Blueprint For Disaster Or Plan For The Future?


"Amanda Vanstone calls it a vision for the future. We call it a vision of hell."

Whether you agree with the rip-roaring front page demolition of the Commission of Audit report in today's Illawarra Mercury, the Daily Telegraph's "Wake up Australia" rebuke to its own readers, or the Financial Review's more august editorial assessment that it's about "Making [the]welfare state affordable", yesterday's announcement from Tony Shepherd has set the stage for Treasurer Joe Hockey's first budget in a major way.

As Ben Eltham wrote in NM yesterday, the report may well have confused the Coalition's economic message in the lead up to some unpopular measures. "Abbott and Hockey may now be wishing they had released it earlier, giving some of the more controversial proposals time to play out," he wrote.

Following up in the Guardian yesterday afternoon, after the release of the commission's report, Eltham wrote that the recommendation to devolve some income tax collection responsibilities to the states further increase the level of complexity. Is this really about efficiency?

"The idea to give the states a 10 per cent income tax tells you all you need to know. Despite a mania for reducing complexity, the Commission of Audit wants to cut federal tax rates, only to increase them again with an extra income tax for the states. At the same time as it complains about duplication, the Audit wants to take single, federal programs and devolve them to eight separate states and territories. Go figure."

The Financial Review's Laura Tingle wrote that the chaos over economics has done the Coalition real political damage:

"The chaotic messages from the Abbott government on its budget strategy, combined with devastating evidence from the Independent Commission Against Corruption in NSW about Liberal Party slush funds — not 30 years ago but in the here and now — has robbed the Coalition of the high ground it claimed on both economic management and probity."

Over at the Australian, the audit is good politics. But their writers are divided on the economics. "The commission includes a stark warning to government, should it feel weak at the knees," wrote economics editor David Uren, in a column generally approving of Shepherd's recommendations:

"There are 64 recommendations for spending cuts. These savings, or savings of a similar magnitude, are needed to deliver a surplus of 1 per cent of GDP by 2023-24.


"Taking $10bn from aged pensioners may not feel good but there are no obvious alternatives on the spending side"

His colleague Adam Creighton, saw the report differently, as "a testament to the eternal timidity of the political class than the inherent severity of the measures." He thinks the commissioners should have pushed for deeper cuts to spending:

"Even if the Coalition adopted all the recommendations in the upcoming budget, government spending per capita would still grow in real terms for each of the next 10 years.


"By comparison, the Cameron government in Britain has had to cut real spending by about 1 per cent every year since 2010."

How much of the report is the Coalition Government expected to implement? The Australian's Paul Kelly thinks "An optimistic rule of thumb is that the Abbott government might adopt a third, reject a third and put a third out to reviews."

But even were they to do so, Fairfax's Peter Martin and Ross Gittins have reservations about the fundamental terms of the audit itself.

Martin wrote today that by ignoring tax expenditures — government programs delivered by concession, rather than payment — it would hurt the less well off.

"Memo to anyone seeking government support: get it delivered as a concession rather than as a payment. The commission of audit won’t notice … [it]wants grants to business axed but it lets tax breaks for business go through to the keeper."

Gittins, in a fiery column, condemned the whole purpose of the audit:

"This report’s proposals go so far over the top — are so impolitic, impractical and improbable — that today is the last you will hear of most of its 86 recommendations.


"What distinguishes this report from its predecessors is the blatancy of its commissioning. It comes from an "independent" inquiry effectively handed over to just one business lobby group, the one composed of the most highly paid chief executives in the country, the (big) Business Council.


"Not surprisingly, the commission found ways to solve our budget problem at the expense of almost everyone bar the top "1 per cent" whose interests the council represents. Speaking as a near one percenter myself, there’s little in its 86 recommendations that would make a dent on my pocket."

You can't please everyone in politics, but for a budget claimed to be for the one percenters, even the Financial Review had things to complain about. In his back-page Chanticleer column, Tony Boyd decried the recommendations to abolish the Export Finance Corporation (EFIC), Commercialisation Australia and the Innovation Investment Fund as "ideologically driven brain explosions".

"If Australia were to abolish EFIC," Boyd wrote, "it would be the only Western industrialised country removing a facility for supporting companies in their international expansion."

Likewise, Commercialisation Australia and the Innovation Investment Fund should be retained as "two forms of government [that]are actually nurturing start-up companies and providing venture capital".

So who wins and who loses? The Guardian's Lenore Taylor calls the audit's report, "a plan that looks, and in isolation, certainly is, unfair". It doesn't make sense to couple the deep cuts with Abbott's proposed "debt levy". That "runs counter to the whole idea that the budget deficit is a long-term structural problem that needs long-term structural solutions … so far the only pain for the rich that we know about is a short-term tax."

In all, she concluded, the poor are going to have to do the heavy lifting. Or as Eltham put it, "You’d have to be a certain sort of person to want this future for Australia."

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.