, if anything, have spending fatigue. Now they are more interested in ensuring the economy’s in good hands.
This is Tony Abbott’s opportunity even though economics is not his strong suit. He needs to leverage the Coalition’s fiscal street cred while avoiding missteps like the silly error of putting Barnaby Joyce in finance. But he is yet to prove he fully understands the rigours of budget discipline. His Budget reply was long on rhetoric and light on detail. In a first or second year of a term, this approach might fly but this is the political equivalent of `DEFCON 2’. Electoral conflict is imminent.
Senior Rudd ministers were surprised he passed up the chance of demonstrating his economic credentials direct to voters branding it the ``I’ll get back to you,’’ Budget reply. Obviously, the Government knew he’d oppose the super tax which is why it specifically tied its revenue to funding the few upsides in the Budget: company tax cuts, other business concessions, and a hike in compulsory superannuation. But if this is the trap, it is one the brazen Mr Abbott was willing to walk into. ``The die is cast. Neither side will retreat. The only way to stop this great big new tax ... is to change the government,’’ he concluded. Fighting words indeed.
With big miners threatening a capital strike on one side and a much needed superannuation boost dangling before voters on the other, the stakes are genuinely high.
Get ready for an almighty battle of the sales pitches. At least on that front, Mr Abbott already has a score on the board: emissions trading.
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