Budget squibbed on reform

The biggest story of the 2020 budget is not, surprisingly, the 12-figure record deficit. It is not the looming trillion dollars in debt. And it is certainly not any supposed unfairness.

It’s the loss of a once-in-a-decade chance to shift the economic trajectory of the budget.

In normal times, the budget imposes practical limits on government spending. Government can never do everything it wants, because to do so would result in massive deficits, and the public still looks askance at unfunded spending, despite persistent efforts by progressives to undermine this sensible instinct.

But in a crisis, different rules apply. Deficits seemingly no longer matter, and governments are free to pursue a broader agenda, for better or worse; as Kevin Rudd did when found himself unshackled as a result of the Global Financial Crisis.

Yet the current government has eschewed longer term reforms in this budget, despite announcing hundreds of billions of dollars in temporary measures.

While the temporary nature of some of the spending initiatives is welcome — if indeed they turn out to be temporary — the government will regret passing up the opportunity to put their stamp on the future direction of the country.

For example, in the lead-up to the budget, there was a lot of focus on the need to bring forward tax cuts to stimulate economic growth and productivity.

Yet in the end, the government’s response was to bring forward only part of its already legislated cuts, and to leave the most substantive reforms (stage 3 which substantially flattens the tax structure and returns years of bracket creep) four years in the future.

This was far too timid.

Moreover, the absence of a more enduring vision leaves the government vulnerable to criticisms that its short-term handouts target the ‘wrong’ groups.

Spending on health, education and childcare are all at record levels and have been growing consistently and rapidly for years; yet the government is criticised for not having new spending plans in these areas.

The government could have used the Corona-handouts as cover for new economic thinking focused on longer term productivity and not on the supposed worthiness of who wins and losses.

If this budget proves anything, it’s that the government cannot win a fight where presumed or actual disadvantage is sliced in a thousand different ways to justify more and more spending.

If a $214 billion deficit isn’t enough, nothing ever will be.

This is an edited extract of an opinion piece published in the Canberra Times as Health and education spending is at record levels. This budget should have gone further on tax cuts