The Coalition has surrendered its key point of political differentiation – debt and deficit
by ROSS FITZGERALD
There were a heap of euphoric headlines in response to the federal budget. And what’s not to like in a budget that spends more money on just about everything, including much more on aged care, disability care, childcare, and the unemployed? The only noticeable lack of enthusiasm came from a few fiscal conservatives who persist in thinking that budget responsibility is what distinguishes the Liberals and Nationals from the Labor Party.
This really was an extraordinary budget coming from a government that had campaigned against its predecessor’s “debt and deficit stretching as far as the eye can see”, claiming that the Rudd-Gillard deficits averaging well under $50 billion a year constituted a “budget emergency”. At least Labor Treasurer Wayne Swan genuflected to the need for budget responsibility with his opening line to the 2012 budget speech: “The four years of surpluses I announce tonight…”
There is now no such acknowledgement from either the Prime Minister or the Treasurer. Instead, a pandemic that has hardly killed anyone in Australia has been used to justify a debt-fuelled extravaganza that Labor would never have dared. At $160 billion (or almost ten per cent of GDP), this year’s budget deficit is an all-time record. Even the official projections show a decade of deficits, with net debt reaching almost a trillion dollars within five years. And bad as it is, this ocean of red ink would be even worse but for assumptions that our international borders will reopen next year, state borders no longer close, there are no further lockdowns, immigration jumps back to a quarter million a year by 2024, and – most critically – interest rates stay at under 2 per cent a year.
These rosy assumptions are about as reliable as the earlier dire ones, that there would be 150,000 Australian Covid deaths and that unemployment would approach 20 per cent, that justified the lockdowns and the consequent cash splash to keep people going through the suspension of normal life that was supposedly necessary for their own good. What’s noteworthy is that whatever the official assumptions, they’re now taken to justify more spending – either because it is supposedly desperately needed; or because it can easily be afforded. If the budget is designed to keep the economy surging and the polls buoyant, it will almost certainly be a huge success. But Liberal-National governments previously prided themselves on doing what was fiscally conservative rather than what was publicly popular. And at the heart of the Liberal Party’s pitch to voters, from John Howard and Peter Costello’s time onwards, has been the often explicit and always implicit claim that only they can be trusted to be prudent and frugal with taxpayers’ money. Given this week’s effort, Costello and Joe Hockey look like political sadomasochists hurting their own prospects and inflicting needless pain on the Australian public with budgets that cut spending, made the economy more efficient and built more price signals into the system. All for nothing, it seems. Perhaps they should have just instructed the Reserve Bank indefinitely to buy government bonds at close-to-zero interest rates and, presto, government could have spent forever!
How can any future Liberal/National opposition credibly complain about a Labor government’s over-the-top spending given the utter bounty of the current effort. Even if, as seems likely, it succeeds in getting Morrison and Co over the line at the federal election due well before next year’s budget, it may have cost the Liberal Party its fiscal credibility for a generation. And that’s if there’s no looming reckoning when interest rates return to normal (and home buyers can’t afford their mortgages), if China stops buying our iron ore, or if the rest of the world stops lending to us.
Consider the policy and philosophical trajectory of the current Coalition government: it was elected in 2013 promising to end Labor’s emissions obsession, to protect our borders and to repair the budget. But what’s happened since Tony Abbott left the prime ministership? First under Malcolm Turnbull and now under Scott Morrison the Coalition government has actually presided over the biggest debt and deficits in history; it’s about to embrace “net zero emissions by 2050”; and the people it’s currently desperate to keep out of Australia are our own citizens who are ravaged by Covid in India.
Presumably, like Malcolm Turnbull before him, Scott Morrison thinks that he can ignore the Liberal base because conservatives have nowhere else to go. He wouldn’t be the first former NSW party director to think that the only way for a Liberal government to succeed is to be a more competent version of a Labor government. The problem with this reasoning is that it’s the people who regard massive deficits as inter-generational theft and who think that frugal financing is a moral as well as a political responsibility who are many of those folk that the Liberal Party relies on to service polling booths and to fund election campaigns. Even if they don’t have anyone else to vote for, and can’t bring themselves to preference anyone other than the Coalition, it would be difficult to win from a one seat majority if these true believers went on strike.
Instead of breathing a huge sigh of relief that the fiscal position is $100 billion better than forecast before Christmas, the Morrison government has promptly spent the extra money. There must be some Coalition backbenchers who find this objectionable. Although unlikely, it would only take one or two of them to play hardball, not just in the party room but also in the parliament, to wipe away the PM’s budget night smile.
Emeritus Professor of History and Politics at Griffith University, Ross Fitzgerald AM is the author of forty-two books. His most recent publications are the political/sexual satire The Dizzying Heights, co-authored with Ian McFadyen, and a memoir Fifty Years Sober: An Alcoholic’s Journey, both published by Hybrid Publishers.
The Spectator Australia, May 13, 2021