Malcolm Turnbull’s budget response was very political. The main practical point was to emphasise retaining the health insurance subsidy and substitute a 3 cent extra tax per cigarette to raise the same income. This is probably sensible in my view but small potatoes. Otherwise the attack was primarily on the size of the $57 billion deficit and the implied debt which he claims will blow out to close to $300b once Labor’s Ruddbank, Broadband and other proposals are included in official debt forecasts.
Turnbull’s point that Rudd’s debt as a fraction of GDP compared to other c0untries was low because the Coalition had wiped-out public debt in Australia was sound. It is a dramatic turn around.
The response of Labor supporters (and standard Keynesians) will be that the debt is necessary to limit the extent to which the economy will falter now and the Coalition will respond that too much is being spent and being spent on projects with a low rate of return such as the Broadband effort.
I don’t know who is correct here – the right sort of stimulus package will necessarily be a stab in the dark – but Labor needs to be positive in its interpretations and the Coalition, if it wishes to regain office, to be cautionary. The future course of politics – unless there is a short-term double dissolution of parliament is clearly ‘hope’ versus ‘fear’. I doubt there will be a double dissolution of parliament – the government can do this if the alcopops legislation is defeated a second time but suspect the double dissolution won’t occur.
I thought Turnbull performed well. He can be a future Prime Minister if the Treasury’s optimistic forecasts turn out to be false and if he sticks to his guns of attacking Labor over debt and deficits. I think Labor’s popularity will now decline in the polls as people start to take seriously the fears expressed by the Coalition.