Federal Treasurer Scott Morrison speaks at press conference in Sydney, Wednesday, March 30, 2016. (AAP Image/Mick Tsikas) NO ARCHIVING
Federal Treasurer Scott Morrison speaks at press conference in Sydney, Wednesday, March 30, 2016. (AAP Image/Mick Tsikas) NO ARCHIVING MICK TSIKAS

ANALYSIS: Morrison's budget hides gifts, bets on growth

On election-eve, Scott Morrison has offered few giveaways, instead stressing the government's credentials as better managers of the economy.

In a Budget Speech laced with job-related initiatives, the Treasurer is backing an up-beat strategy that re-orients selected revenues to promote economic growth and eventually ease budgetary pressures.

He is betting on higher employment growth, more business investment and an easier tax environment for small business. 

The new mantras are 'incentives to earn', 'rewarding hard work', 'grow and hire'. 

Yet, perplexingly, budget papers predict modest economic growth forecasts, flat employment rates and low inflation. The RBA's cut in interest rates on budget day underscores this economic fragility.

The government has chosen to await medium-term revenue growth across its major sources of income, rather than risk overt tax increases. 

Taxes from growing superannuation reserves are rising by 24.2% over the next two years, the GST is growing by 11.4% and personal income tax by 14.7% over the same period. Business tax cuts (almost $9 billion) will be offset by tobacco tax rises ($4.7b), higher income superannuation taxes ($2b), and tax avoidance measures ($3.7b).

As an election gambit, the budget makes small waves, but creates importantly few constituencies of complaint (unlike the 2014-15 Hockey budget).

It makes the best of a dire fiscal situation, but one that was largely inherited from their predecessors.

It allows both Morrison and Turnbull to claim a reputation as serious economic managers rather than expedient populists, but we have to take on trust their ability to deliver the outcomes given their relative inexperience (and tetchiness) in the two most senior roles in government.

Finally, the 2016-17 Budget confirms that we will have an election fought largely on economic management credentials.

 

Professor John Wanna is a political research expert with Australian National University


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