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“Invariably the way it goes” means that the L-NP rules from opposition.OUS News

Labor’s federal budget has shown a lack of foresight by simply supporting the policies laid out by the Coalition, writes Professor John Quiggin.

The FEDERAL BUDGET collapsed last week by Treasurer Jim Chalmers is universally described as ‘steady as she goes’. During a period of favorable coverage, which is usually guaranteed by “isolation”, when journalists are exposed to government-preferred propaganda, this phrase was usually used in a positive way. But as time goes on, some troubling questions arise to ponder.

First, given that Labor has just taken office, “going forward all the time” means keeping the course set by the previous government. For the millions of Australians who voted for the change, this is hardly reassuring.

More importantly, if the Labor government is simply adjusting the policies of the previous government, why pass a second budget for 2022-23 at all? The information on the economic situation of Australia presented in the budget is undoubtedly important, but it could be presented in Mid-year economic and budget forecast a statement that should have been anyway.

A closer look at the budget reinforces these concerns. In the run-up to the adoption of the budget, the government’s plans to increase parental leave from 20 to 26 weeks were repeatedly announced. But that measure won’t even go into effect until July 2024. The necessary legislation could be left until next year’s budget, or even next.

Federal budget leaves poor Australia behind

The same applies to another big announcement – a plan to build a million new homes by the end of the decade. Aside from the fact that the federal government plans to support only a hundredth of that number (10,000 homes), this policy, like the parental leave measure, should not begin until mid-2024.

Some elements have a more immediate effect, including cuts to PBS co-payments and higher child care fees. But these are only minor variations on measures already announced in the March budget by then Treasurer Josh Friedenberg. Frydenberg proposed a $10 reduction in PBS surcharges, while Labor offered $12.50. It’s hard to see that such a tiny adjustment required a theatrical budget.

The minor changes announced in the budget hide something far more important: the inability to change the measures envisaged by the L-NP, which did not take effect when they were expelled from office.

Three of them are of particular concern: the end of the tax credit for low- and middle-income individuals, the expiration of the hospital cost-sharing agreement, and, most importantly, Phase 3 of Morrison’s tax cut.

The low-to-middle-income tax credit was part of a ploy by which Morrison, as treasurer, packaged his tax credits for high-income people. Because it was presented as compensation rather than a rate cut, Morrison could have planned for it to expire and hope no one noticed.

Federal budget supports investment in technology and IT

But when the time came, Morrison, now prime minister, decided it was too hard to raise taxes for ordinary Australians while benefiting those with higher incomes. Unfortunately, Labor has not repented of this and there will be no compensation this fiscal year.

The same applies to the agreement to share the increased costs of running public hospitals as a result of the COVID pandemic, which has by no means ended. Josh Frydenberg provided enough additional funding to keep this agreement going until December. Despite requests from the states, Labor will allow the funding to expire on schedule.

Finally, and worst of all, Phase 3 tax cuts. With spending in excess of $20 billion a year starting in 2024, these cuts, aimed almost exclusively at those with incomes over $120,000 a year, eclipse everything else in the budget. . They are worth about 200 times as much as Labor’s signed paternity leave pledge and account for most of the projected increase in public debt.

In the run-up to the budget, the government encouraged discussion of Phase 3 tax cuts. There was a strong consensus that the (very limited) reduction for middle-income individuals should be maintained, but that the cut for high-income individuals was unjustified. Once that consensus seemed to have solidified, it was shattered by Prime Minister Albanese’s clear commitment that the cuts would go ahead as planned.

As far as income and expenditure policy is concerned, before the election, Labor committed itself to support the policy of the LNP in all important respects. The budget farce we have just seen fulfills this obligation.

Steady as she goes, indeed.

John Quiggin is Professor of Economics at the University of Queensland. His latest book, Economics in Two Lessons: Why Markets Work So Well and Why They Can Fail So Much, is published by Princeton University Press. You can follow John on Twitter& @JohnQuiggin.

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