The Times Australia
The Times World News

.
The Times Real Estate

.

Beyond the spin, beyond the handouts, here’s how to get a handle on what’s really happening on budget night

  • Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University
Cover of 2023 budget glossy

Three weeks from now, some of us will be presented with a mountain[1] of budget papers, and just about all of us will get to hear about them on radio, TV or news websites on budget night.

The quickest way to find out what the budget is really doing will be to listen to the treasurer’s speech, or to peruse online the aptly-named “glossy[2]” – a document that last year was titled “Stronger foundations for a better future[3]”.

Cover of 2023 budget glossy
Glossies are used to make each budget attractive. Commonwealth Treasury[4]

But they will tell you exactly what the government wants you to hear, exactly as it wants you to hear it.

If you are looking instead for the truth – what the government is actually trying to achieve and what it is holding itself and its officials to, I would suggest something else, tucked away on about page 87 of the main budget document.

It is required by the Charter of Budget Honesty Act[5] introduced in 1998 by Peter Costello, the treasurer under Prime Minister John Howard.

On taking office in 1996, Costello set up a National Commission of Audit[6] to examine the finances he had inherited from the Hawke and Keating governments, presumably with an eye to discovering they had been mismanaged.

But the members of the commission weren’t much interested in that. Instead, they decided to deal with something more fundamental.

Budget as you wish, but explain your strategy

Governments were perfectly entitled to manage money in whatever way they wanted, and they were perfectly entitled to spend more money than they raised (which they usually do, it’s called a budget deficit[7]).

What the commission wanted was for governments to make clear what they were doing, and to spell out the strategy behind it.

Only part of it was about being upfront with the public. The commission also wanted governments to be upfront with themselves – to actually develop frameworks for what they were doing, rather than doing whatever they felt like.

The commission recommended a Charter of Budget Honesty[8], which among other things requires officials to prepare independent assessments of the finances before each election, requires budget updates six months after each budget, and requires tax expenditures[9] (tax breaks) to be accounted for like other expenditures.

And it requires the publication and regular updating of a fiscal strategy statement[10].

Where treasurers hold themselves accountable

The fiscal strategy[11] can be thought of as an exam question set by the student who is being examined – something along the lines of “this is what you say you want your budget to achieve, please set out the means by which you plan to achieve it”.

It turns out to have been exceptionally effective in getting governments to organise their thoughts, make budgets at least try to achieve something, and let the rest of us know what they are trying to achieve.

Every few years, treasurers change the strategy, as is their right. Treasurer Jim Chalmers says he’ll change it again this budget, to de-emphasise the fight against inflation and to more greatly emphasise the need to support economic growth[12].

His statement will tell us what’s behind his actions in a way the glossy words in his brochure and speech might not.

The strategy that has signposted 26 years

Treasurer Peter Costello published the first fiscal strategy. Alan Porritt/AAP[13]

Previous statements have signposted all the important turns in what the budget is trying to do.

The first, in 1998[14], committed Costello and Howard to achieving a budget surplus on average over the economic cycle and whenever “growth prospects remain sound”.

Making that commitment more difficult was another “not to introduce new taxes or raise existing taxes over the term of this parliament”.

Two years later, after the government had won an election promising a new goods and services tax, that commitment was changed[15] to “no increase in the overall tax burden from its 1996-97 level”, a condition met by calling the GST a state tax.

Hockey and Morrison wound back spending

The Labor budgets from 2008 loosened[16] the tax target to the average share of GDP below the reference year, which they changed to the higher-tax year of 2007-08.

The first Coalition budget under Treasurer Joe Hockey in 2014 changed the target from tax to spending, pledging to bring down the ratio of payments to GDP[17], and pledging a surplus of 1% of GDP by 2023-24.

Any new spending would be more than offset by cuts elsewhere, and if the budget did receive a burst of unexpected revenue it would be “banked” rather than spent.

In 2018 Treasurer Scott Morrison reintroduced tax as a target, that he spelled out precisely. Tax was not to increase beyond 23.9%[18] of GDP.

During COVID, Frydenberg spent big

Frydenberg pushed unemployment well below 6%. Lukas Coch/AAP[19]

In 2020, in the face of a COVID-induced recession and soaring unemployment, Finance Minister Mathias Cormann and Treasurer Josh Frydenberg pushed the old strategy to one side.

They would spend big now to keep the economy afloat so they wouldn’t have to spend more bailing it out later, and they wouldn’t return to their old concern about the deficit until the unemployment rate was “comfortably below 6%[20]”.

So well did they succeed that in 2021 Frydenberg made the momentous decision to keep going, abandoning the promise to return to worrying about the deficit when unemployment fell below 6%.

Instead he promised to keep spending big until unemployment was “back to pre-crisis levels or lower[21]”.

