NATSEM BUDGET 2016: The budget that launches an election

Michelle Grattan

Michelle Grattan is a journalist and Adjunct Professor at the Institute for Governance and Policy Analysis, University of Canberra

As Treasurer Scott Morrison said recently, this will be no typical budget, because it has to be a launching pad for the election, which will be formally called days later.

The bottom line here is that if the budget is a flop Malcolm Turnbull's formal campaign will begin very badly. Given it's such a long stint to the July 2 polling day there's time for recovery but a sour start would, in light of the close polls, be highly risky. This is not a matter of the budget giving a poll ''bounce'' but not setting the Coalition back.

Remember, however, it is not just the government that will be on the spot in budget week. Much will be riding on Bill Shorten's reply two days after the budget. He will be aiming to make that speech, delivered to the parliament and telecast to the nation, his own launching pad. If there are bad reviews, he'll pay.

Governments use budgets to project values and send key messages, as well as for their core purpose of ''getting and spending''.

NATSEM has analysed the speeches given by the treasurer and opposition leader since 2001. Taking the 2014 and 2015 budgets, delivered by Joe Hockey, the first was full of references to ''build'', while the latter stressed heavily ''business'' and in particular ''small business''. Unsurprisingly, in the replies of both years from Bill Shorten that nasty word ''cut'' appeared multiple times.

Much of the language of budget speeches is by necessity dry, but laced with hype about past achievements and future hopes (cast in the guise of expectations and projections). Looking over the years, treasurers and opposition leaders often throw in a lot of references to ''Australia'' and ''Australian'', which sound more highfalutin than the pedestrian ''country'', ''nation'' and ''people''.

While the focus is on the specifics of budgets, the rhetoric is also significant. Is it stern, reassuring, vague, precise? How much does the government rely on looking into the long term, rather than concentrating on what's closer at hand? Is the ''tone'' right for the times? Are there any phrases that will return to haunt?

In 2014, Hockey sprinkled his speech liberally with references to people contributing, which was emblematic of what his budget was about and summed up in his declaration that ''the age of entitlement is over''. He referred only once to Australia being a nation of ''lifters not leaners'' but it was seen by many as divisive and offensive.

There will be both economic and political benchmarks for judging this budget.

On the economic side, most basically, does it provide a convincing pathway for tackling debt and deficit? In opposition, the Coalition focused on the need for budget repair but in government it dropped the ball, after the harsh measures of the 2014 budget met Senate opposition and public outrage.

Recently Moody's rating agency has pointed to Australia's rising debt and suggested that tax increases are needed to address it because cuts alone won't be adequate to the task – not an argument Morrison is willing to countenance.

The budget will need to show the warning has been absorbed and that, if the government is unwilling to accept Moody’s advice, it has found other ways to deal with the challenge. Yet it is not expected that much can be done on the spending side, given the proximity to an election.

It's no good the budget just being aspirational in terms of its fiscal story – the numbers have to be credible. If assumptions, forecasts and projections are seen as unrealistic, the budget will be marked down by the markets. And a lack of credibility on the economics will undermine the budget's political heft.

There are two crucial markers for judgements about the politics of the budget. Is it fair? And does it project sufficient purpose and imagination?

In 2014, NATSEM modelling documented how hard low and middle income families with children would be hit by the budget measures. The ''fairness'' argument turned into a disaster for the Abbott government. Malcolm Turnbull has been at pains to stress fairness, especially in the context of whatever is done on tax.

Big initiatives will be subjected to the fairness test individually, and the whole budget must appear fair. The availability of modelling, while not the only measure, provides one ready way of calculating fairness.

Assessing a budget's sense of purpose is more subjective than judging its fairness. And it is hard for the government, which has dashed many hopes, to inject convincing purpose. The public want some inspiration and optimism, but lay it on too thick and it’s an invitation to cynicism. Besides, we've heard so much of it before, such as the ''infrastructure'' story.

The government has the additional problem that it built expectations that it soon found it could not meet. This is particularly so in tax, where it seemed to be moving to a tax mix shift, with a rise in the GST and a significant income tax cut, but then retreated to what are expected to be modest changes. On negative gearing, the government earlier said there were ''excesses'' that needed to be addressed but it has now ruled out any changes.

On tax, the government is caught between needing to be able to say it is doing something on reform, while wanting to make itself a small target on the issue so Labor’s tax policy is, by contrast, a big target. The budget will test how well it can manage that juggling.

Michelle Grattan AO, Australian journalist, was the first woman to become editor of an Australian metropolitan daily newspaper, The Age. Grattan is currently Chief Political Correspondent of the Conversation and a Professorial Fellow in the Institute for Governance and Policy Analysis at the University of the Canberra.

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