The fantasy Budget’s biggest winner is not who you think it is

The MSM is, as usual, focused entirely on the now at the expense of the future. Treasurer Morrison and Do-Labor Malcolm have apparently reset the political agenda and punters are ready to swing back to them in droves, via The Australian:

In the outer reaches of western Sydney, where the seat of Lindsay was once the bastion of Howard’s battlers, voters are taking a second look at Scott Morrison.

The Coalition will be hoping the first impression of the Treasurer’s budget is a signal the lost tribe is ready to return.

In Lindsay last year, voters endured a Liberal election campaign that focused on an innovation agenda. It appealed to them so much they kicked out sitting member Fiona Scott and gave the seat to Labor with a margin of 4.1 per cent.

Voters yesterday indicated the Coalition and Scott Morrison are again speaking their language and that a priority shift had been made.

And, next up, comes the coup de grace, at the AFR:

Treasurer Scott Morrison has cleared the path for personal income tax cuts ahead of a 2018 federal election after pledging to do whatever it takes to stop the automatically growing Commonwealth tax take from rising above the Coalition’s comfort zone.

With the 2017 budget having significantly repositioned the government on a range of spending issues, and lifting a range of taxes, attention will inevitably turn to the income tax policy position it takes to the next election.

Its only current pledge for the next poll is that it will proceed with an income tax cut for companies that have turnover of $50 million – a politically impossible platform to take to voters.

The budget paper’s forecasts for budget surpluses over the medium term are based on projections that tax collections will reach the 23.9 per cent of GDP “cap” set by Mr Morrison then stay there beyond 2022-23, a prediction which the budget says is based on the “cap” being enforced, rather than any presumption of what will happen to tax collections.

Well played, sir! The punters rebooted, the tax cuts to flow, the Howard years restored, Tony Abbott and his fiscal conservatives banished.

It is a compelling fantasy to the mercurial-minded. Those that like to say the right thing in the right moment then take the easiest self-interested path out of the room.

The problem is it is built upon a fantasy that is going to be exposed by year end. That fantasy is this:

The Budget has very little chance of meeting its terms of trade forecast as iron ore and coking revert to mean. Thus its income projections are equally fanciful:

What this means is very simple. By year end the Budget outlook will be collapsing and the MYEFO will have to shred it. It’s pretty clear that S&P is fed up with Treasury lying about it’s outlook and wants to downgrade Australia. It needs one more opportunity of outlook failure to do it and it is coming by the time we reach the December MYEFO. So, the AAA rating is very likely going to be stripped. While that may not make a huge difference to anything in practical terms, the political symbolism will be very resonant indeed. Especially so for those that believe, and have gone public on, Australia facing a Budget emergency:

Another Western Sydney punter sums up where this will lead:

Lindsay is as diverse as Australia; so are the views of its residents. Carleita Stewart, who owns a small car sales business in Penrith with husband Wayne, yesterday shook her head at an increase to the debt ceiling. “At the very least Malcolm Turnbull and Scott Morrison have got the courage of Labor’s convictions,” she said. “The last election I donkey voted for the first time in my adult life, so perhaps I can’t complain, but how can you tax more and say you’re a Liberal government?”

Taxing the big banks and the increase in the Medicare levy added fuel to her political fire, which has been burning since former prime minister Tony Abbott was removed.

“The bank levy, it’s saying ‘let’s tax success’,” she said. “The additional NDIS funding … I have a daughter with a disability, it’s unsustainable. Making disabilities go retail is nuts. The whole narrative of the good debt, bad debt, is crap.

“Tony Abbott did a good job of saying we had a debt crisis; at least he said what he was going to do. This budget is about Malcolm Turnbull’s re-election.

All Do-Labor Malcorrison has done is underline the fiscal credentials of the Parallel PM.

Expect his revenge to be swift and fierce when the time comes.

David Llewellyn-Smith
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  1. Tassie TomMEMBER

    Labor and The Greens should “reluctantly” pass this. It is a nothing budget with nothing in it. When all the assumptions are exposed as absolute crap it should all be on the government’s head, without the excuse “it would have been ok if the senate hadn’t nobbled it”.

    • Agree. Plus it will trigger Abbott to go full on against and cause internal shit fights all over. I hate to miss such a show.

  2. “I donkey voted for the first time in my adult life”?

    I thought 17 year olds are not allowed to vote.

    The wage growth graph is brilliant. Abbott stopped indexing the minimum salary on the 457 visa at $53k. And the LNP want to cut Sunday penalty rates. No doubt, they want our wages to shrink.

  3. Wait, what? Did I read this correctly? A person with a child with a disability is more concerned about the budget deficit?

    • Yep. Or she is lying.

      I saw ABC 7.30 or Lateline just before the 2010 election and they talked to a bogan who thought that traffic jams are caused by refugees!

      That is when I first realised that the electorate thinks most immigrants come by boat rather than aircraft.

      I see the same in India, the electorate thinks PM Modi is a crusader against corruption – he is probably the opposite.

    • Ronin8317MEMBER

      The NDIS helps disability providers rather than the one who is disabled. As the government have lost the ability to monitor how the money is spent, it will be rorted to infinity.

      • Ha ha.

        And we are importing heaps of cousin lovers – thus heaps of kids will be born disabled in AUS.

      • Planners would approve the services so it can’t be rorted to infinity. However, no doubt many of the planners are inexperienced and service providers will be only too happy to over-service. State workers’ compensation schemes provide good examples of how out of control rehabilitation costs can become. At some point the Medicare levy will have to be raised further or promises cut back in order to make the scheme viable. Actuaries never get it right.

  4. I think you guys may be grasping for headlines with this one.. unless you’re saying Carleita understands economics better than the treasury? (Who knows, maybe she does..)

      • Stewie Griffin

        Moody’s just downgraded Canadian Banks….. tic-toc, tic-toc

        “Toronto, May 10, 2017 — Moody’s Investors Service (“Moody’s”) has today
        downgraded the Baseline Credit Assessments (BCAs), the long-term ratings
        and the Counterparty Risk Assessments (CRAs) of six Canadian banks and
        their affiliates, reflecting Moody’s expectation of a more challenging
        operating environment for banks in Canada for the remainder of 2017 and
        beyond, that could lead to a deterioration in the banks’ asset quality,
        and increase their sensitivity to external shocks.

        The banks affected are: Toronto-Dominion Bank, Bank of Montreal, Bank of
        Nova Scotia, Canadian Imperial Bank of Canada, National Bank of Canada,
        and Royal Bank of Canada.

        The BCAs, long-term debt and deposit ratings and CRAs of the banks and
        their affiliates were downgraded by 1 notch, excepting only
        Toronto-Dominion Bank’s CRA, which was affirmed….”

  5. Jumping jack flash

    “Thus its income projections are equally fanciful”.

    How can anyone believe that graph? It just looks ridiculous.

    Surely everyone knows by now that the general idea is to cut wages, not grow them. Starting way back with Howard’s Workchoices. When that was rejected, they brought in the 457 slaves to flood the labour markets.

    They follow their agenda, no matter what.

    The only difficult part is doing it so it doesn’t cause a recession. They’ve got all kinds of accounting and statistical tricks for that though.