Does the budget matter? It depends on who's asking

Simon Cowan

30 March 2019 | The Sydney Morning Herald

A number of things about this year’s budget have been unusual. Not only is it going to be delivered in April – this Tuesday, in fact – rather than the traditional May; but if you weren’t paying close attention you may not even have noticed its imminent arrival.

Budgets have followed a similar pattern for a number of years now. Positive news stories are selectively leaked in the weeks before, primarily so they can each get media attention and not get lost in the general budget commentary. Bad news is foreshadowed to soften the blow.

The budget has effectively expanded to cover nearly a full month of political focus. And while the occasional one has contained some surprises (2014 comes to mind), for years, commentators have been complaining budget day is irrelevant because the media knows everything in the budget before it’s delivered.

Obviously the tragedy in Christchurch has taken much of the media’s attention this year, and the government may not have wanted to risk overshadowing the NSW election; but it’s still unusual that the budget feels almost like an afterthought.

So much so, you might ask whether this budget matters. But the answer depends on whether that means ‘will the budget matter?’ or ‘should the budget matter?’

Evidently the government thinks the budget will matter: their re-election strategy clearly depends on building significant momentum off the back of the budget and rolling straight into an election campaign.

The centrepiece of such a strategy will almost certainly be the announcement of the first budget surplus in more than a decade. It’s hard to see any reason why they would delay the election so they could deliver a budget if they weren’t able to deliver a surplus.

After all, any new grand spending plans announced in the budget are unlikely to do them any good.

First, the electorate is unlikely to respond to anything that starts too far out in the future (that is, beyond the election). If there might be a different government in five weeks, why put any stock in the current government’s plans for four years’ time?

Moreover, Labor can simply adopt any proposals the electorate likes and campaign against anything that is the slightest bit controversial. This largely neutralises any positives in the budget as election issues, while magnifying any negatives.

Bill Shorten has no doubt already all but written his budget reply speech, focusing on how ‘unfair’ the budget is, and leaving a few spaces in the script for the as yet unannounced budget measures he plans to attack.

So the question of ‘will the budget matter’ politically really comes down to ‘do undecided voters care enough about a budget surplus?’ And judging by the fact that the voters didn’t punish Shorten and Labor for promising to increase the deficit at the last election, the signs don’t look great.

It is the eternal lament of conservative governments around the world: they are brought in to do the years of hard work to rectify the finances of the spendthrift left; and as soon as they have done so, they are turfed out so the left can come in and spend up big again.

Of course the voters should care about a surplus, and the budget should matter, because the ever increasing levels of taxation and spending are not a positive for the economy. The budget will return to surplus on the back on increasing tax receipts from individuals and companies, and in spite of the growth in government spending.

There is no particular evidence that this spending has been effective, either. Despite school spending increasing significantly in recent years, results have not improved. Childcare spending has grown too, but parents report out of pocket continue to grow as fast as ever. Welfare and health spending both grow year on year, despite the obvious waste in both systems.

Voters should impose a discipline on government spending — after all it is their money. But instead they reward ill-discipline, voting for whoever promises the biggest benefit to them. Ideally paid for by someone else.

In the longer term, such a strategy is unsustainable: you either become economically moribund or fiscally bankrupt. So even if the public no longer holds a budget surplus in such high regard, and it’s unlikely that the budget will change the electoral fortunes of the government, all budgets do matter.

But right now they probably matter more in the long term than in the short term.

Simon Cowan is research director at the Centre for Independent Studies.
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