FYI | May 09 2007
By Greg Peel
There was only one real surprise in the budget that night, and that was the $5bn Higher Education Endowment Fund, which effectively just adds more to the Future Fund but with an education earmark. Cynics would suggest that the government is merely putting back into higher education that which it has taken away so effectively over the years.
Skills training measures were welcomed by industry groups, but this is just a long awaited catch-up as well and will not affect in particular sector specifically.
Infrastructure spending was somewhat of a let down. While the government has promised to throw money at another area that has been sadly lacking in foresight, measures to fund road and rail capex won’t kick in until 2009-10, and there was nothing there to solve the mining industry’s rail/port congestion problems anytime soon.
Any hope that climate change issues would be dealt with in any meaningful sense were quickly dashed. There was some extra money for a handful of Australians to install solar, and the Murray-Darling water package was already known. Funding was announced for a scientific unit to address energy-saving issues, but the rhetoric was still along the lines of cleaning up existing industries rather than supporting renewables or other “green” developments. Tax exemption was offered to the forestry industry to not cut down trees.
There was probably not much to expect in the area of greenhouse in this budget anyway, as the government’s taskforce on carbon trading doesn’t report until the end of this month. That might bring about some new developments or expenditures, but given the task force is comprised of the CEO’s of the country’s worst polluters, nothing ground breaking is expected.
If any industry can take some heart it would be Consumer, and maybe Gaming, but even then it was slim pickings. The aged get a hand-out, as do carers, and generous increases in childcare support includes a backdated rebate. Tax cuts were as expected and fairly benign, basically giving back to taxpayers the extra they’ve put in. But it will mean a few more dollars in the pocket for low/middle income earners.
This may find its way into the odd flat-screen TV or poker machine, but it is nothing to write home about.
Economists are in general agreement that these fiscal measures are unlikely to place undue pressure on the current inflation situation, and as such few expect a change to the RBA’s current monetary policy neutral stance.
However…
The Treasurer still has $10bn from this year’s surplus up his sleeve. No one is foolish enough not to think that a few election-winning whammies may still be headed the electorate’s way as the year progresses. They may have been saved up, or it may be that the government has kept a fighting fund to counter any new ALP policy initiatives. An early (August) election is certainly not on the cards, and Budget (Phase Two) still awaits us.
From the election point of view, Costello was understandably and typically smug when interrogated on ABC television last night. The budget is a good one as it has something for everybody and it addresses a few pressing issues. But Costello also knows that which he’s not yet telling us.
Wayne Swan looked largely uncomfortable when it was his turn in the hot seat. It’s hard to look tough when explaining that there’s nothing much the ALP would change. He has to convince the electorate that most of the Treasurer’s initiatives were already ALP policy. He also knows it’s not over yet.
The response from the financial markets both last night and this morning have been largely a yawn. None of the currency, interest rate or stock markets has reacted with any direction in mind. We will have to wait and see what might be around the corner.