Malcolm Turnbull, already weakened by his narrow election win, has no option but to stick to the substance (excepting unintended consequences) of his budget repair reforms, particularly in welfare and superannuation. Otherwise, he would not only suffer an ultimately fatal loss of prime ministerial authority, but, even worse, any serious attempt by his government to pursue essential and urgent budget repair would be hostage to the political anarchy of pressure groups, of dissident Liberal parliamentarians using proxy issues to undermine his (questionably gained) leadership, of a skittish Senate and of a Labor opposition bereft of any skerrick of principle.
Labor’s Bob Hawke was right when he proclaimed there could be no significant economic reform in Australia without the consensus that was given to him by the trio of Bill Kelty’s union movement, by the big end of town and, more importantly, by the Coalition (when John Howard was Leader or Deputy). After the latest evidence of Labor’s irresponsible electoral populism by buying votes through handouts that would increase the already untenable budget deficit (some of which the Coalition foolishly matched), the prospect of getting consensus for meaningful cuts to spending looks bleak.
Back in 2014, Bill Shorten’s budget reply was attacked in The Spectator Australia for his ‘brazen dishonesty in refusing to acknowledge the seriousness of the debt issue and the need to address it’. And for shamelessly exploiting (as unfair to ordinary Australians) the ‘box of fiscal nasties’ when then Treasurer Hockey, in the words of The Speccie’s Rowan Dean, sought to impose ‘a long-overdue focus on returning the welfare safety net to being just that…. Without the kind of action Mr Hockey is urging, Australia faces never-ending budget deficits’. He added: ‘The budget is not the problem; it’s the way it was sold. Or rather, the way it wasn’t’. So while the narrowly re-elected Turnbull government will be able to save $2 billion of the mounting welfare bill by using regulations to implement its anti-fraud program, the remaining $3 billion of the $5 billion it seeks by reviewing welfare entitlements will need to be legislated – through the non-government majority in the Senate. Claiming a mandate will not attract the sort of consensus that is likely to get the super reforms through, particularly as Labor was happy to include Turnbull’s $6 billion super ‘savings’ in its own election costings.
It was considered good policy (but badly sold) in 2014 to hit welfare recipients and lower income earners in the name of budget repair, but in 2016 it is now seen by the same people as bad policy to hit high-income earners who are misusing a specific tax benefit for other purposes. Apart from the ‘retrospective’ furphy, the main thrust of the attack on the reforms relates to damaging confidence in the future of superannuation, with the government’s own supporters leading the charge; it ducked for cover when the first shots rang out. So Turnbull lost the potential political benefit of using the super hit on high incomes to counter Labor’s synthetic cry of ‘unfair’ on the Coalition’s company tax cuts. It was left to people like the BCA’s Jennifer Westacott to make the point: ‘The tightening and better targeting of superannuation tax concessions, is a sensible approach to finding savings while ensuring the system remains focused on reducing reliance on the age pension and providing comfortable retirement’. But the government did nothing to spread the word of such influential business leaders, leaving the field to be dominated by critics; it couldn’t even summon up enough bloggers to inundate the ‘comments’ section of on-line newspapers, where ill-informed scare campaigns dominated. And there was no effort to let the million or so beneficiaries of $3 billion of support for lower income superannuation and other improvements, know what they stood to gain.To extend Dean’s 2014 analysis, the Turnbull campaign made no attempt to ‘sell’ the long overdue focus on returning retirement income tax concessions to being just that – to provide enough for retirement, rather than being unintended unsustainable open-ended wealth-creating devices subsidised by future generations though budget deficits. Again, ‘The budget is not the problem; it’s the way it was sold. Or rather, the way it wasn’t.’
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