Election 2016 open thread: budgets and pork barrels

Three weeks to go and the biggest story electionwise for me wasn’t the 10-year Labor budget plan, it was Turnbull’s pork barrel strategy.

Turnbull’s $1.7 billion pork barrel strategy

Phillip Coorey in the AFR has reported that the LNP are carpet bombing marginal seats with small vote-buying grants. We’ve had 58 “micro-announcements” in Coalition seats for projects like revamped football club change rooms, new netball courts, fixing mobile phone black spots. Some $1.3 billion has been used to sandbag LNP marginal seats. Funds have also been allocated to nine Labor seats and Denison, held by independent Andrew Wilke.

Labor’s 10-year budget plan

Here’s the plan.

It sees the budget come to surplus at the same time as the LNP – in five year’s time, just outside the four-year budget period, the same time as the Government.

Bernard Keane pointed out that the LNP government has once again kicked the can down the road, but that doesn’t stop them from criticising Labor for doing the same thing. Labor’s argument is that growth and budget surpluses can be achieved While maintaining a decent, fair society.

Greg Jericho sees it as a battle between the old way and the new way of going for growth.

    The Liberal Party’s policy is more driven via the fairly old style approach of cutting company tax to hopefully increase the pie.

    The ALP’s path is in some ways a newer approach but one now recommended by both the OECD and the IMF of growth achieved with a major focus on equality.

Ben Eltham in reporting on a speech by Andrew Leigh, says “you could argue that Labor is doubling-down on inequality, making it a major theme of economic policy across its platform.”

Leigh has in his sights the concentration of market power by large companies, some foreign owned.

The LNP’s entire budget strategy is based on the company tax cuts and other toxic cuts being passed by a compliant senate, which looks increasingly unlikely.

The Conversation did a fact check on Shorten’s statement that under the Coalition government, $100 billion has been added to Australia’s national debt.

It’s true, but Australia’s debt though large by Australian standards is small by international standards.

He also says the LNP have tripled the deficit. That’s probably true too.

The f-word goes off

Bill Shorten started it by suggesting childcare was mainly women’s business. The net result is that feminist ranks have been swollen by the inclusion of Malcolm Turnbull and a number of other male politicians, including George Brandis. But you have to be accepted by the tribe to wear the appellation and your deeds have to reflect your words. Eva Cox takes a look.

Labor’s childcare policy

Labor is stumping up about $3 billion to enhance childcare support.

The LNP has a similar sized policy, but rather different. However it is linked to “zombie cuts” in family welfare, which have been stuck in the senate.

Arts funding: Labor vows to scrap ‘ministerial slush fund’

Labor will scrap the “ministerial slush fund” now called “Catatyst” and restore $105 million to the funds to the Arts Council. Labor will add a further $20m a year for four years from 2017, which is less than the $300 million ripped out by the LNP.

There will be $60 million extra to the ABC to make Australian drama. I believe drama like Jack Irish,Rake and Janet King costs about $2 million per episode.

Labor will only commit to considering any proposals or recommendations to adjust the territorial copyright regime “with caution”. This is about the parallel importation of books. At present the local industry makes money on Harry Potter and invests the profits in emerging Australian authors. I understand the only country that has tried parallel importing is New Zealand, where the policy has decimated their publishing industry. Their authors now look to Sydney and Melbourne to get started. In future we may all be looking to New York and London.

Mitch Fifield talking to Patricia Karvelas sounded as though they are going to go for it, but Karvelas was trying to give him an escape route rather than go for the jugular. I worry about her.

In debate with Mark Dreyfus, Fifield said that what the arts really needed was a strong economy with lots of rich people who would then patronise the arts. That would take us back to the eighteenth century. Read all about it in Crikey, if you have a sub.

Or go to Ben Eltham at The Guardian, who advises Mitch not to turn up at a debate without an arts policy.

Here’s Labor’s policy.

Labor to boost community legal centres

A decent society must have equal access to justice. Several times I’ve heard commentary that legal aid has been sent over a cliff by Coalition cuts. Justice is only available to the rich or perhaps to the very poor, since that’s how far legal aid will stretch. Labor is seeking to repair the damage.

