Election Preview

 

By David Hughes

First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.

In the current fiscal environment, delivering a Budget reply is a somewhat thankless task. With the Budget in a state of utter disrepair, there's only so much that can be realistically addressed within a 20-minute speech.

On Wednesday, we provided MRC subscribers and donors a detailed breakdown of the Budget. It makes for sobering reading.

When you strip away the spin, the Budget figures reveal:

  • Government spending as a proportion of GDP is the highest in four decades, excluding the peak of Covid-19 spending.

  • No improvement in the budget position compared to forecasts made at the last election, despite an unexpected tax revenue windfall of nearly $400 billion.

  • Spending growth is unsustainable, significantly outpacing both economic growth and inflation. This year, spending is forecast to rise 6% above inflation.

  • The federal bureaucracy continues to grow by another 3,400 positions next year and totalling 41,000 new roles since the last election.

Despite these challenges, counterproductive policies abound:

  • We have a productivity crisis yet the Government persists with retrograde IR policies such as abolishing the ABCC (despite analysis showing CFMEU militancy adds 30% to construction costs).

  • We have an energy crisis yet the Government blindly pursues a renewables-only agenda, covering the consequences with short-term handouts rather than sustainable policy solutions.

  • Business investment is stagnant, yet the Government is phasing out the successful instant asset write off which helps small businesses invest and grow.

But the greatest disappointment on Budget night was the lack of focus on the fundamental health of our finances. Debt and deficit are becoming the norm rather than the exception, with debt set to cross the $1 trillion mark next year. The main focus of any budget should be the bottom line — that's certainly the case for family budgets. Yet this Labor Government seeks to distract from a disastrous set of books with an irresponsible and condescending set of handouts. 

The tax cuts proposed by Labor are offensive — designed with the sole purpose of allowing Labor to claim ‘every worker gets a tax cut’. In reality, there is no cut as bracket creep erodes the modest savings before they even commence. 

A worker earning $100,000 annually will see a mere $268 tax cut in the 2026-27 fiscal year, increasing to $536 thereafter — about $5,000 over ten years. However, bracket creep will cost the same worker $25,000 over that decade. Economist Professor Richard Holden summarises aptly: "The government is stealing a $10 note from you and throwing back a $2 coin — and doing it 2,500 times over."

Over the last year the MRC has provided solutions to help an incoming government hit the ground running:

This election presents a significant political turning point. Not one of the above reforms will be possible under a chaotic minority Government. A hung parliament is a real possibility and it's the worst scenario imaginable — one where the Greens and Green-like Teals hold the balance of power.

With the Greens and the Teals calling the shots, any chance of balancing the Budget, sensible energy policy, sustainable migration or investing more in defence goes out the window. 

To paraphrase Milton Friedman, when you spend somebody else's money on somebody else, you're not concerned with how much you spend or the value you get. 

If Anthony Albanese must rely on the Greens and Teals to remain Prime Minister, expect him to fully embrace this principle — opening the taxpayer's cheque book wide, regardless of the long-term cost to Australia.

 
 
 
 
 
 
 
 
 
 
 
Susan Nguyen