Budget Zombies Stalk the Coalition

22 April 2018

Originally published in the Australian Financial Review.

The federal budget is the nation's fiscal and economic blueprint - a document that lays out the agenda of the government of the day and outlines the policy priorities for the year ahead.

The federal budget is the nation's fiscal and economic blueprint - a document that lays out the agenda of the government of the day and outlines the policy priorities for the year ahead.

But at the moment it’s little more than a work of fiction.

And that's because it’s being propped up by billions of dollars of measures that have little or no chance of passing the Parliament.

The so-called zombie cuts, amounting to $2 billion over four years, have either already been rejected by the Parliament, are unlikely to pass, or have never been introduced.

Take, for instance, the measure that makes up about half of that total - the Turnbull government's plans to axe the Energy Supplement.

Amid rising power prices, it would be a cut for 2 million Australians, including pensioners, carers, people with disability and the unemployed.

Axing the Energy Supplement for new pensioners would mean a cut of $14.10 per fortnight for single pensioners or $365 a year.

The $1 billion hole left in the budget is still being booked as a saving to the bottom line, even though the government can't pass the measure and the Parliament doesn't want anything to do with it.

Meanwhile, the initial proposed start date came and went last year and a new one hasn't even been pitched up yet.

Then there's the rest of the zombies still lurking in the budget, including cuts to Family Tax Benefits, increasing the maximum liquid assets waiting period, cutting the pension supplement for people overseas, changes to the pension residency requirement and cuts to the Pensioner Education Supplement and Education Entry Payment.

But here's where Scott Morrison and Mathias Cormann have really started to push the fiscal fantasy too far - the Liberals aren't even trying to pass their plan to increase the pension age to 70.

The move, which would make Australia's pension age one of the oldest in the developed world - older than the likes of the US, UK, Canada and New Zealand - was first introduced in the 2014 budget.

Whether it's a lack of political courage or the knowledge that it's doomed to fail, the government hasn't even tried to introduce the measure during this term of Parliament.

That hasn't stopped them from booking it as a budget saving, though, to the tune of $3.6 billion over the medium term.

Even if the government managed to get some of the measures past the crossbench, their budget would still be littered with holes.

It's time Morrison, Cormann and the Liberals stopped treating the Australian people like fools.

It will be one of the key tests when the Turnbull government's make-or-break budget is handed down in a few weeks.

If he keeps those harsh cuts in the budget it will be one big fiscal fairy tale not worth the paper it is written on.

Under the Liberals, we've seen higher deficits, record and growing debt much higher than they inherited, stagnant wages and reduced living standards.

Even with billions of fake savings in the budget the Liberals' record debt is growing faster on their watch than under Labor, which had a global financial crisis to deal with.

And new numbers released by the IMF show general government gross debt as a percentage of GDP has blown out substantially in Australia under the Liberals, but fallen on average among advanced economies, including the United States, New Zealand, Canada, Germany and the G20 as whole.

The state of the budget on Malcolm Turnbull's watch is not because the Senate rejected his harshest cuts, but because he continues to give the biggest tax breaks to those who need them least.

With global economic conditions in the best nick they've been this decade, Turnbull, Morrison and Cormann have no excuse for their budget mess, and they have no excuse for clinging to fake savings measures.

If they were truly interested in fixing the budget in a meaningful way, they'd ditch their unfair cuts and adopt Labor's structural reforms, including our changes to negative gearing and capital gains tax, family trusts and dividend imputation.

Our changes are far more likely to pass the Parliament; they deliver sensible and responsible savings; and they repair the budget in a fairer way that doesn't rely on fairy tales and fiction.

This piece was first published in the Australian Financial Review on Monday, 23 April 2018.