Debates

Bill had a debate with himself at the Broncos’ League Club and lost. All we heard was how he wasn’t going to take the GST off tampons. A pity because Laura Tingle says he “fielded a range of questions on policies that haven’t featured much in the election campaign to date.”

He’s going to debate Malcolm on Facebook, and it will only matter if he makes a boo boo. He should give it a miss.

ABC Vote Compass

    Vote Compass is a tool developed by political scientists for exploring how your views align with those of the candidates.

It’s an ‘opt in’ survey, and as such is unscientific in terms of what it says about voters in general.

Mental health services in jeopardy

See

Every year 12,000 people die from suicide and medical illnesses related to mental illness. I make that 32.8 per day. An estimated $200 billion is lost wellbeing each from mental illness.

The Government is redirecting funds for the Early Psychosis Youth Service (EPYS) centres, currently run by the youth mental health organisation Headspace, “to the Primary Health Networks (PHNs) for redistribution to a broader range of youth mental health programs, following a review by the National Mental Health Commission.”

I think there six EPYS centres and 31 PHNs. Effectively the specialist expertise built up will be lost and it will be like water into the sand.

McGorry says the National Mental Health Commission recommended building on the EPYS centres, but the Department of health put together a Mental Health Reference group to give them the recommendations they wanted to hear.

Not sure what Labor is doing.

Turnbull draws on humble childhood in new campaign video

Yes, really.

Malcolm Farr called it “log cabin-itis”, after the American practice of politicians spruiking their humble beginnings.

It was a political act, and an appeal to the emotions.

Savings kerfuffle

There was much agitation today about Labor backflips in making their budget balance. This article in the ABC has the story. It has new savings measures at just over $3.6 billion over four years, and total savings of $8.9 billion. Confused?

Then it uses a ScoMo quote as a heading as though it was a fact, which it isn’t.

This was the bit I didn’t like:

    It has dropped its opposition to the Coalition’s cuts to the research and development tax incentive, and said it would back the freeze on higher education grants.

If you go to Patricia Karvelas’s interview with Chris Bowen, you have “new and old” savings of $3.6 billion and it’s over a decade.

I don’t think Chris Bowen is confused. He told her that it wouldn’t mean $100,000 degrees, and it won’t mean waving through “zombie cuts”.

The AFR does a bit better:

Labor cuts_1465541915991_600

The new saves over four years amount to $1.476 billion. In budget expenditure of over $1.6 trillion, that’s vanishingly small.

28 thoughts on “Election 2016 open thread: budgets and pork barrels”

  1. It all seems to be small cheese at the moment. Shorten needs to say something big and attention grabbing if he is going to win.
    BTW Prepolling starts in my electorate next Tues (14/6). That is almost 3 weeks before the actual election. About 1/3 of voters are expected to prepoll this time because of clashes with school holidays.

  2. John, I think Labor saw this as the week they would show them as serious economic managers, exactly because pre-polling starts next week. I think Laurie Oakes probably got it right (looks like it’s paywalled):

    THIS was the week that was supposed to bolster Labor’s economic management credentials, but the plan backfired because of a silly misjudgment.

    The attempt to present a glossy and shallow PR pamphlet as a 10-year plan for Australia’s economy was greeted with almost universal scorn.

    The lack of detail in the lightweight document about how a Labor government would tackle budget repair enabled Bill Shorten’s critics to portray him as a leader not serious about matters economic.

    Labor looked like it was trying to spin its way out of trouble, which is ironic because the Government are the masters of spin.

    Yesterday before the cuts were announced we were getting Turnbull’s ridicule being portrayed as news on the ABC. Turnbull’s statement would come in the headline, then a short introductory statement, followed by Turnbull’s voice, then summing up his point.

    It amounts to the ABC putting its authority to work to confirm Turnbull’s BS as the truth.

  3. The ABC can’t just suddenly hate Turnbull ( aside from most of the linked to ” journalist” ), they needed the Turnbull love to get Abbott out.

    I expect an ABC production similar to ” Bastard Boys ” that we had on the eve of the 2007 election.

