The Budget Outlook after the PEFO
As expected, today’s publication by Treasury and Finance of updated fiscal and economic estimates and projections – the so called PEFO published under the Charter Of Budget Honesty - do not show any significant change since the Budget of 3 May. I have include the most important sections of PEFO here.
Budget & Economic Plan (Sic)
How to interpret the Budget? My initial reaction was “much ado about nothing”, by which I meant that while there have been reductions in superannuation “concessions” and in tax rates for small businesses offset by increases in tobacco excise, together with a small initiative on youth employment and commitments to fund various types of infrastructure, there was little change over the next two years in estimates of total government spending and revenue relative to the total economy.
Turnbull on Federal State Relations
It is becoming more difficult by the day to guess what rationale is behind the limited policy announcements Malcolm Turnbull is starting to make. One interpretation of Turnbull’s latest announcement is that he reached a personal view that he needed to announce something new. That led to his decision to announce a “new” policy on federal-state relations without providing substantive detail because he thought that there would general agreement that something needed to be done to reduce the vertical fiscal imbalance between the Federal and State governments. And that there would be much discussion of the idea and praise for him for initiating it.
Turnbull Decides Early Election & Budget
No sooner had the latest Newspoll been published (details are attached) with a 51/49 TPP in favour of the Coalition, but with the first negative net satisfaction ratio for Turnbull personally, than he announced an early return of Parliament to (again) consider two pieces of legislation on workplace relations and a double dissolution election on 2 July if the legislation is not passed this time by the Senate (of the two pieces of legislation, one has already been rejected twice and this rejection could be used to call a DD). This would be a considerably earlier election than the September/October months which Turnbull himself had previously foreshadowed.
Economic Outlook
At a time when in January the IMF revised down its global GDP forecast for 2016 from 3.6% to 3.4%, and also forecast a fall of 9.5% in non-oil commodity prices (after a fall of 17.4% last year), Treasurer Scott Morrison is justified in repeating his boast that today’s December quarter GDP increase of 0.6% (seasonally adjusted) shows Australia is continuing to grow well above the average in the OECD. In fact, the trend in GDP growth has edged up slightly since 2013.
The Missing Economic Policy
Today’s Newspoll shows the two major parties are now on the same TPP (down from a steady 53/47 for the Coalition). Although Turnbull remains clearly preferred as PM, his indecisiveness over whether to raise the GST/cut income tax and his failure to produce any new substantive economic policy has contributed to the downturn. Turnbull’s general approach of not ruling any policy in or out –and then not deciding on anything – has not helped and his net satisfaction rating is down to 10 compared with 38 in mid-November. As Rowan Dean put it in Saturday’s AFR, “Turnbull: The Force Awakens has lost business to Deadbill”.
Treasurer Morrison on Government’s Economic Policies
It is not often that one accepts most assertions and back up used by 7.30’s Leigh Sales when interviewing a minister from the Coalition Government. But her interview of Scott Morrison after he gave a 9 page address to the National Press Club (text attached with 5 pages of Q&A) go to the heart of the problem with the performance of the government led by Turnbull since he became PM. The text of her interview with SM is set out below and attached are comments on the address by her, another ABC interviewer and Shadow Treasurer Bowen. Following are the main points arising from SM’s presentation and his interview with Sales.
Some Things are Ruled Out, Some Not
We have now experienced two meetings/summits of world leaders following the Paris terrorist attacks last Friday, one by the G20 in Turkey and one in Manila by those involved in the negotiation of the Trans-Pacific Partnership trade agreement (still to be approved by the US Congress). Although there was a general recognition at both meetings that the Islamic State constituted a powerful force and agreement that “something needs to be done” to combat it, no specific combined response was agreed, except that whatever else might be done boots on the ground are ruled out.
More Questions About Turnbull
It remains difficult to reach any firm conclusion about the implications of Turnbull’s acquisition of the Prime Ministership. As expected, the first opinion poll shows Turnbull as a Better PM than Shorten (62/38 %) - compared with the 42/58% under Abbott - and a lift in the TPP to 50/50 from 46/54 in the last Newspoll. But one might have expected an initial more favourable outcome for Turnbull.
Refugees Surge Raises Serious Problems
The difficulties being experienced by refugees from Syria, Iraq and other Middle East countries in reaching Germany are not stopping the increasing attempts by individuals to take advantage of the free inflow which that country is allowing. Some are portraying Merkel as a saviour and there is pressure on other western countries to accept increased numbers.