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Budget squabbles? Trump and China will have greater impact

David Speers
May 18, 2017

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By David Speers

The polls weren’t great, but otherwise the government should be happy with how this post-Budget week has gone. The AAA credit rating was retained, the unemployment rate fell and the banks ensured the focus remained on the most popular element of the Budget: the big new bank tax.

That’s not to say it’s smooth sailing from now on for the government. Far from it. The ratings agencies still have Australia on a “negative watch”. The unemployment rate bounces up and down like a yoyo as part-time jobs come and go. And this week’s record low wages growth confirms many Australians simply aren’t getting ahead at all (they also highlight how optimistic the Budget forecasts of a steady climb in wages may prove to be).

When it comes to the politics of this Budget, however, the government is winning. This Bank Levy may be unfair. It may run against Liberal ideology and all the government has said about the need to lower company taxes. But the more the banks squeal, the happier the Treasurer seems to be. The banks are not popular. This new tax is. It’s as simple as that.

If the banks pass on the cost in the form of higher interest rates, and somehow manage to convince their customers to blame Scott Morrison, then maybe the politics of this will flip. But, it’s hard to see how that happens. Certainly not by sending out bank bosses earning some of the highest salaries in the land to complain.

If the government isn’t troubled much by the banks, it seems even less worried about Bill Shorten. The Labor leader hasn’t really landed a blow on this Budget. At least not yet. The main fight he wants is a class war. He’s been pitting the “millionaires” against the “battlers” every day this week. “Under a Labor Government I lead”, he says, “millionaires will pay a little bit more and ten million people will pay less.”

In reality, no one will pay less tax than they do right now. Under Labor, the battlers would pay just as much tax as they do right now, while everyone earning more than $87,000 would pay an extra 0.5% Medicare Levy. Those earning more than $180,000 (Bill Shorten’s “millionaires”) would be slugged with an extra 2% hike on top of that. None of this would apparently go towards the NDIS mind you, as Labor maintains it’s fully funded. This would mainly be to fund Labor’s huge $22b increase in school funding.

The Opposition Leader has jumped further to the Left in response to Turnbull’s “centrist” Budget and Coalition figures are pleased to see it. But they can hardly afford any complacency. Shorten is a strong retail politician and this “millionaires” versus “battlers” fight has a way to run. The government needs to pass its Medicare Levy increase (for all workers) through the parliament as quickly as it can, with either the Greens, Nick Xenophon or Pauline Hanson. A drawn-out contest over taxing the working class more won’t be in Malcolm Turnbull’s interests.

For all the furious debate between Bill Shorten, Malcolm Turnbull and the banks, it’s worth noting the events in Washington and Beijing this week will have a far more profound impact on Australia.  

Donald Trump is now facing four Congressional inquiries and a special counsel investigation into links between his campaign and Russia. The leaks against him this week have been highly damaging and presumably from a determined element of the intelligence community, which has decided Trump has no place in the White House. Who knows where this will end? The shadow hanging over his Presidency will pre-occupy Washington, stall the prospects of tax reform and damage the standing of the United States.

At the same time, China is stepping into the empty drivers’ seat of global leadership. President Xi Jinping unveiled his extraordinary “One Belt, One Road” infrastructure plan. More than a trillion dollars will be spent on roads, rail, bridges and ports in China and beyond to build a modern day Silk Road.

China is asserting itself economically and strategically, while the United States is consumed by political drama. Here in Australia, we may squabble over the Budget details, but it’s these tectonic shifts that will ultimately matter far more.

Published: Friday, May 19, 2017

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