Little Joe's Budget report card

Michael Pascoe is one of Australia's most respected finance and economics commentators with 37 years in newspaper, radio, television and online journalism. He regularly appears on Channel 7's Sunrise and news programs and is a regular conference speaker, MC and facilitator.

 

It’s a curious thing that the government in general and Joe Hockey in particular are getting caned for some of the things in the budget that are actually sound policy, while they’re escaping scot free for some of the things that were poor.

Full coverage: Federal Budget 2014

Most importantly, it’s not the promises they’ve broken that are so bad as the promises that they haven’t broken and should have. Thus, as Yahoo7 Finance’s appointed headmaster of Fiscal College, it falls to me to give the fresher Treasurer a mixed report card:

Dear Mrs Hockey,

Your Joe has been a diligent treasurer during his first term with a fine attendance record and he’s certainly been trying, but here at Fiscal College, we hope for more in our treasurers.

Firstly, Joe has an attitude problem that is proving very difficult to fix. We feel he spent so long snarling for a living in opposition, that he can’t quite throw the habit now that he’s been given a go in government.

He did well as a shadow treasurer by pretending we had a “budget emergency”. Indeed, on budget night last year, he upped the ante to claiming we had a full “budget crisis”. But now that he’s in government, we feel it would be better if he levelled with the population and let them know that we have a problem, not a crisis.

Related: What the Budget really means for you

The problem must be fixed and Joe has been quite creative is his term assignment is setting out how he can deal with it in the longer term. He gets marks from that, even though some of his measures aren’t popular with those in the lower grades. Changing the indexing of pensions to the consumer price index, rather than the strange male average weekly earnings is a good answer and re-introducing the indexing of fuel excise is sound fiscal policy, just what the text books recommend. Contrary to some of the games played while in opposition, we suspect Joe quietly knows that the government has a revenue as well as a spending problem.

He only gets a half mark though for the increased top marginal tax rate that he just insists on called a “debt levy” for reasons best kept unto himself. The correct answer there is that it’s a temporary solution to what is a longer-term problem. There were better, lasting ways to get to the desired answer of “sharing the pain”, such as permanently reducing the discount on capital gains tax and applying a reasonable rate of tax on the bigger superannuation fund earnings that are presently rather ridiculously tax free.

Dealing as we do at Fiscal College with our sister school, Politics Tech, we understand that politicians don’t always tell the truth when trying to be elected. In fact, they never tell the whole truth. The unfortunate escalation of tension at Politics Tech with repeated chanting of “liar, liar, pants on fire” hasn’t done anyone any good.

We feel that if a politician finds he or she needs to break a promise for a good reason, she or he should break all the promises that should be broken. Some of the kiddies Joe associates with, especially that Abbott boy, seem to have tied Joe in something of a knot about what are core promises and what are non-core.

Related: Hockey dragged over the coals

So what disappoints us most is what Joe hasn’t done in his first big assignment. He thinks he can breeze along, putting off until tomorrow that which should be done today, but that just creates further problems for him down the path. Refusing to face up to genuine tax reform as an issue until after another student council election, not touching superannuation when it’s in desperate need of adjustment and, perhaps most of all, trying to pass off responsibility for the hard tasks to the little State treasurers really isn’t the stuff of the Fiscal College giants.

Thus, we believe Joe will have to try harder, be more honest with himself and the rest of the school, or the way ahead will be less than we would all desire.

Then there are some things that really won’t do. Young Mr Dutton is sure to get the whole form in a mess with the Medicare co-payment plan – if he really understood how it works, he’d realise the system is much more complex and has to be treated with more caution than just deciding doctors can collect a few dollars from each patient. One of the masters observed that such half-thought fiddling with Medicare could end up as the Coalition’s Pink Batts moment – whatever that means.

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The Medicare subject is one that Joe will have to resit until he genuinely understands it and gets it right – not an easy task by any means.

Also, to deny any pocket money to those in the junior classes if they can’t find chores to do when there simply aren’t enough chores to go round, well, that’s just nasty.

In summary, we think Joe is capable of more. His longer-term, big picture artwork is acceptable, but his short-term doctrinaire work is a disappointment for all. The bottom line of his first budget is that he is promising a year of lower economic growth and higher unemployment – something that many people seem to be overlooking. That’s a big mistake.

Regards,

The Headmaster