The decision propelled unemployment down to a 50-year low of 3.5%[22].

Read more: Frydenberg spends the bounty to drive unemployment to new lows[23]

Along with high iron ore prices, that one change of strategy has probably helped deliver Chalmers two consecutive budget surpluses – the one he announced last year for 2022-23, and the one he is set to announce this year for 2023-24. More of us have been in jobs paying tax[24], and fewer have been out of jobs on benefits[25].

It’s a powerful demonstration of the real-world difference budget decisions can make, and the way in which the fiscal strategy[26] tells the story.

References

  1. ^ mountain (budget.gov.au)
  2. ^ glossy (treasury.infoservices.com.au)
  3. ^ Stronger foundations for a better future (archive.budget.gov.au)
  4. ^ Commonwealth Treasury (archive.budget.gov.au)
  5. ^ Charter of Budget Honesty Act (www.legislation.gov.au)
  6. ^ National Commission of Audit (webarchive.nla.gov.au)
  7. ^ budget deficit (www.investopedia.com)
  8. ^ Charter of Budget Honesty (webarchive.nla.gov.au)
  9. ^ tax expenditures (www.aph.gov.au)
  10. ^ fiscal strategy statement (cdn.theconversation.com)
  11. ^ fiscal strategy (cdn.theconversation.com)
  12. ^ support economic growth (ministers.treasury.gov.au)
  13. ^ Alan Porritt/AAP (photos.aap.com.au)
  14. ^ 1998 (images.theconversation.com)
  15. ^ changed (images.theconversation.com)
  16. ^ loosened (images.theconversation.com)
  17. ^ payments to GDP (images.theconversation.com)
  18. ^ 23.9% (images.theconversation.com)
  19. ^ Lukas Coch/AAP (photos.aap.com.au)
  20. ^ comfortably below 6% (cdn.theconversation.com)
  21. ^ back to pre-crisis levels or lower (images.theconversation.com)
  22. ^ 3.5% (www.datawrapper.de)
  23. ^ Frydenberg spends the bounty to drive unemployment to new lows (theconversation.com)
  24. ^ paying tax (www.finance.gov.au)
  25. ^ on benefits (theconversation.com)
  26. ^ fiscal strategy (cdn.theconversation.com)

Read more https://theconversation.com/beyond-the-spin-beyond-the-handouts-heres-how-to-get-a-handle-on-whats-really-happening-on-budget-night-228387

The Times Features

How weight stigma in maternity care harms larger-bodied women and their babies

According to a study from the United States[1], women experience weight stigma in maternity care at almost every visit. We expect this experience to be similar in Australia, ...

10 Ways to Make Money Online and Provide Financial Stability

The possibility of earning money online has reached unprecedented heights. The proper strategy enables anyone to begin earning money. You don't need fancy degrees or special skil...

The Power of Exterior Design: How Facades Influence Property Value

First impressions count when it comes to real estate, and nothing quite sets the tone for a property like its exterior design. A building's facade is more than just an aesthetic ...

The Best Adjustable Bed and Mattress Packages for Comfort

The appropriate bed and mattress are essential for establishing the perfect sleep environment. If you seek a way to upgrade your sleep experience, adjustable bed and mattress pac...

Designing a Modern Home: Features That Will Make Your Dream House Stand Out

Designing your dream home is an exciting journey, and for many, it’s an opportunity to create a space that reflects their personal style, functionality needs, and modern trends. ...

Client Dinners Done Right: Tips for Meaningful Engagement

Client dinners offer more than just a meal—they’re an opportunity to build lasting business relationships in a more personal and relaxed setting. Done well, these dinners can str...

Times Magazine

Top Benefits of Hiring Commercial Electricians for Your Business

When it comes to business success, there are no two ways about it: qualified professionals are critical. While many specialists are needed, commercial electricians are among the most important to have on hand. They are directly involved in upholdin...

The Essential Guide to Transforming Office Spaces for Maximum Efficiency

Why Office Fitouts MatterA well-designed office can make all the difference in productivity, employee satisfaction, and client impressions. Businesses of all sizes are investing in updated office spaces to create environments that foster collaborat...

The A/B Testing Revolution: How AI Optimized Landing Pages Without Human Input

A/B testing was always integral to the web-based marketing world. Was there a button that converted better? Marketing could pit one against the other and see which option worked better. This was always through human observation, and over time, as d...

Using Countdown Timers in Email: Do They Really Increase Conversions?

In a world that's always on, where marketers are attempting to entice a subscriber and get them to convert on the same screen with one email, the power of urgency is sometimes the essential element needed. One of the most popular ways to create urg...

Types of Software Consultants

In today's technology-driven world, businesses often seek the expertise of software consultants to navigate complex software needs. There are several types of software consultants, including solution architects, project managers, and user experienc...

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

LayBy Shopping