Budget issues…

Tuesday’s budget from the second smuggest Australian Treasurer on record really only had a few remarkable details to it, most of the major issues having been well and truly “leaked” over the previous days and weeks. The sheer cost of any aspect of defence, security, border protection and counter terrorism was one surprise –the fact that it was going to be a priority certainly wasn’t. And it was well telegraphed that the PBS was going to get some (un)welcome attention, as were other areas of welfare which were focussed on. The surprise came in other areas. The opposition claiming for instance that the rise in interest rates of one percent or more that everyone has been expecting for months was now due to the surprise deficit in the 2001/2 financial year, not the strong economy we have experienced are expecting. Both the opposition and the democrats bursting into verse to grab the best headline. We’re reminded of Mohamed Ali’s great one liner: “he’s a poet and he don’t know it.” Natasha and Simon – stick to policy and leave literacy and bush ballads to the experts. But the real surprise is that although no doubt experienced and polished(?) politicians, no one apart from Finance Minister Senator Nick Minchin has the faintest idea of how to really sell the budget to the community. By “really” we mean make the budget sound reasonable and plausible, rather than pensioners paying for border protection and defence. The good Senator was the only one to our knowledge who put the PBS in perspective – both the total maximum cost to a pensioner, and the relativity of the increase as a proportion. And what’s all this got to do with interest rates, as the economy seems set to deliver rises of up to 1% over the next 12 months? Firstly, the 2002/3 surplus will keep the financial markets happy, and this year’s deficit was last year’s news. Secondly, increased health costs will help take some discretionary spending out of the economy, but not from the sector that is driving retail sales and consumption. And finally, if the opposition and the democrats really get together to successfully dismantle key aspects of the budget, we could see some fun and games on financial markets.