  4. I think it’s mainly that the right of politics complain more about ABC bias, and ABC journalists over compensate in an effort to be “balanced”.

    The ABC seeks ‘balance’ rather than ‘truth seeking’ as per the BBC.

  5. A bunch of economists were quick out of the blocks saying that the sky would fall in if we didn’t get the budget back to balance pronto.

    Alan Mitchell in the AFR was similarly critical of Shorten, but said in the article that the LNP was equally to blame. It had a Treasury graph of net debt as a percentage of GDP, which didn’t look all that scary to me. It peaks about the same as the Keating debt of the mid-1990s. You can see a similar graph in this National Library piece from 2015.

  6. Here’s another perspective on the necessity or otherwise of balanced budgets. It’s nearly two years old so it references Hockey’s economic incompetence but, since that trait seems to be shared by Morrison and Bowen, it is still appropriate.
    Who remembers that by the time Menzies retired he had allowed public debt to balloon to 41% of GDP?
    And (looking at the graphs in Brian’s linked National Library piece) when the completely incompetent Whitlam government was sacked the net debt to GDP ratio (%) was in negative territory, about the same as it was when the Howard government got its marching orders.
    Evidence should outweigh rhetoric, but it doesn’t.

  7. GDP = C + G + I + N

    C is equal to all private consumption, or consumer spending, in a nation’s economy, G is the sum of government spending, I is the sum of all the country’s investment, including businesses capital expenditures and NX is the nation’s total net exports, calculated as total exports minus total imports (NX = Exports – Imports).

    So quadruple G to grow C and I with borrowed money, what could possibly be the downside ?

    Australia maintains its standard of living with N (NX).
    ALP had the best terms of trade in history and blew it.

  8. ALP had the best terms of trade in history and blew it.

    Jumpy, which Labor government are you referring to? (There’s been a few).
    Or are you saying that every ALP govt since federation has had the best terms of trade in history and they all blew it unlike, say, the Howard govt?

  9. Part of the problem is that most people tend to think that government spending and borrowing should follow similar rules to households. There is also this funny idea that government debt is bludging on future generations even when the loans aer being used to pay for things that will make life better in the future. A few things are worth noting:
    -Federal governments can “print money” to cover deficits. Deficits do not automatically have to be covered by government loans. Taken to extremes printing money creates runaway inflation and collapse of the value of a countries currency. But hey: Australia is suffering from an over priced currency and an inflation rate that is low enough to be of some concern. Printing money to cover part of the deficit actually makes sense right now.
    -Some infrastructure spending was withheld during the mining boom because too much of our construction industry was tied up by the mining boom. We need to have a plan to use freed up construction capacity to build the infrastructure we need for the future.
    -GDP growth is low because our internal customers don.t have enough money to spend, particularly on Aus products and services. A fairer distribution of wealth would help overcome this problem. One of the smart things about Rudd’s GFC response was that the money he sued to stimulate the economy came as one-offs that did not have to continue into the future. It is worth remembering that Turnbull saw reducing the taxes on the rich as the answer to the GFC.

  10. Did he really,

    “It is worth remembering that Turnbull saw reducing the taxes on the rich as the answer to the GFC”

    , JohnD? I’d love to see that reference some time if you can dig it up,…for my archive of infamous ideas.

  11. Because John the debt incurs repayments.
    At the moment those repayments equal a Royal Adelaide Hospital every 8 weeks or a Gold Coast University Hospital every 6 weeks.

    Nothing is free.

  12. BilB, I tried to Google about Turnbull, but couldn’t find anything. Chris Berg of the IPA reckons the Reserve bank could have handled the GFC, but Joe Stiglitz disagrees.

    Jumpy is almost right about terms of trade, and GDP, but has gotten hold of it from the wrong end. I’ll do a post later tonight, because it needs a few graphs.

  13. All i ask is that you consider both production driven growth as well as the weaker consumption driven growth that follows production.
    Ta.

  14. Jumpy, I’m not an economist and it won’t be that ambitious, just explaining a few concepts and what happened.

  15. Jumpy: Production and consumer purchasing power work together to drive the economy. At the moment a lot of production is limited by the capacity and willingness of customers to buy, not capacity to produce.

