Budget reporting goes on and on while I try to work my way through it all. There is something extremely nasty about the responses running just below the surface on social media, peaking through from time to time into the more public space. I can understand it, but I don’t have to like it.
Looking at the commentary especially in the Financial Review, the debate is not primarily about fixing the budget as some commentators think and the Government would like to present. It’s about the means adopted. The Government wanted to fix the budget and do the things it wanted to do. To do this, it had to cut out the things it didn’t want to do. It also wanted to force some structural, social and behavioural changes. I make this point only because it is quite clear from the numbers that the Government could have achieved the same budget outcomes with a different policy mix. It chose the mix, and those choices were its choices. That’s what the debate is about.
On the distributional impacts, NATSEM modelling would seem to confirm just how skewed the budget impacts are. You can actually see something of the same effects in the consumer confidence surveys where the fall in consumer confidence is most marked among Labor voters, with the diminished number of Liberal voters still positive.
If we put aside debates about budget aggregates, macro-economic impacts or indeed fairness, we are still left with the question of what it all means. What will be the impact of this budget on the way Australia operates and on the various sectors and activities affected by the budget and by all the associated policy changes? How might it work in practice?
This is where my present confusion lies, for I don’t understand the system design elements, the detail, well enough to track the likely impacts. I suspect the Australian Government is in the same position. Certainly the Opposition is.
This budget has timelines built into it. Changes come in at different points in time stretching well into the future. Those affected by the budget have to make judgements about impacts based in part on the what if principle. What if this actually happens?
To illustrate with a simple example, I can measure the possible impact on my daughters of the introduction of interest charges on HECS debts. All I need to know is their debt and then apply some interest rate ranges. What I can’t properly assess are the behavioural impacts.
Will better off parents or former students with access to cash draw forward their paybacks? Some will, giving the Government cash. What will be the impact on demand for university places? Now,that’s more complicated, for it depends in part upon movements in university fees affected by other budget changes. Normally with price signals, and that’s what this change is, you would expect them to work by reducing and also redistributing demand. That means fewer students going to university studying a different mix of courses.
For the universities themselves, the position is fiendishly difficult for they have to try to work out and respond to multiple possible interacting changes that affect every aspect of their operations.
I think that the Abbott Government has made a fundamental error with this budget. It’s simply too complicated, bringing in too many changes at one point. There is no prioritisation, no phasing, no picking of the key battlefields. In military terms, they have decided to invade on multiple fronts. Lacking logistics and with ineffective communications systems, the command staff is running around trying to push the campaign. Meantime, behind the front all the support activities are struggling to find the time and resources to follow up.
For the life of me, I cannot see just how the Abbott Government can have any hope of managing the changes they have unleashed. This is a practical, not political, judgement. It’s pink batts, but on a large scale. With every jurisdiction, every institution, every NGO, every peak body, every business and all citizens affected by the changes, the task of explanation is enormous. Every inter-government agreement is affected, every program. All this has to be managed in circumstances where, mixing metaphors, spot fires are breaking out all the time.
Staying with the fire analogy since Mr Abbott is a volunteer fire fighter. if you want to do some remedial burning, it’s not a bad idea to focus the burn instead of spraying fire starter across a vast expanse of bush. Perhaps we can call all this Mr Abbott’s bushfire.
Sue pointed me to this cartoon by David Pope from The Canberra Times on the fire theme.