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Breaking the heart of the heartland

By Brendan O'Reilly - posted Monday, 22 May 2017


The Liberal Party, when appointing Malcolm Turnbull as Leader and PM in 2015, aimed to gain more of the middle ground in Australian politics. In this respect it mimicked the Hawke Government, which had wooed the middle classes with some policies (e.g. economic deregulation, relative spending restraint) not particularly associated with the centre-left. While Hawke retained the Labor "brand" in all this (by simultaneously implementing Labor's social, industrial relations and other policies) the same cannot be said for Turnbull and the current Coalition. This is because recently adopted policy stances are inconsistent with core Liberal and conservative values.

Conservative voters' chief expectation is that Liberal/National governments will be economically responsible. There was an expectation that they would put an end to the Rudd-Gillard spending-spree-driven deficits. Instead the Coalition has continued them with $29 billion to $49 billion deficits, and a debt ceiling soon to be raised to $600 billion. There is little tangible to show for the increased debt, and the Government's promise of a Budget surplus of $7.4 billion in 2021 is as unbelievable as earlier promises of a return to surplus made by Labor's Wayne Swan.

Despite media rhetoric from the likes of the ABC and Fairfax, the only responsible federal Budget brought down in the past decade was the Hockey Budget of 2014. While its individual elements can be debated, there is no doubt that that the spending restraint of that budget was on the right track.

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Tony Abbott made three major mistakes in relation to the 2014 Budget.

First, in the run-up to the 2013 federal election, he should never have agreed to implement Gonski Mark 1 or the NDIS, which were both unaffordable. Secondly, his profligate (and subsequently doomed) paid parental leave scheme should never have been contemplated in an environment of deep budgetary cuts. Thirdly, he should have been prepared to call a double dissolution election in reaction to the blocking by the Senate of so many 2014 Budget savings measures. (His government had 90 seats in the House of Representatives and a majority of 29 on the floor and could have won such an election.) Essentially, by not responding on that occasion, Abbott mandated reckless behaviour by the Senate, which has continued to pass spending proposals but blocks nearly all sensible savings measures. No wonder that then Treasurer Hockey (in his most honourable moment) gave up and resigned.

Many of Turnbull's Budget compromises are not worthwhile.

He sought (despite a clear shortage of revenue) to cut the company tax rate to 25c in the dollar for all companies over a decade, mainly because the Government wanted Australia to remain a competitive country for large international corporations. The Senate will only back a cut in the company tax rate to 27.5 per cent for companies with up to $50 million in annual turnover, so that the Government ends up with the worst of all worlds. It loses revenue it can ill afford but has done nothing to attract mobile international capital.

Nearly every bill that Turnbull got through the Senate (e.g. Backpackers' Tax, the ABCC, superannuation reforms) required change to the point of greatly compromising the original aims. He continues to turn a blind eye to ever-increasing blowouts in Medicare and the NDIS.

Besides economic responsibility, other things people expect of Coalition governments include facilitation of individual choice in matters such as education and health, reduced income taxes, an atmosphere that encourages enterprise, and investment decisions based on merit (though allowing minor pork-barrelling of the bush to please the Nationals). The latest Budget seems to have ditched these aspirations also.

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The raft of investment decisions approved by the Turnbull Government don't stack up. We don't need an $8.4 billion inland rail link from Melbourne to Brisbane. This will merely duplicate the existing link via Sydney, and will not justify its cost. Decisions to build submarines and Navy warships locally (a massive pork-barrel to places like Adelaide), are at odds with the disastrous track record of these industries. (Our shipbuilding and submarine industries in reality were more deserving of a shutdown than the car industry.) The biggest investment disaster, however, is the Rudd-inspired NBN, which some analysts now tip to eventually cost as much as $90 billion, and which risks being overtaken by developments in wireless technology.

The Federal Government has commissioned David Gonski to deliver a new education report dubbed "Gonski 2.0" by year's end, and says it will overhaul education funding in a bid to end the "school funding wars". Mr Turnbull said the Government would also introduce a new "needs-based system" to determine school funding across the country. 

Under the new system, the Commonwealth Government will boost its share of schools funding by an additional $18.6 billion over the next 10 years.  Just $2.2 billion is of this is funded over the next four years (within the forward estimates).  The remaining $16.4 billion for the last 6 years (88 per cent of the total increase) is effectively unfunded

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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