  16. John, you are right that the LNP see every crackpot as preferable to a Green. I heard, Michelle Grattan I think, that the decision was a Turnbull one in the end, so their voting strategy would match his rhetoric.

    I’m not sure there was any deal as such with Labor, but I understand all they have given away is to preference Liberals ahead of Nationals where there are socalled ‘three-cornered’ contests where a sitting conservative has retired.

    Labor’s preferences would only come into play if they came third. Adam Bandt was elected in 2010 on Liberal preferences, was he not?

    What’s up for grabs is Xenophon in the SA lower house. I gather Labor has made no commitments, but may preference Libs ahead of X.

    I understand Labor will still preference Greens ahead of the LNP and probably everyone else in the Senate.

  17. Jumpy, my post is there now.

    The bit I didn’t bother answering was this:

    So quadruple G to grow C and I with borrowed money, what could possibly be the downside ?

    Quadrupling government expenditure and we’d need to be like North Korea. No-one is remotely suggesting that and it’s not worth talking about.

  18. jumpy, adjust the 1992-3 figure for inflation. Then put both numbers as a percentage of GDP and we have something to talk about.

  19. Jumpy, on my first Google attempt, Peter Martin on an IMF study:

    It identifies only two periods of Australian “fiscal profligacy” in recent years, both during Mr Howard’s term in office – in 2003 at the start of the mining boom and during his final years in office between 2005 and 2007.

    The stimulus spending of the Rudd government during the financial crisis does not rate as profligate because the measure makes allowance for spending needed to stabilise the economy.

    The Whitlam Labor government of 1972 to 1975 also escapes censure.

    The economists from the IMF’s fiscal affairs department found the only other years of profligate spending during the past six decades took place during the conservative government of Robert Menzies, in 1960. It says the Menzies government was notably prudent in 1950.

    And Emma Alberici:

    As a proportion of GDP, between 1996 and 2007, government spending averaged 24.2 per cent. The stimulus spending of 2009/2010 pushed spending up to 26 per cent of GDP but since then it’s been contained at 24 per cent. All things being equal, if Wayne Swan had the revenue today that Peter Costello had in the 2000s, the 2012/13 budget would be in surplus.

    And:

    In a recent study of 55 leading economies around the world, The International Monetary Fund identified four periods in Australian history when governments were engaged in “fiscal profligacy”: they were in 1940, 1960 and between 2003 and 2007.

    Please note, we are talking about a few percentage points of GDP here or there. If we had the expenditure of an average OECD country, we’d be talking about a third more or so. Talk of quadrupling is ridiculous.

  20. jumpy, adjust the 1992-3 figure for inflation. Then put both numbers as a percentage of GDP and we have something to talk about.

    Brian, you are ignoring what I’ve said and continue to say.
    GDP is a BS figure because government spending effects the equation directly in 3 of the 4 components.

    It is basically a pork barrel indicator !

    It most certainly is not an indicator of Gross Domestic Product.

    Can you find a way to see what I’m saying?

  21. Jumpy, what is your preferred measure for economic performance and how do you propose we get the rest of the world to use it instead of GDP?
    (For the record, I agree with you that GDP is poor measure, because in my opinion it counts too many negatives as positives, but it is the measure used globally.)

  22. I’ll get to roots great question as that is the guts of it, after my cooking duties ( guests in 2 hours !)

    I don’t see all Govt spend as evil. Some services can only be done by them. But why allow your $100 bill to be forcibly taken on threat of jail, to be put the the beuqacratic washing machine that shrinks it to $50 or less when it can be done a much more efficient way ?

  23. Jumpy you don’t seem to understand that borrowing money to build things now costs exactly the same as saving money to build things later. The gain in borrowing is in having access to the objects sooner, and that is important to governments for schools and hospitals.

    This is also important to business which routinely lease finances machinery, and well pretty well everything.

    Your argument that the cost of borrowing is depriving the public of “hospitals” etc, is a fallacy because the hospitals (to use your example) were built when the debt was taken on and have been in operation for the use of the public ever since. Not only that but they have been turning an unbudgeted profit which helps to pay down the debt sooner.

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