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Joe Hockey says this budget is not the last word in fixing the nation’s finances but the first. And that first word is “surprise”.
It’s a brave beginning for the Prime Minister who had promised to run a government of “no surprises and no excuses”.
It’s a surprise on three levels. First, because Tony Abbott has broken so many of the vows he swore to keep.
No new taxes, no increased taxes, no cuts to education, no cuts to health … these are promises discarded. This is as easy a job for Bill Shorten as any opposition leader has ever had.
It’s a surprise on a second level because, while Abbott was a cheap populist in opposition, he now reveals himself to be a purposeful prime minister.
He’s not looking for popularity but respect. His budget is a bold political bet that people will not punish him for breaking promises but reward him for being tough and responsible.
The budget inflicts pain on most of the population, young and old: young people lose any right to unemployment benefits for a minimum of six months, uni students will pay more for degrees, pensions will be less generous, two million families will lose part or all of their family payments, the free visit to the doctor is history for almost all, motorists will pay more for petrol, high income earners will pay a new 2 per cent tax levy.
A great outcry will rise up across the land. Some of this will vindicate Hockey’s argument that people have come to feel entitled to government benefits. But actually cutting into them is a politically dangerous way to prove a point.
The budget’s a surprise on a third level because it exposes Abbott as a more ideological conservative
prime minister than even his mentor, John Howard.
Abbott once described himself as Howard’s political “love child.” But Howard was the sugar daddy of the family payments system. He was the arch exponent of middle-class welfare in pursuit of the votes of the “Howard battlers”.
Abbott now cuts into the Howard edifice by about $6 billion over
Howard never attempted the deregulation of the university sector. Abbott has.
Howard never attempted to impose a “price signal” – otherwise known as a co-payment – on the routine visit to the GP. Abbott has.
Howard’s treasurer, Peter Costello, once called Abbott more a DLP man than a member of the Liberal mainstream. It was a reference to the fact that Abbott spent some of his formative years incubating in the company of BA Santamaria’s now-defunct Democratic Labor Party.
But Abbott now proves Costello wrong. Abbott and Hockey are forging a small-government, pro-market country, distinctly at odds with the DLP agenda.
Overall, the budget marks Abbott as serious about achieving an overarching promise: to stop the debt.
The budget’s declared aim is to cut the federal deficit from $49.9 billion this financial year to $29.8 billion next and to achieve a near-balanced budget – a $2.8 billion deficit – in the fourth year.
If so, he will have pursued the national interest of better finances over the political interest of greater popularity.
But, in truth, he’s making a virtue of a necessity. Abbott is not popular; he has never been popular as prime minister. He is, according to the Nielsen poll, the first unpopular leader to take the prime ministership in 40 years.
He has concluded he cannot expect to win popularity by spending more money. But he can hope to win grudging respect by being tough with the national finances.
He and his treasurer are making much of the equality of sacrifice in the budget; people across every income bracket are taking some pain.
But the truth is that, in this budget, the poor will make a permanent sacrifice, while the rich make only a temporary one. The 2 per cent tax levy on people earning over $180,000 expires after three years. The cuts to welfare and pensions will endure.
So while the budget does put Australia on track to better national finances, it also sets the country on a path to greater inequality. Hockey will regret the moment he was snapped puffing a cigar.
This is the angle that Labor, the Greens and, probably, Clive Palmer’s United Party will seize on to try to block key measures in the Senate. The $7 Medicare co-payment, for instance, will be hard fought there.
The budget does achieve the big economic task that it needs to accomplish. The boom in mining investment is in the process of tapering off by a big 4 per cent of gross domestic product in the few years to come.
The economy needs a new source of growth to replace this. The Hockey budget switches some money from recurrent spending to pay for new infrastructure, and roads in particular.
And it does it at a moderate pace. The cut in spending in the budget’s first year is sizeable but not savage. At about the equivalent of 0.8 per cent of GDP, it will not do any appreciable harm to growth in the short term.
Abbott has revealed his true prime ministerial character in this budget. And it’s entirely different from his character as opposition leader. The populist is gone and the tough ideologue has arrived.
A prime minister’s first budget is his best chance to impose tough decisions on Australia; Abbott has not missed.
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