Labor opposes tax cuts so that social services dont have to be slashed when the inevitable downturn comes.
Why has the budget been stubbornly in deficit since 2009? Ask your local Liberal and they'll tell you if s because the Labor government locked in unsustainable spending on the NDIS and schools. Now lets put aside for a moment the fact that Labor undertook a series of spending cuts and revenue increases elsewhere to pay for these important social investments. How do
these so-called "big spending" schemes compare to our current debates?
Well, the Gonski school funding model cost $31 billion over the decade from when it was introduced and the NDIS cost $63 billion. A lot right? Well, not compared to the costs being baked into the budget by the Turnbull government
The government has passed its income tax cuts at a cost of $140 billion. The
corporate tax cuts cost more than $80 billion. To solve the GST distribution
conundrum the government threw $7.2 billion at the problem.
Does the government bother claiming that any of these things are paid for
elsewhere in the budget? Nope. They claim they are funded simply because they appear in the budget papers. If I tried that on, I would be laughed out of the room by the nation's financial journalists.
When asked how he proposes to pay for
his income tax cuts Scott Morrison replied: "I don't consider tax relief a cost to the budget" He really did. I'm sorry Scott but whether it is a spending increase or a tax cut the budget bottom line is worse off as a result
We have opposed most of the government's personal income and corporate tax cuts not as some claim, out of some radical class-warfare approach to politics, but rather a more prudent and cautious approach to budgeting.
We should not be locking in these massive budget drags now when we have
no idea what the global economic environment will be in 2022 or 2024 when much of the tax cuts come on line. I prefer a more traditional, prudent approach of making commitments when we know they can be afforded.
The budget is currently enjoying the fruits of the most benign global economic environment in almost a decade. But there are plenty of downside risks, especially global debt which is 48 percentage points higher than it was just before the global financial crisis. While the global economic upswing continues, the risks are increasingly tilted to the downside. The IMFs Economic Outlook report released just last week notes that with "downside risks mounting, many countries need to rebuild fiscal buffers to create policy space for the next downturn".
Malcolm Turnbull and other government ministers have been quick to assure that if economic circumstances allow, the personal income tax cuts will be brought forward. But what if there is a downturn? No dice: the tax cuts will be delivered come hell or high water, apparently.
This of course can mean only two things: a budget blowout or cuts to services.
Cutting taxes to force a consequent cut to services is known in America as "starving the beast".
If there is downturn in the future, you can hear the furrowed brow lectures now: schools and hospitals must be cut because of the straitened economic circumstances. There will be less mention of the tax cuts baked into the system when things were good.
"Starving the beast" may be popular with ideologues and with the Institute of Public Affairs. It will be less popular with the Australian people. Opposing the never-never personal income tax cuts and bigger business tax cuts was a big political call for Labor. But it was and remains the right call - the prudent call, for protecting the budget and services Australians rely on.
This opinion piece was first published in the Australian Financial Review on Monday, 23 July 2018.
