The fallout from last night's Budget has been rather odd.
Here's the front pages of today's newspapers:
The Australian: A Wing and a Prayer
The Herald Sun: Tough Love
The Daily Telegraph: Razor Rudd
The Courier Mail: Swan's $58b Shuffle
The Advertiser: Bob the Builder (no I don't get it either - surely they could at least have tried Wayne the Builder)
SMH: Cut, Spend and Borrow: Will Swan's Plan Work
The Age: Here Comes Hard Labor
All in all it was a bit of a mix of saying the budget was tough, and others saying it wasn't tough enough.
Most criticism from economists came in the form of those like Chris Richardson of Access Economics last night who took issue with the prediction of growth coming out of the recession, and that not enough cuts were made:
It's hiding the big and bad adjustment task which still needs to be done. And my fear is we'll keep hiding it all the way through till the next election and neither side will fess up to the tough choices needed.
Ross Gittins was supposedly tearing into the budget according to the front page of the SMH web site, but his actual analysis was a tad wishy washy:
Most people will find in it things they like and things they hate. Perhaps that means it will leave them more bemused than angry, but my guess is that Kevin Rudd will get the "howls of protest" he predicted.
Usually, budgets are pretty simple affairs, coming in two types. In times of inflationary boom they haul on the brakes, cutting spending and raising taxes; in times of recession they step on the gas, increasing spending and cutting taxes.
But Rudd has never been a man to do one thing at a time, so this budget tries to move in both directions simultaneously.
To alleviate the recession and limit the rise in unemployment, it announces $22 billion in new spending on key road, rail and port projects, as well as increases in the age pension and big tax cuts (well, they're big if you earn more than $150,000 a year).
But with this being our seventh tax cut in succession, plus what the collapse of the resources boom has done to tax collections, Swan is worried about the size of the budget deficit and how long it will take to get the budget back under control.
Hence his plans to cut back middle-class welfare by reducing superannuation perks, means testing the private health insurance rebate, and cracking down on abuse of the Medicare safety net. Not to mention hikes in the Medicare levy surcharge.
The trouble with this is it's all a bit previous, as the Poms say. The recession has hardly got started, we have only the faintest idea of how long and bad it will be, but already we're worrying about what we'll do when it's over.
It's as though we're planning the clean-up after the cyclone, even before the cyclone's hit. Surely battening down the hatches would be a smarter idea at this point.
Which is all a bit, "I like what they've done but wish they had done more... or less or something".
And to be honest, I can see where he is coming from. The infrastructure spending is great. The raise of the pension is long overdue (Swan was particularly cutting today when he said that while it was raining gold bars the Howard Govt couldn't find a way in the budget to increase the pension). But there was a hope that some of the more flabby (ok majorly obese) policies of the Howard years would be trimmed.
We wanted Swan to be a butcher, not a plastic surgeon. We wanted to be put on the slab and be told, "this'll hurt you a lot more than it'll hurt me".
But rather than an economic waterboarding, according to economists, all we got was a bit damp as we ran inside to get out of the rain.
The big question is will this cost the economy in the long run? There is the danger that once the economy does get going again (which it will) inflation will come back out to play and the Government will be forced to really cut back in the budget as it tries to get back to surplus and halt inflation. That ain't good.
But that is a bit of a worse case scenario. Actually worse case scenario is that this expansionary Budget does nothing to reduce unemployment but it does increase inflation, and thus it's stagflation here we come. Let us hope not.
I think the main reason there is this feeling that the Budget wasn't as strong as some would have liked is the brilliant media management by Rudd and Swan. They leaked all the bad stuff (in fact all the good stuff too). So by the time Swan said them last night they were old hat. Cutting the private health rebate and breaking a major election promise? Meh. Cutting back on superannuation assistance? Boring. Hiking the medicare surcharge? Oh please, like that hurts...
Had they kept those things secret, as well as the increase in the age of the pension to 67 years, then all hell would have broken loose this morning. By spreading out the nasties, the hurt has been somewhat anaesthetised.
What did I dislike? The keeping of the first home buyers grant is not what I would call good policy. It is done purely to keep housing prices up, not to help first home buyers. Swan and Rudd fear housing prices diving as they have done in the USA - so ignore anything they say about this helping young people get a house. If they had to keep it, I would have gone with keeping it only for those building a house.
I'm also not a fan of the baby bonus, so more means testing of that. Though from memory it is now spread out rather than given in one plasma TV hit, so it's not too bad. There are others, but I must admit not being a a big supporter of killing them all off in one hit - we already are in a recession, no need to stomp on someone to make sure they're down.
But the real interesting thing about the budget is the Liberal's response. They are focusing on the debt and the deficit, as though such things are automatically terrible for the economy (sigh, yes I know...). Turnbull like a economic-dolt has come out and said the Liberal Party could have produced a surplus or very small deficit. Why on earth would he say that like it is a good thing? When the private sector goes away, the public sector needs to come in, or the economy will go into complete meltdown. A surplus budget is actually a contractionary budget - it is trying to keep a lid on growth - under Howard the RBA would have liked bigger surpluses to keep inflation and growth from growing too strong. Does anyone want to keep growth down at the moment?? Well yes, Turnbull and Hockey (and Costello).
Didn't these guys ever read about the 1930s?
The Liberals are left to say they would spend less and cut more, but not say where they would cut. All they will say is they would not have spent the stimulus package in December and April, and thus they would have had 60 odd billion more to play with (they will ignore that such a policy would mean the economy would already be set on the path to being completely stuffed).
The politics of this will be interesting. I think the Govt will take a slight hit in the polls, but it will be more of a bump rather than a slide. Fortunately for the ALP, Turnbull and Hockey are the worst shadow economics double act since Crean and McMullan (nothing against Bob, but he was never going to be Treasurer).
What is more interesting (of sorts) is that today of all days Peter Costello decided to launch his own web site (petercostello.com.au) which suggests he's sticking around for the next election.
The word I have from people who know such things is that the leadership is his if he wants it. But that has been the case since Nov 07. Mark this all those Liberal supporters who wait in hope that he will be your saviour - there is no way Costello will take the leadership unless he is 99.9% sure that he will win the election if he does. If Rudd stays popular, Costello will stay on the back bench.
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