Source: The Conversation (Au and NZ) – By Michelle Grattan, Professorial Fellow, University of Canberra
The run-up to a budget always sees a degree of chaos. But this year it has looked like one of those willy willies that blow up in outback Australia when the wind stirs a storm of dust.
A Middle East war, a fuel crisis, another interest rate rise, calls for extra cost-of-living help amid warnings against high government spending, accusations of prime ministerial lying – they are collectively testing the government’s ability to control how it wants to frame its fifth budget.
But the immediate “narrative” it puts on the budget is one thing – more significant in the longer term is getting its settings right in these extraordinarily volatile times, something we’ll only be able to judge in retrospect.
As is the modern way, some major items have been announced well before Tuesday’s main event, including reform of the National Disability Insurance Scheme and a fuel security plan.
The NDIS overhaul is the big money saver in the budget, a whopping $22 billion. But that is based on heroic, and surely questionable, assumptions, most notably that the scheme’s annual spending growth, now 10%, can be slashed to an average annual 2% in each of the coming four years.
Unless the figures are to be manipulated, this surely defies all previous experience with this scheme. Applying the brakes that sharply looks impossible, especially as some of the details are still to be worked out, and consultations (which often bring concessions) are yet to be held.
If the NDIS’s early cuts can’t be achieved, the government has a hole in its savings package.
It would be interesting to know whether Reserve Bank Governor Michele Bullock is sceptical about the NDIS savings assumption. Bullock, who has previously been wary of appearing to call out excessive government spending, was explicit this week, telling her post interest rate rise news conference, “when governments are spending a lot of money and we’re running up against capacity constraints, then they do need to think about whether or not there’s ways they can help the inflation problem by looking for ways to constrain demand”.
Questioned about this statement, Treasurer Jim Chalmers, who insists he will save more than he spends in the budget, played down her words, saying she was answering a “hypothetical” question. (She had been asked whether too much reliance was placed on central banks rather than governments to keep inflation under control.) Bullock did give a nod to Chalmers’ efforts to constrain demand, but she must have been aware of how her words would be heard, given the controversy around anything she says on spending.
The government went to the 2025 election promising income tax cuts, and some changes to the tax treatment of superannuation, but not much else on the tax front. But after the post-election economic roundtable it became clear Chalmers was going to pitch to include significant tax changes in this budget. The question was: would Anthony Albanese let him do so?
From what we know so far, the answer seems to be “yes”, with anticipated reworkings of the capital gains tax (CGT) and negative gearing (and possibly tougher tax treatment of trusts).
A political cost is already being paid – by Albanese, who before the election promised (at times belligerently) not to tinker with negative gearing or CGT. Questioned this week about potentially breaking his word, the prime minister’s tone was narky.
Leaving aside the basic issue of integrity, in political terms does breaking these promises matter?
With Labor having a massive majority and the opposition shambolic, the government will reckon it can get away with it, so long as it can present a budget with more “winners” than losers and it can carry the (not uncontested) argument that it is promoting intergenerational equity. To help with this, the budget will promise a modest one-off handout for taxpayers in work.
But the deceit further undermines the trust people have in the political system and its politicians.
Saturday’s byelection in former opposition leader Sussan Ley’s seat of Farrer will be a case study in how trust has leached away from the so-called “parties of government”.
For three quarters of a century the southern New South Wales seat – centred on Albury while extending to the South Australian border – has been safely in Coalition hands. It was once held by the Nationals’ deputy prime minister Tim Fischer. But this weekend the contest is set to be between One Nation’s David Farley and high-profile community independent Michelle Milthorpe, accused by her opponents of being a “teal” (because she has received Climate 200 money), a label she disowns.
Different as they appear at first glance, the community independents (including the teals) and One Nation represent two versions of today’s “grievance” politics. It’s ironic, but symbolic, that in Farrer they are both decked out in orange.
The regional strand of the “community candidate” movement can be traced to Cathy McGowan, who wrested Indi (across the Murray River from Farrer) from the Liberals in 2013, and was succeeded in the seat by another independent, Helen Haines (who has campaigned for Milthorpe). McGowan and her followers wanted to make Indi more politically salient, rather than being regarded as a safe seat governments and oppositions could effectively ignore when it came to needs and services.
Community candidates exploit the grievance constituents have that their electorate is not being heard. Milthorpe captured their essence when she told the Guardian, “I’m here because I was feeling dissatisfied with the major parties. They don’t understand our regional context. My job is to take the voices of Farrer to parliament and make sure that people understand what we need out here.”
One Nation has a much wider view of many voters’ sense of “grievance” – reflecting and amplifying, for example, discontent over the size and composition of immigration.
Community candidates want a place at the political table for their electorates: One Nation wants to overturn the table.
In Farrer, the idiosyncratic Farley doesn’t quite fit the One Nation policy mould, but the voters are reacting to a vibe, and to Pauline Hanson, rather than worrying about the fine print.
Saturday’s result will frame, for the worse, Opposition Leader Angus Taylor’s budget week. The expected Liberal loss will be a setback for him, whoever wins. If the victor is One Nation (which is getting Liberal preferences) it will be more serious because that will pump up the already highly inflated tyres of a party that could do serious damage to the Liberals’ prospects in the coming Victorian election.
To come back to where we started, whether it’s Farley or Milthorpe, the result in Farrer seems certain to set off a willy-willy.
– ref. Grattan on Friday: The Farrer result will set off a willy willy. The budget already has – https://theconversation.com/grattan-on-friday-the-farrer-result-will-set-off-a-willy-willy-the-budget-already-has-282268