Tax cuts for small business are where large numbers of votes are for the Coalition – yet would the ‘employee bank’ change their mind with a coffee and a small portion of a cookie? Dinesh Malhotra has his doubts.

Melbourne, May 4, 2016: Budgets in an election year are the greatest tools the incumbent party possesses to reclaim another stint in the top job and the Turnbull-Morrison team seems to have chosen to present it ‘painted in a low-key and undramatic hues’.

No wonder Bill Shorten is giggling and Chris Bowen is not pretending to hide his grin.

It is a budget so cautious that it feels as if it has not been even delivered. All the major instrumentalities the government is claiming – to engineer “jobs and growth” – do not promise any jump to top gear any time soon and thus – perhaps it will deliver nothing significant for any significant segment of Australian society.

“You get the feeling this budget was pulled together with the use of a checklist. “We’ve got to have something on super, bracket creep, women, company tax, cities, multinationals, infrastructure . . .” wrote Ross Gittins, Economics editor for the Sydney Morning Herald.

“It involves a lot of imminent-election tidying up of loose ends from projects the government has supposedly been working on for three years, plus much squaring away of key interest groups.

What it’s not is any kind of carefully considered “plan” for the economy, whatever Scott Morrison’s claims”, he added.

Although Ross Gittins thinks this budget is a plan to get Malcolm Turnbull re-elected, I believe it does little to trigger any voter movement from the ALP to the Coalition.

And thus, if the opinion polls are correct, it is now a real possibility, we will see a new prime minister on July 3, pacing towards the appropriately refurbished Lodge.

In my opinion, with this very “status quo” kind of budget, the fight for the Liberals is to “not lose” rather than “to win” the 2016 election.

The “status quo” assessment is based on the fact that the budget has not gone far enough to manoeuvre the engines of health and education, environment and international trade encouraging Australian export to deliver renewed vigour and benefits.

Rather the apprehensions of doctors’ co-payments, cash charges for blood tests etc. are lingering in the shadows.

The rejuvenation Scott Morrison wanted through a 50% jump in the GST was not there for him to magically change the numbers and provide for everything which is now missing; but real visionaries do manage to create by rejigging the jigsaw pieces and it is axiomatic Scott Morrison has shown lack of adventure and sided on the side of caution and considered merit.

In the end, we have a budget which has nothing to sell for now and may deliver goods to sell in the future. As far as we can see, that is how far it goes for now and thus will be a brave and miraculous endeavour to sell it successfully for July 2.

But I do concede, there are almost 60 days to July 2 and they say – ‘a day in politics is a long time’.

Saving the low to middle income-earners from the 50% jump in the GST seems to be something which we will see a lot in the selling of this unadventurous budget.

The tiny tax cut offered to people with more than $80,000 a year, benefits only a quarter of taxpayers and how many of them will change their minds on 2 July is a question both Turnbull and Shorten are pondering over. Perhaps not many, I believe!

Morrison’s effort to keep the big end of town on their side – traditionally their own territory anyway, is well captured by Ross Gittins, “What else do high earners get? No reneging on ending the 2 per cent temporary deficit levy. No change to negative gearing schemes, to the 50 per cent discount on capital gains tax, to family trusts or to deductions for professional development courses in Hawaii.”

Having come to the office shouting vociferously the “debt and deficit crises in Australia”, the Coalition delivers a deficit of $40 billion (or 2.4 per cent of GDP) in the present financial year, falling only to $37 billion (2.2 per cent) in the coming year.

For Labor, Chris Bowen has the following, among other points of criticising the 2016 Budget:

  • Individuals who earn the most will get a double tax cut – someone on $1,000,000 will get a $16,715 tax cut tonight while three quarters of Australian taxpayers receive absolutely nothing.
  • A couple with a single income of $65,000 with three children in primary school are $3,034 worse off a year – and receive no tax cuts.
  • A single mother with an income of $87,000 with two children in high school is $4,463 worse off per year as a result of tonight’s budget.

“To claim that a tiny tax cut and a “glidepath” cut in company tax will have any significant effect on jobs and growth is an exercise in over-optimism and exaggeration”, says Ross Gittins.

Opinion gurus see the tax cuts for small business as cuts where large numbers of votes are.

The designers of the budget have banked all their hopes on –

  1. small business owners – on reduction in the company tax to 27.5% (drop of 1%) and
  2. their large number of employees – a less than $1 a day tax cut if their income is more than $80,0000.

The first group – perhaps are sentimentally their bank and have been so for decades but that the second group will change their mind with a coffee and a small portion of a cookie – I have my real doubts.

You need to add some weight to their hip pocket by adding some real dollars!

The other initiatives – of taxing the MNCs – making them comply with Australian tax laws on the profits they earn here and changes to superannuation – which leave 96% of Australians untouched – do not make any attractive reading for the average Australian voter, other than a sentimental gotcha’ achievement.

This advantage-Shorten 2016 Budget is now over to spin doctors on all sides of Australian politics!

Dinesh Malhotra

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