Budget hits political reset

The Turnbull government has attempted to push the political “reset button” with a big spending budget, says University of Melbourne public policy and political expert Nicholas Reece.

Faced with dire polling the government has gone for popular spending measures on infrastructure and the National Disability Insurance Scheme (NDIS) in part funded by new revenue raising measures in the form of a higher Medicare levy and a new tax on big banks.

“Every budget is a combination of policy and politics but this budget really is all about addressing the political challenges of the Turnbull Government - it is as much a political document as an economic document,” Mr Reece says.

“It is the biggest spending budget in Australian history outside of an emergency or a recession.”

He says it buries the previous Abbott coalition government’s 2014 budget that included deep and unpopular spending cuts.

“The days of ‘debt and deficit disaster’ are over and now it is the era of ‘good debt and bad debt.’”

The Turnbull government’s second budget, delivered by Treasurer Scott Morrison on Tuesday, abandons $13 billion worth of unpopular saving measures left over from the Abbott government, which had been repeatedly rejected by the Senate.

“The Budget has been called Labor-lite and that is probably right: it certainly more closely resembles a traditional Labor Government budget than any of the Budgets delivered by the Abbott Coalition Government,” says Mr Reece, who is a former senior adviser to Labor Prime Minister Julia Gillard and Victorian Labor Premiers Steve Bracks and John Brumby.

“This budget finally dumps $13 billion in zombie measures that having been hanging around from the Abbott era, and it sets out some new budget policy directions with a huge investment in infrastructure and funding for the National Disability Insurance Scheme.”

Mr Reece, who is now a principal Fellow at Melbourne School of Government and School of Social and Political Sciences, says the decision to end the Medicare rebate freeze will play well politically, and the plan for a Medicare Guarantee Fund to protect health spending heads off any scare campaign from the opposition on health funding.

But he notes that there are also few measures aimed at shoring up the Government’s conservative base with plans for random drug testing of welfare recipients deemed to be at risk of substance abuse, and new penalties for recipients that routinely avoid employment meetings.

“Those measure are right out of the conservative play book,” he says.

“As to are the company tax cuts and the removal of the deficit levy on high income earners.”

Mr Reece says the $75 billion infrastructure plan is a step in the right direction so long as the money goes into worthwhile projects.

The schools funding package falls $22 billion short of Labor’s commitment to fund the Gonski reforms but is a step forward in terms of a needs-based funding model and is still a commitment of significant new funds.

The higher education reforms look set to be one of the big policy debates post Budget with Labor and a number of cross benchers indicating they will not support the plan to charge university students more and cut university funding.

But he believes the government had “wimped out” on tackling housing affordability with its new measures unlikely to make a significant difference.

“Australia’s housing affordability problem stems from too much demand and not enough supply. This Budget does not do enough about either,” he says.

And, according to Mr Reece, the Government’s plan to allow first homebuyers to take advantage of the tax benefits of superannuation when saving for a deposit will add more upward pressure to housing prices.

“What they should have done is address the capital gains tax and negative gearing tax breaks which would have the twin benefits of cooling house price rises and delivering huge budget savings.”

“Overall the budget is the government’s best chance of a political reset and it makes pretty good fist of it.”

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