Budgets in Canberra used to be a very big deal – a focal point of the political year. But Covid has turned a fixed ritual into something more fluid. Over the past 12 months, we’ve been in a permanent budget, with the Treasury in a huddle, and money flying out the door, so one Tuesday in May of 2021 feels overshadowed by a public health crisis humanity hasn’t yet conquered.
But next week’s budget remains an important milestone for a government that has executed a monumental shape shift during its period in office: from Tony Abbott’s apocalyptic screeching about debt and deficit disasters and Joe Hockey’s pontificating about the end of the age of entitlement – to Scott Morrison shovelling money out the door to save (as he put it, correctly) “lives and livelihoods” during the pandemic.
The political backlash to the Abbott/Hockey first strike in 2014 – that first austerity budget replete with broken election promises – was so visceral it marked the beginning of the end of Abbott’s prime ministership. The Coalition has been tiptoeing away from that disaster in every budget since, and Tuesday night will take project reinvention one step further.
Just a quick statement of the obvious: we haven’t seen the budget yet, and any sensible analysis should never get ahead of the facts. With days to go, we are mired in the realm of expectation management.
In this spirit, we can whip through the main points quickly. The treasurer Josh Frydenberg is characterising this as a crisis budget. What he means is Australia’s economy still needs support to recover from the first recession in 30 years. Frydenberg told me this week the bounce back from Covid could not be taken for granted. There are too many uncertainties.
Beyond the continued crisis management, there will be investments in essential services – aged care and mental health. This is where we need to revisit my point a minute ago about the Coalition’s incremental reinventions. During the pandemic, the government’s rule of thumb was spend big but don’t bake the spending into the budget bottom line; pursue stimulus that will wash through. On Tuesday night the government will uncouple from that mantra, and unveil new structural spending on aged care and mental health.
These investments are a function of necessity, and dare we say, basic decency, given the terrible consequences of chronic underfunding of aged care, and the national crisis in mental health. From my perspective, this spending is absolutely essential. We can only hope it’s sufficient, and well-targeted. But in Coalition terms, there is some sensitivity around handing down a budget that could be badged as Labor lite.
Exemplifying this, John Roskam, the executive director of the Institute of Public Affairs, penned a jeremiad in the Financial Review this week noting the Abbott/Hockey budget of 2014 (which he would not consider a disaster) “was only seven years ago, but it feels like a time from another era”. Roskam lamented that reform, for the current generation of Liberals, invariably involved “the government spending more money”.
The IPA man did note there had been a realignment. Expectations about what governments do were reset first by the global financial crisis and again by the pandemic, and the conventional debt and conversation rightly shifts on its axis in an environment of zero interest rates. Roskam noted the resting disposition of the Liberal party of 2021 was on the zeitgest.
But Roskam’s plaintive tone has some resonance in some quarters of the government. While government MPs are inclined to be disciplined, some Liberals work hard to check their frustration about the government’s lack of appetite for the reform agenda Roskam would approve of. Some are frustrated by a prime minister who regularly rewards leaden obedience and loyalty ahead of philosophical zeal.
Frydenberg and the finance minister Simon Birmingham had their worldviews and political inclinations shaped by the prevailing mores of the late 1980s and 1990s. While leaning in, to some degree, to the realignment currently in progress, both also appear acutely aware that appearing Labor lite might win you votes in the centre but doesn’t get you a gold star from the base.
In a conversation on my podcast this weekend, Birmingham was at pains to contend there will still be a contest with Labor at the next election about the quality of each parties respective spending initiatives. Frydenberg engages with the sensitivity this way. He says this will be a budget of “Coalition values – support for regions, support for families, support for the private sector, lower taxes, homeownership”.
“We are not engaging in a spendathon,” he says. “This is not an excuse to spend on every old program that is in the bottom drawer. This is a targeted approach.”
As proof of his bona fides, Frydenberg notes the government ended the jobkeeper subsidy when interest groups demanded it be kept, and declined numerous requests to buy an airline at the height of the crisis. There is also the matter of the stage three tax cuts, a package that benefits high income earners.
I put it to Frydenberg if he was serious about funding social services, perhaps he would nix a tax cut for people who don’t really need it in favour of investing more in aged care or mental health or childcare. But the treasurer says the tax cuts stay. “That’s a significant reform … 95% of taxpayers will pay a marginal rate of no more than 30 cents in the dollar”.
In any case we will see where all the various balances lie next Tuesday, and reserve all judgment until that point. Speaking of balances, it is interesting to take a minute just to review the most important balance in any government – the professional relationship between the prime minister and the treasurer. While Frydenberg has been grinding away putting his budget together, Morrison has been enduring the heaviest political weather of his prime ministership.
Frydenberg is a genial character who likes to be liked. He’s had some very hard postings (the climate and energy portfolio during the horrendous national energy guarantee war), and now Treasury during Covid. But he makes a point of maintaining friendships everywhere.
It’s fair to say, given his competence and his network, he’d currently be at the front of the queue to replace Morrison in the event the prime minister became surplus to requirements, or decided enough was enough. I’m not for a moment suggesting either of those things are imminent.
Still, it’s been a bumpy few months, and I’ve been around long enough to see how various treasurers have (or haven’t) chosen to differentiate themselves from their leader at various times in order to put themselves more indelibly on the travelator of advancement. Peter Costello, who wanted to lead, but never challenged, certainly did it with John Howard as that government began to age.
Without trying too hard, and certainly without breaking a sweat, I can imagine a number of ways where Frydenberg (who is only a couple of years younger than Morrison, but in sensibility, seems to hail from a different generation) could have struck a mildly different tone to the prime minister during the Brittany Higgins furore without risking life and limb – a minor flirtation with product differentiation, a bust of side eye, just to signal to the colleagues.
But he didn’t do that. Not once. If anything, he showed up for Morrison as support crew.
I asked Frydenberg this week whether he wants to be prime minister. He said: “I want to do a good job as treasurer, and I’m very happy doing it.”
Given the treasurer is one of those politicians whose ambition is limitless, and whose ascendancy through the pecking order seems pre-ordained, it seemed worth persisting with the line of questioning.
So you never want to be prime minister? Never in your life?
He said: “I want to be the best I can be, and I’m very happy doing this role as treasurer for as long as it is required. I’ve got a great relationship with the prime minister. We work closely together. It’s a partnership and my focus is on delivering Tuesday night’s budget and seeing a continuation of Australia’s economic recovery.”
Perhaps when your ascendancy seems pre-ordained provided you don’t make a hash of things, the smartest approach involves biding one’s time.