Prime Minister Malcolm Turnbull addresses a media pack on the morning after the federal budget. (ABC News: Matt Roberts)
Let’s pretend for a moment that politicians don’t actually run the economy.
This should be easy because in general they don’t. And all the claiming credit for the good bits and denying they had anything to do with the bad bits rather confuses the conversation.
That doesn’t mean the relationship doesn’t work the other way: the economy regularly makes or breaks the fortunes of politicians.
And the rest of us just have to live in it in the meantime.
The federal budget each year really has two elements to it — the one where the government announces what it is going to do with itself, and our money; the other, where it sets out the official forecasts for the year ahead.
The brutal reality of the focus on the forecasts — unless you are an inmate of NerdCamp — is that all you are likely to hear about the economic forecasts on budget night is that they are “(sniff), a bit on the rosy side” or possibly “wildly/ridiculously optimistic”.
This is a shame because the budget papers often have an interesting discussion about the economic outlook and emerging trends that float above and beyond the mechanical correctness of whether growth is at 2.75 per cent or 3 per cent.
And, given the causal relationship between politics and economics (see above), they sometimes frame the political story of the day in a completely different way to the one we have in our heads.
Treasurer Scott Morrison shakes hands with Prime Minister Malcolm Turnbull after delivering the budget on Tuesday night. (ABC News: Matt Roberts)
‘Statement No 2’
This year’s economic forecasts, contained in what is known as Statement No 2 and generally written by the Treasury rather than the government, has lots of these bon mots.
For example, there is a section contemplating the implications of the growing integration of the economy with that of the rest of the world.
(Just in case, nudge nudge, anyone is thinking putting up the barriers to the rest of the world is a good thing.)
There is another section looking at the recoveries in the non-mining sectors of the economy and labour markets, and yet another considering how the impact of global oil prices on the Australian economy is changing (high oil prices used to be bad for us but are now good for us because we export so much LNG, the price of which is linked to oil).
Listen to the background noise
Where all this feeds into politics — and the speeches that Scott Morrison and Bill Shorten gave in Federal Parliament this week — is that it paints a picture of the “background noise” against which people consider their political choices.
And, particularly with by-elections now due in Western Australia, Tasmania, South Australia and Queensland, that background noise is pretty important.
For the story in the budget is one of how, after years in which the mining boom first gave us all a massive shot of income, then a terrible hangover, the mining sector is fading more in to the background of the overall economic story.
We are becoming a much more balanced and multi-faceted economy as a result.
This is particularly important in regional Australia, where the ebbs and flows are felt more violently than in the cities.
Non-mining investment has been picking up. The public sector has been spending a lot on infrastructure. People are building hotels and aged care facilities. A boom-related housing construction glut in the regions has also started to be absorbed and people have started building houses again.
The impact of the NDIS
Part of the massive increase in new jobs created in the past year flows from the extraordinary — but not quite comprehended — impact of the establishment of the National Disability Insurance Scheme.
Whatever the scheme’s many flaws, whatever the arguments about whether it has enough money, it is becoming an economic factor in its own right.
When the NDIS starts providing funding in small towns, whether that is through provision of services or hiring carers, that has an impact.
The budget papers say all this in slightly duller terms.
“While the unwinding of the mining investment boom in recent years has had a large direct effect on growth, it has also resulted in negative spillovers in the broader economy,” the budget reports.
“It has especially weighed on non-mining business investment in Queensland and Western Australia, but this effect is diminishing.”
Such things do not change without both reflecting and influencing people’s outlook on the world.
Malcolm Turnbull and Scott Morrison outside Parliament House the day after the budget was handed down. (ABC News: Matt Roberts)
We’re less grumpy
Pollster Tony Mitchelmore says that since about October last year, the edge seems to have come off the level of grumpiness voters in focus groups have been unloading. They are not quite as grumpy about the economy or the future.
He puts it this way: it took us a long time to get over the shock that the golden years of the resources boom had come to an end, and to the subsequent shock that left many thinking the sky was about to fall in.
It’s not all sunlit uplands and jolly fine show. But voters might have “catastrophe wearout”.
All that talk about the debt and deficit disaster and crisis eventually wore thin.
So you can be pretty sure the fact that it features so little in the Government’s rhetoric these days is not just because they have been singularly unable to do anything about reducing our national debt.
Even Mr Shorten has reframed the debt discussion, to simply note that debt is bad because it is now costing more each year to pay the interest — $18 billion a year in fact — than he says is being spent on things like the NDIS and aged care.
The race is on
Equally the Government’s singular focus in the budget on tax cuts might have made the budget look a bit dull and unimaginative. And people might think the tax cuts are hardly anything to write home about. But the takeout from the fact there are tax cuts at all is that they reinforce the message that things must be better than they were.
We have only just seen the beginning of the race to win our votes this week.
The Government’s budget was still trying to clean up some of its greatest political vulnerabilities and was framed in the knowledge that some of the policies Labor has already announced gives it more money to play with, and that the Government will have to counterattack later.
The only comfort for the government is that, even if Labor doesn’t proceed with the company tax cuts, that only improves its bottom line from 2023 onwards.
Meantime, both sides have had to resort to low income offsets — rather than changes to the income tax scale — to deliver tax relief to low income earners. And that only makes the eventual and inevitable overhaul in our personal income tax system all the more complicated a task for the future.
Laura Tingle is 7.30’s chief political correspondent.