Labor costings pass, but scare tactics detract

The ALP have just released their budget costings document.  I have mixed feelings — on the one hand it is a necessary feature of "democracy by auction", while on the other, it is necessary to prevent irresponsible and unaffordable promises hoodwinking the electorate.  It is also a game where the government of the day has an inbuilt advantage.

It seems to me that budget costings have to tell a plausible story about policy without being bogged down in gory detail.  The ALP failed this test in 2004, while the Liberals failed in 2010.

This time I think the ALP have a good story to tell — I'm just not convinced they tell it well.  Quite rightly, they point out that the Tony Abbott-Malcolm Turnbull government have done little to repair the budget damage inflicted by the previous Rudd-Gillard government.

Therein lays the problem — yes, the first two Hockey budgets were poorly conceived and poorly received.  That the ALP has managed to convince the electorate that Hockey's increased spending over Wayne Swan's last budget somehow represented "unfair" cuts reflects poorly on the government's communication strategy.

It is true that budget deficits have grown and public debt too.  One of the biggest mistakes the Abbott government made was to abolish the debt-ceiling.  If the ALP wanted to demonstrate its commitment to budget responsibility it would commit to re-introducing the debt ceiling.  This is one "hard decison" that both the government and opposition could commit to, yet neither does.

An additional criticism of the ALP costings is the petty and trivial examples given in the initial press release.  This is "form above substance" politics.  The first is to cap at $5000 the cost of managing tax affairs — this excludes small business and is aimed at a very small number of high income individuals.

It will "save" $1.7 billion over ten years (that is $170 million per year or 0.038% of this year's budgeted expenditure).  Then there is the removal of "junk" private health care policies that will "save" $384 million over ten years ($38.4 million per year or 0.009% of this year's budgeted expenditure).  These "savings" are highly speculative, but ultimately will make no contribution to budget repair.  Why mention them at all?

The ALP does two things well in its budget costings.  First it keeps emphasising that it has worked closely with the Parliamentary Budget Office.  This office was created expressly for the purpose of providing sound advice to politicians and to allow the electorate to have some confidence in electoral promises.  Second, it has invited a distinguished panel of public intellectuals — Robert Officer, Michael Keating and James MacKenzie to evaluate their costings and assumptions.

Importantly for our purposes the panel concludes:

All of the costings in Labor's Budget Plan are of a similar quality as budget estimates generally, and therefore represent a reasonable basis for assessing the net financial impact on the Commonwealth Budget.

Now make of that what you will — the Opposition's costings are just as good or bad as the government's costings.  In one sense that is very pleasing because we can then focus on the substance of the policies and abstract from the numbers themselves.  Mind you, the ALP doesn't reveal its assumptions, it provides long lists of budget estimates (so see for yourself that despite criticising the government on the NBN the ALP won't be spending anymore on it than the government will).

What is worrying is that both the government and the Opposition have a 10 year plan, and both plan to return the budget to balance in the same year, 2020-21.  In other words, a long time from now — after the next election.  That is simply not plausible.

The other difficulty is that the policy costings are long on slogans, long on criticism of the government and short on actual budget repair.

To be fair, the Abbott-Turnbull government is easy to criticise.  To be even fairer, the Abbott-Turnbull government has failed in precisely the same (economic) area where the Rudd-Gillard government failed.  The Shorten opposition don't address that collective failing anywhere in their budget costings.  Why will the ALP succeed now in its economic management, when it failed so comprehensively in its last term of government?

The ALP tells us it has a six point plan:

1. Investing in people
2. Building Australia
3. Driving investment in new industry and renewables
4. Supporting innovation and startups
5. Helping small business
6. Budget repair that's fair

That sounds like the long version of "Jobs and growth".  It is here that the ALP has to engage in scare tactics.  It is not clear what "privatising" Medicare even means.  How are we going to spend even more money on education — last time the ALP were in office we were tearing down perfectly good school halls and then rebuilding them.  Let's rather focus on increasing the quality of education before increasing the quantity of money thrown at education.  So the scare tactics are not serious policy work, they are transparent tactics to detract from the similarity in overall policy.

Of course in a democracy we expect the government and opposition to converge towards similar policies — and that, I think, is what is happening here.  Very similar policies and costings that are as good or bad as each other, however, don't suggest that a change in government is warranted.

So we have a competent attempt at policy budget costing — that must be good for the democratic process.  What is missing, to my mind, is a competent attempt to grapple with the actual budget deficit.  Mind you, they are hardly alone in that failing.

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