Hockey's Mean Budget Is Full Of Contradictions


If you want to get a feeling for the mess of contradictions, meanness, trickiness and tribalism that is the Abbott-Hockey Government’s first budget, it's worth looking at two of the biggest decisions it contains.

The first is the massive cut of $7.5 billion to foreign aid, repudiating commitments made in Australia’s name by the previous government. The second is the proposal for a $20 billion fund for medical research, notionally financed out of co-payments made by sick people for visits to the doctor.

The $20 billion is an "aspirational" number, to be reached over six years or more, while the $7.5 billion will be realised over the four year period of the forward estimates, presumably with further "savings" into the future.

So, these measures will roughly cancel out. In the context of a supposed budget emergency, the fact that the government has room to play with billions of dollars of discretionary spending is striking.

In announcing the fund, Hockey made the rather grandiose suggestion that it might lead to treatments or even cures for "dementia, Alzheimer’s, heart disease or cancer". This seems implausible. The US National Cancer Institute alone has a budget of $US5 billion a year and, while there has been some worthwhile progress, the War On Cancer declared by Richard Nixon 40 years ago is far from won. So, in all probability, our money will make a marginal contribution to the continuing global research effort. The direct benefit to Australians will be modest at best.

Nevertheless, the switch in priorities reveals a lot about the world view of Abbott, Hockey and the people who surround them. The budget takes money from "people like them" (the poorest of the poor) and uses it to do good works for "people like us", researching diseases feared by middle-aged people in the First World. This kind of meanness and tribalism has characterised just about every decision taken by the current government.

Then there’s the trickiness of tying this noble-sounding piece of public good research to a leftover item from the market liberal reform agenda of last century, the idea that a co-payment for Medicare visits will somehow control health costs for the community as a whole, rather than merely shifting the costs from the healthy to the sick.

The notion of "hypothecation" (tying a particular revenue source to a corresponding outlay) is generally regarded by economists as meaningless. Still, in contexts like the Medicare levy it does no harm to remind people that they are paying for health services through their taxes (though the total costs are much more than the levy).

On the other hand, using what is in effect a tax on visits to the doctor to "fund" medical research is just a stunt. And while this is the biggest, the budget is full of stunts like this: presenting cuts to education spending as increases because universities are allowed to raise their fees, wrapping up a (justified) increase in the top marginal tax rate as a "debt reduction levy" and so on.

But above all, this is a budget full of contradictions, reflecting the different politics of the two men most responsible for it, and the approaches to politics that they represent.

Abbott is a man of three-word slogans, with little concern about a coherent approach to policy, particularly as regards economics. The three word slogans "axe the tax", "paid parental leave" and so on are his version of John Howard’s "core promises". He’s happy enough to make and abandon general assurances like "no cuts to health and education", but he’s not really interested in an economic reform agenda.

Hockey is a cipher, but his statements reflect the long standing orthodoxy of the political elite. Governments need to cut spending, particularly on "entitlements" reduce taxes and sell assets. Since the electorate doesn’t agree with these priorities, the only time to do this is years away from an election. The inconvenient feature of this timing is that it requires a rapid repudiation of the promises used to gain office, and the way to deal with this is to discover a "crisis" or "emergency".

Combine the two and we get a mixture of draconian, probably unsustainable cuts, and lavish expenditure on luxury projects. Exactly the same mix can be seen in Queensland, where Treasurer Tim Nicholls plays the role of Hockey the budget-cutter, while Campbell Newman lashes out on a massively expensive new office building for the government, "financed" by manipulations of the kind we saw on Tuesday night.

Unfortunately for Abbott and Hockey, the public has grown tired of the kind of theatre exemplified by Commissions of Audit, horror budgets and so on. But, with nothing much better on offer from Labor and the Greens, they may well switch to the vaudeville of people like Clive Palmer.

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