Thursday, May 5, 2011
But no. Yesterday's first Baillieu government budget is so moderate that no one could sensibly object to it other than for lack of daring. Team Ted has done what he promised to do in the election campaign, and hardly a thing more. Despite the tough talk, the bottom line is that this budget increases spending, cuts taxes and pays for it by taking on more debt.
Remember when Jeff Kennett and Alan Stockdale did when they took power? Within three weeks, they had announced massive job cuts, electricity price hikes, cuts to transport and other services. Union chief John Halfpenny led 100,000 people to demonstrate against them on the steps of Parliament House. It was revolution.
Remember when John Howard and Peter Costello took power and declared they had inherited a "Beazley black hole"? They then used their first budget to cut spending by $6 billion in one hit, dumped half their campaign pledges as "non-core promises", and slashed export and job training programs so deep it still hurt 10 years on.
The Baillieu government is not going to be like that. It came in with a program, and it is going to deliver that program. Yes, it's been shouting out from the rooftops that Brumby left the budget in ruin, and that the Gillard government has made it even worse. Its handpicked fiscal task force headed by former Treasury secretary Mike Vertigan claims the budget is on an "unsustainable" track, and requires spending cuts of $2 billion a year.
But is that going to change Ted's plans? Not one sausage.
Treasurer Kim Wells took pride yesterday in telling us that the budget enshrines all the Coalition's campaign promises, except for putting protective service officers into hospitals, which is still being worked out. For all the rhetoric, his budget is business as usual.
Those promises include spending cuts estimated to save $1.6 billion over five years, by forcing departments to trim their purchases, consultants, advertising and head office staff. That's just housekeeping: this government will be spending more than $250 billion in that time.
Yesterday added another $638 million over four years of small-scale spending cuts, most deliberately left vague. The pointiest of them is to limit the $300 School Start bonus to low-income families. If you've got to cut spending, that's a pretty fair way to do it.
The budget papers reveal another $932 million over four years from anonymous "reprioritisation and other adjustments" to spending plans: we'll find out what they are when they don't happen. Ted also plans to collect $481 million in extra revenue over four years, mostly by hiring 50 more tax inspectors. That's as revolutionary as this gets.
The bottom line, even after all those savings, is that the Government's decisions collectively will increase ordinary spending by $2.9 billion over the next three years, and cut taxes by $174 million. It plans to spend $2.35 billion more on new infrastructure than the Brumby government had budgeted for.
And to finance all that and to pay for the hits from the Grants Commission and cost overruns on projects such as regional rail and myki Ted and his team plan to borrow $10 billion over the next three years, more than twice as much as Brumby last budgeted for. Over five years, the Baillieu government would almost treble the budget's net debt, from $8 billion in mid-2010 to $23 billion in mid-2015. That wasn't one of their campaign promises, but it's their solution to the pickle they found themselves in trapped between campaign promises, shrinking Commonwealth grants, and rising project costs.
Let's make two points clear. First, that level of debt in itself is nothing to worry about. If these figures are right which is a big if the debt would peak at about 6 per cent of Victoria's annual output, at a time when Washington would owe 83 per cent of its GDP, and Japan 156 per cent.
But second, no one can increase debt forever. Wells envisages that Victoria's debt will settle by 2015, but in part because infrastructure investment would shrink to replacement levels. That's not a long-term solution, so he also implied that next year's budget will be the tough one, after the Vertigan audit team has picked through spending in detail.
That would be challenging. Baillieu has shown us he is a careful decision-maker. He could prove a hard man to convince of the need for big spending cuts, when fiscal discipline and years of growth could do the job without that pain.