From The Australian:
LABOR’S claim that an Abbott government would cut services to fund its promises is resonating in the electorate – but the Coalition is resisting huge pressure to crank up its own attack ads about Kevin Rudd.
Labor’s nightly track polling in marginal seats by party pollster UMR, provided to The Australian, shows that over the past fortnight, between 49 and 55 per cent of voters were “worried” about cuts that a Coalition government could make to jobs, health and education. Polling undertaken on Tuesday night showed 15 per cent of voters in marginal seats were “extremely worried” about cuts to services, 16 per cent were “very worried” and 24 per cent were “fairly worried”. Forty-one per cent were not concerned.
Senior Labor sources acknowledge that prosecuting this message of cuts to services by a Tony Abbott-led government is the party’s main hope to stem the loss of seats.
To me, the only reason that this critique has currency is the Coalition’s still murky costings. The very sizable black hole is a space in which fear mongering can echo.
What the costing are is anybody’s guess. Joe Hockey is arguing he’s got stimulus lined up:
“We’re still giving the Australian people the tax cuts and the fortnightly pension increases associated with the carbon tax package, because we don’t want to hit them for Labor’s failures,” Mr Hockey told the National Press Club yesterday.
“We want to make sure that there is appropriate stimulus on the first of July next year, and in the following year with our (paid parental leave) and our company tax cut there’s a stimulus as well.” The argument builds on a series of claims from the Coalition in recent weeks that it would post higher economic growth than Labor by scrapping the carbon tax, repealing the mining tax and cutting company tax. Offsetting those measures, however, the Coalition intends to bring in a $4.4bn parental leave levy that will raise almost as much as the company tax cut.
But economists are skeptical:
Grattan Institute chief John Daley said the personal tax and pension measures were too small to be considered a stimulus, given that the bigger factor was the net impact of overall budget policy.
The Coalition’s policy is to scale back the budget deficit more quickly than Labor and produce a budget bottom line up to $2bn better than the current budget settings. “By definition, if you’re looking at reducing your budget deficit that’s a contraction,” Mr Daley said. “It may not be particularly contractionary but by definition that’s what it is.”
Macquarie Research chief economist Richard Gibbs questioned the overall impact of the tax and pension changes.
“While I am always happy to see the government giving back some of our hard-earned tax dollars, the proposal by Joe Hockey is unlikely to be a major stimulus to economic growth as the majority of the concessions will be saved,” he said.
“And they most certainly will not be leveraged by households to support consumer demand.”
Coalition sources have argued that other policies, such as cuts to red tape, would also lift growth.
The AFR’s Laura Tingle is rightly confused:
Others, including The Australian Financial Review and Bank of America Merrill Lynch’s Saul Eslake, put the spend to date at between a conservative $25 billion and $30 billion, meaning the net budget improvement at this point may only be $1 billion over four years.
There is also a question about what the cash, rather than the accruals impact, of these savings might be.
But by announcing just savings on Wednesday, the Coalition managed to look like it was deferring to calls for it to explain how it will fund its various spending proposals – including its hugely expensive paid parental leave scheme – without having to deal with the fact these savings are already accounted for in commitments made during the campaign, and earlier.
As a political exercise it was smart. Mr Hockey and finance spokesman Andrew Robb were able to argue they could now demonstrate their savings could be achieved without the big cuts to health and education that Labor has warned would come with a Coalition government, and without a goods and services tax.
The core business constituency isn’t sure either:
Business will lose almost $5 billion in tax breaks through the $31.6 billion in savings the Coalition deems necessary to restore the government’s finances.
The measures, which include scrapping an instant asset writeoff worth $2.9 billion and loss carry-back provisions worth $900 million, were supposedly funded by the mining tax, which the Coalition also plans to abolish.
While the cuts have been flagged for years, some business groups expressed disappointment after shadow treasurer Joe Hockey unveiled them before a debate against Treasurer Chris Bowen, at the National Press Club in Canberra on Wednesday.
…The executive director of the Council of Small Business of Australia, Peter Strong, said the changes generated extra uncertainty for businesses.
He said there were now fresh questions about when the changes would take effect, potentially forcing companies to junk asset investment plans.
“They’ve caused confusion,” he said.
I am also lost. If I add up all the Coalition savings and spending I still come with around a $17 billion black hole but I have no faith in this at all given it’s using a mix of accrual and cash accounting and I have no idea where my starting points are. This is a poor look for a political party campaigning on trust and budget professionalism and feeds the fear that Labor is stoking.
I expect we’ll see a swing back towards the government in the next week or so (incumbents always get 11th hour swings). It will be larger than it needed to be, if not outcome altering.
