Photo: The economic benefits of the proposed deficit levy are both small and short term. (AAP: Alan Porritt)
The neoconservative thought bubbles emanating from the Commission of Audit are designed to make Joe Hockey's upcoming budget look moderate by comparison, writes Mungo MacCallum.
Even after 15 hours of surgery, my recovery was not entirely beset by hallucinations.
But given the amount of kites, balloons, smoke and mirrors emanating from the government about what will and won't, might and mightn't, be in the budget, it may as well have been. Or to put in Bazza McKenzie terms: from the safety of a hospital bed, it has all been one massive Technicolor yawn.
The initial emetic was the revival of the claim of budget emergency, necessitating urgent and drastic action to smash the deficit within five years. Since this unlikely proposal was not only rejected by an army of economists but also contradicted most of Treasurer Joe Hockey's actions since his election, this always appeared dubious at best. But for the sake of argument, let's assume that he is fair dinkum, and examine a few of the ideas floated to make us all suffer for his ambition.
First there was the Medicare co-payment, predictable enough; in spite of their regular pre-election protestations, the Liberal have always been unhappy with the idea of a universal public health care system, and having failed in their zealous attempts to strangle it at birth 40 years ago, have invariably spent their time in government seeking to undermine it. A co-payment would be a useful wedge, aimed at driving more people towards the well-cosseted private health insurance industry.
It is obviously inequitable and also silly; if we are serious about containing health costs, the only fair and sensible course is simply to increase the existing Medicare levy on progressive income tax. Double it if you like: with a proper explanation, voters would accept and even embrace the need for a little evenly-spread pain to preserve the much-loved institution. But while it may be good economics, that solution is, for this government, bad politics.
And the same applies to Hockey's eminently sensible proposition that the age for pension eligibility will have to be raised, and sooner rather than later. Of course, if his conservative colleagues had allowed the Hawke-Keating superannuation scheme to develop seriously, instead of turning it into yet another tax lurk for the well-off, the problem would be far less acute. But as it is, something will have to be done. However, let's get some sort of order into it. Before pushing up the age limit, it would be smart to make sure that the non-pensioners have something to do with their time other than hanging around Centrelink.
So far, the controlled leaks were at least consistent, if not exactly best practice. But then came the Deficit Levy, now morphed into a temporary increase in the top two marginal tax rates. The justification is that this is the only way Abbott, Hockey and the rest of the gang can think of to make sure that the very rich make at least a token contribution to the common weal, a moderately worthy aim which raises the question: why didn't they do it sooner and make it permanent? Answer: because not only would it break the habit of a lifetime, but because it is, as the panicked party room has discerned, a really great big broken promise.
It wasn't the first and it won't be the last, but because of its fundamental nature, and also because of the inanity of the justifications offered (it's only a levy, not a tax) it has assumed totemic status. This one is not just bad politics; the economic benefits are both small and short term. It may well prove as ephemeral as the business lobby's dystopian Commission of Audit.
This, as Ross Gittins among others has pointed out, was never meant to be taken seriously; it was only ever set up to produce a recipe for the kind of scorched earth feudalism which would make Abbott and Hockey look like moderates in comparison. It is no more than a cloud of thought bubbles, a neo-conservative wet dream. If it was so easy to abolish Medicare, restrict education to the wealthy, reduce the impoverished to serfdom and introduce not just one but six new taxes (one for each state), John Howard would have done it years ago. Abbott can't and won't.
But it adds to the plethora of confusing and essentially contradictory signals emanating from the Prime Ministerial bunker. We'll keep our promises, no surprises, but suddenly we have discovered a crisis invisible to the world's economists and plan to make you miserable for a while so you'll thank us when we remove the thumbscrews.
Of course there are easier ways. If the mining boom is really winding down, like, say, the car industry, is it not time, indeed past time, to remove the massive taxpayer funded subsidies given to them? If we are really facing an ageing population, should not the superannuation tax breaks at least be means tested so that the money can be redirected where it is needed? And surely it would be a good opportunity to reinstate fuel excise indexation, precipitately abandoned by Howard in the polling panic of 2001?
But these are apparently among the dwindling list of still sacred bovines confined to the luxurious corral guarded by the people who really run the Liberal Party. And of course, if Abbott and Hockey were serious about finding easy and painless ways to collect money, they would abandon the costly and ineffective policy of Direct Action on climate change and set up the emissions trading scheme Kevin Rudd planned to bring in on July 1. And while they're at it, that they could rejig the Mining Resource Rent Tax to make it a genuine revenue raiser ...
But now I'm sure I'm hallucinating.
Mungo Wentworth MacCallum is a political journalist and commentator. View his full profile here.
Don't take these dystopian budget ideas seriously - The Drum (Australian Broadcasting Corporation)
