28
Aug
2016

Morrison, Turnbull, Abbott & Me on Government Spending

A Tougher Budgetary Policy by Coalition?

Realising that it risks being attacked in the new Parliament for lacking specifics to justify its “jobs and growth” policy,  there are signs that the Turnbull government has, at almost the last minute, produced some commentary on why government spending and deficits must be reduced.

We heard on Thursday that Treasurer Morrison, in an overly long address to Bloomberg in Sydney (see Treasurer’s Speech), blasted the complacency about the level  of government spending, particularly on welfare  assistance. While there were some questionable comments (such as  “we now have an earnings problem”) and too much focus on what might happen in China (which he acknowledged he didn’t really know), his main conclusion was on the right track  - “We must arrest the growth in public debt, before it is too late, by getting expenditure under control at sustainable levels and boosting revenues through growth friendly tax policies”.

Importantly, while pointing out that the growth in welfare spending is “one of the most difficult challenges”, he  drew attention to an aspect that is rarely mentioned viz “More Australians are also likely today to be net beneficiaries of the Government than contributors – never paying more tax than they receive in government payments” (it seems to be just over 50%). Thefurther development of an analysis on this basis (which I emphasised in a report to ACCI I authored in 2006) has the potential to develop a basis for effecting over time substantial and justifiable reductions in government assistance to those with above average incomes. That, in turn, is a policy to which Labor could hardly object.

Then we had today in Weekend Australian a report by Paul Kelly from an exclusive interview with Turnbull (see Turnbull on Budget).Hetold Kelly that  his mission included policies to restrain spending and that  “we have to make –and we are making – the moral case for budget repair” to prevent “piling on debt” which the next generation would have  to meet. While Turnbull’s responses left something to be desired (we need more than “the moral case for budget repair”), they suggest some toughening in his position on reducing government expenditure and against measures proposed by Labor to increase revenue (although his support remains for additional revenue from superannuation).

Just how far Turnbull and his current Ministers will go along this tougher policy track remains to be seen. But they will likely be encouraged to stay with a tougher policy by the address by Abbott also made yesterday to the Master Builders Association (see Abbott Speech). As Weekend Australian editorialises, “there is much to commend his speech and its exhortation to Mr Turnbull and Mr Morrison to make the case for reform” (see Weekend Australian Editorial).

I have also managed to get my two-pennyworth with Weekend Australian publishing my letter as the lead. As it happens, the Letters Ed deleted from my letter the sentence “Historical experience is relevant to budget policy”  but ran the headline “History backs Morrison’s warning on tax divide” (see below). He also deleted three other references shown in square brackets in the letter below.

I mention here that I was still in Treasury when the two Labor ministers to whom I refer realised that they had to present a better budget than initially envisaged. In fact, much to the annoyance of two fellow Treasury bureaucrats (including the then Secretary to whom I had shown a draft before sending it), I had sent a “personal” minute to Treasurer Keating arguing that the budget then being considered needed to be much tougher. I think my 7 page minute in July 1986, and my hour and a quarter discussion with him, had some influence in improving the initial budget proposed for 1987-88 and the following year.Government expenditure actually fell in real terms in 1986-87, 1987-88 and 1988-89. Why couldn’t that be done in the next three?

Leave a Reply