From the Shadow Treasurer’s Twitter feed this morning:
And my full article being tweeted by Mr Bowen reproduced below.
Is there a reason Scott Morrison still has a job?
Treasurer Scott Morrison is having a terrible, horrible, no good, very bad week and it is unclear why he still has a job. A Treasurer has three roles: to manage the Budget in the national interest, to manage the politics of the Budget and to set policy in the national interest. In the past week he has trashed two of these principles and violated the other.
Morrison’s credibility as the top budget manger is in tatters. His Budget outlook is a laughing stock with the iron ore price now $10 below his forecast within two weeks. Other ridiculous assumptions coming apart include:
- dwelling investment to grow 2% when we already know it has peaked in ABS data;
- business investment is expected to fall -5% when hard ABS data is already measuring it at -18%;
- wages and demand growth based on 1.6% productivity gains and 2.5% wages growth when the current trend is sharp falls and 1.6% wages growth in the last quarter (and still falling);
- nominal growth is supposed to be 4.25% but when you add the right outlook it falls to 2.5%, the same as this year, at best.
The Secretaries of Treasury and Finance both declared the outlook highly questionable:
The medium-term economic and fiscal projections are sensitive to the assumptions that underpin Treasury’s estimate of potential GDP — that is, assumptions about population, productivity and participation. They are also sensitive to the assumed pace of the economy’s return to potential — that is, the assumption that the adjustment period lasts five years.
…The medium-term projections show that, without considerable effort to reduce spending growth, it will not be possible to run underlying cash surpluses, say in the order of one per cent of GDP, without tax receipts rising above 23.9 per cent of GDP. Even if payments were reduced from the levels projected at the 2016-17 Budget to the long-term average of 24.9 per cent of GDP by the end of the medium term, tax receipts would still need to rise to around 24.2 per cent of GDP by 2026-27, well above the average of the past 30 years, to achieve a surplus of one per cent of GDP. Reducing spending growth has proved difficult in practice.
…Australia has a relatively strong fiscal position by international standards. However, Commonwealth Government debt levels are projected to reach recent historical highs, both on a gross and net basis. These debt levels are not an immediate concern given historically low interest rates and a growing economy. But should Australia experience a significant negative economic shock or increased interest rates or debt levels rise above current projections over the medium term, the debt burden will impose an increasingly significant cost on the fiscal and economic outlook. It is crucial for Australia to maintain its top credit rating to ensure the Commonwealth’s borrowing costs, and those across the economy more generally, are kept as low as possible.
The RBA declared it farcical:
Plans to balance Australia’s federal budget by around 2021 are implausible, says Reserve Bank policymaker and economist John Edwards, adding that the nation risks losing its prized AAA credit-rating status.
Mr Edwards said the plan outlined by Treasurer Scott Morrison in the government’s 2016-17 budget to bring the budget back into balance by 2021 was too slow as it relies on rising income tax collections to be achieved.
“I don’t think we can disregard the possibility that the ratings agencies will lose patience with a fiscal trajectory which is simply not plausible, relying as it does on increased personal tax collections,” Mr Edwards, a Reserve Bank of Australia board member, said in an interview with The Wall Street Journal.
If Australia lost its AAA rating, it would be a “big deal,” he added.
“Given that we have higher foreign liabilities than similar rated countries, and given that debt as a share of GDP is rising more rapidly than many other highly rated countries, there is always a risk we are going to be kicked out of the (AAA) club,” he said.
S&P deferred its decision and Moody’s declared the Budget a pack of lies in the nicest possible way:
The projected increase in revenues as a share of GDP is based on a return to robust nominal GDP growth which generally comes with a higher revenue-intensity of growth. Our forecast for nominal GDP growth is somewhat more muted than the government’s. We estimate that the adjustment to an environment of lower commodity prices is still underway and will continue to weigh on corporate profitability and wage growth. As a result, improvements in the government’s revenues may be somewhat more muted than currently budgeted.
In short, in terms of budget management, Morrison gets a shocking fail.
Moving onto the politics of the budget, today’s costing bungle is enormous:
According to Fairfax, the disputed $35 billion relates to spending cuts made by the Government which Labor disagrees with, which the Coalition assumes it will spend. But it assumes that Labor would fully restore the $19.27 billion of foreign aid cuts implemented by the Coalition, which is wrong because Labor has only announced $800 million over four years, thus leaving an $18 billion-plus hole in the Coalition’s costings.
There are other mistakes, too, including a $1 billion error in Labor’s schools policy, a potential $10 billion error on its superannuation policy, along with some smaller amounts.
And you could hardly say his Budget sell job lit up the nation, either.
Finally, and worst of all on policy, yesterday Peter Martin revealed the following:
An email obtained by Fairfax Media shows Greg Paramor, the managing director of property company Folkestone, discussed the need for a study critiqueing Labor’s policy with Brian Haratsis, the executive chairman of advisory firm MacroPlan Dimasi. Mr Paramor, who is a friend of Mr Morrison and former president of the Australian Property Council, made the request after his encounter with the Treasurer.
“Greg recently had the opportunity to meet with The Hon. Scott Morrison to discuss negative gearing,” the email notes. “As a result of that meeting, Greg agreed to provide a report to the Treasurer – he asked Brian Haratsis to undertake a study on the impact of the proposed negative gearing changes.”
The email, sent from an unnamed person inside Mr Paramor’s company, was sent to senior industry figures last week.
It also asks for feedback as “the Treasurer is keen to get the report next week”.
Rather than look to manage the economy using the best possible policy, this is evidence of Morrison colluding with a vested interest to denude the Australian people not only of good policy but the knowledge of a bad one.
If the Australian media were not already the fig leaf of the Banana Republic, this story would have run until the Treasurer was forced to explain himself thoroughly or to resign. Although it is not strictly illegal, it is an obvious violation of the principles that underlie the Westminster system of government.
Is there a reason Scott Morrison still has a job?
