Gone are the days when treasurers delivered budgets that contained at least some significant surprises and set the likely economic parameters for at least the next year. These days many budget decisions are announced well in advance of budget night and initiatives deemed to be popular tend to be leaked to maximise publicity.
Tonight’s event is an example. Labor’s resource super profits tax will be critical to the budget’s forward estimates. But the policy was announced by the Prime Minister and Treasurer over a week ago. This led the Opposition Leader to say the Coalition will oppose the tax in the Parliament. This throws a doubt over a key plank of Wayne Swan’s budget even before it is delivered.
Whatever the intention of the tax, it has not led to any increase in Labor’s support in the opinion polls. Yesterday’s Herald/Nielsen poll had the two-party preferred vote at 50 per cent each for Labor and the Coalition. This is similar to last week’s Newspoll, which had the Coalition at 51 per cent, and identical to the current Morgan and Essential Media polls.
In her Australian Financial Review column on Friday, Laura Tingle reported on a briefing the Prime Minister’s Office organised for selected newspaper journalists shortly after the Prime Minister’s release of the Australia’s Future Tax System Review, headed by the Treasury secretary, Ken Henry.
According to Tingle’s report, Rudd gave the impression to those attending the briefing he believed the package would be a political winner with those Australians who want to see mining companies verbally belted.
Certainly this interpretation is consistent with how the Prime Minister acted on the day after the announcement of the proposed tax. On May 3, he appeared on the AM program, declared BHP Billiton and Rio Tinto were 40 per cent and 70 per cent foreign owned respectively and alleged “their massively increased profits … built on Australian resources are mostly, in fact, going overseas”.
Later that day Rudd marched in the Labour Day celebrations in Brisbane and was filmed claiming the tax would fund superannuation for the marching workers. In fact, most funding for Rudd’s plan to increase compulsory superannuation contributions – from 9 to 12 per cent – will come from employers.
The most interesting take from the Herald/Nielsen poll turned on the fact 47 per cent opposed the resources tax, with 44 per cent supporting it and 9 per cent undecided. If the Prime Minister’s tactic was to increase support for Labor by criticising mining companies and appealing to low-income employees, the tactic has so far not worked.
A majority of Australians probably accept that mining companies should pay more tax – a proposition with which some mining executives happen to agree. But it is one matter to increase the tax rate for this industry and quite another to make mining in Australia the most heavily taxed mining industry in the world.
Most Australians know the mining boom helped Australia to escape the worst consequences of the global financial crisis. Moreover, due to the initiative of the Keating government, most Australians have superannuation and they understand their savings are linked to the success of the mining industry.
The times do not suit a Gough Whitlam-style criticism of a key industry. In April 1974, for example, the Labor prime minister alleged Australians had “been subsidising mining investors – mainly foreign corporations”. Most Australians today understand that, since European settlement in 1788, the prosperity of the country has depended on foreign investment.
Rudd, his colleagues and advisers come from a different generation to the Labor politicians and aides who made up the successful governments led by Bob Hawke and Paul Keating. Hawke and Keating were seared by their close knowledge of the disastrous Whitlam government.
In his memoirs, published in 1994, Hawke referred to its “fiscal irresponsibility”. In a series of articles in 1987, Keating criticised “the Whitlam vision”, which he regarded as consisting of government spending as a principal means of achieving greater equality.
Last November, in an address to the Whitlam Institute, Henry effectively supported the fact, in its three years in office, the Whitlam government presided over “spending growth of around 56 per cent in real terms”. The Treasury secretary acknowledged that subsequent governments chose to fund the additional expenditure though increased taxation rather than by increasing public debt, which had been the Whitlam approach. According to Henry, in the first half of the 1970s increased expenditure was good policy. This is not the view of Hawke and Keating.
Rudd is much more responsible than Whitlam. But he exhibits Whitlamesque characteristics in publicly attacking business leaders and commentators who disagree with him – whether on the now dumped emissions trading scheme, the resources tax or whatever.
It’s easy for Rudd to attack mining companies – especially when such entrepreneurial types as Clive Palmer accuse Wayne Swan of being a “socialist”, even a “communist”. However the real task for the Prime Minister is to explain why Australia needs a resource rent tax and why it is in the national interest for Australia to have the world’s highest-taxed mining industry.
This requires the policy advocacy of a Hawke, a Keating, a John Howard or a Peter Costello kind. It was Whitlam who advocated the tactic of crashing through or crashing. But few Australian politicians crashed as comprehensively as Whitlam.