2018 federal budget: eyes firmly set on the next election

Can the federal budget turn around the Turnbull government’s fortunes? As the economy finally gains momentum, the Coalition’s strategy is to spend the bounty in the hope of securing its own political future.

“It’s a really important budget,” says Monash politics lecturer Dr Zareh Ghazarian. “It’s expected to be the final budget before the next federal election, so it has to resonate with voters. It’s a once-in-a-year opportunity for the government to reclaim the front foot in terms of policy.”

All budgets are important, but this time the pressure is particularly intense, given that the Coalition has trailed Labor in the past 31 Newspolls.

In the past, a post-budget bounce in the polls has generally proved elusive or fleeting, but Dr Ghazarian says budgets do provide an opportunity for a government to “reset the political debate and talk about the issues they want to focus on – it can be a circuit-breaker”.

He describes the budget as fiscally cautious. Although the government is talking up the economy and better times to come, he says the document reflects a “deep uncertainty and caution. If the economy doesn’t travel as well as predicted, the government is pumping billions into infrastructure projects to help offset any economic downturn.”

The strategy has been kind to Victoria. After years of complaining that it's been dudded by the Coalition’s budget allocations, the state is a winner this time around, receiving almost a third of the $24.5 billion set aside for infrastructure.

Dr Ghazarian says the money is flowing to where it's needed most – Melbourne is Australia’s fastest-growing city, with congested roads and crowded, inadequate public transport.

Read more Melbourne public transport – what are the long-term solutions?

The other big winners are low-to-middle-income earners, who will receive tax cuts of up to $10.50 a week. The cuts will be “positioned as an investment in the economy”, he says. “The hope is that people will go out and spend it.”

The cuts for lower-income earners are also likely to be more electorally popular than the proposed company tax cuts that have so far failed to be passed by the Senate. Labor says it will approve the initial tax cuts announced in the budget, which will compensate for sluggish wages growth, but is likely to oppose progressive cuts to higher-income earners. The government says it intends to introduce a flatter tax rate across the system over the next six years.

Read more Tax splash as Treasurer Scott Morrison shows us the money

“They would make a significant change to the tax system; they want to legislate that now when we don’t know what the financial circumstances will be in 2024,” shadow treasurer Chris Bowen told the ABC.

Before the budget, senior Coalition figures and economic analysts discussed the importance of the government’s tax revenue not exceeding 23.9 per cent of GDP – a standard that was set during the Howard years. Dr Ghazarian says he doubts ordinary voters are interested in this “level of specialist debate”. “What they're interested in is the rising cost of living, and the need and demand for infrastructure” (including health and education, which were not a priority of this budget). “This is what they are really talking about.”

The budget gives the Coalition the opportunity to reinforce the message that they're sound economic managers – to play to the electoral prejudice that Liberals and Nationals can be trusted to spend prudently. During the Rudd-Gillard years, the Coalition attacked Labor for presiding over a “debt and deficit disaster”. Treasurer Scott Morrison says the budget will return to surplus a year early, in 2019-20.

But retired Liberals have their doubts. Before the budget was delivered, former Liberal treasurer Peter Costello and former Liberal leader John Hewson criticised the short-term strategy of spending money to buy votes before the election. Mr Costello predicted he would die before the deficit was paid off, and called for spending to be cut by $18 billion a year. Dr Hewson accused the government of “falling into the Howard-Costello trap of having unexpectedly strong revenue and committing it rather than putting it away for a rainy day”.

But Dr Ghazarian says the government, with its one-seat majority and its run of bad polls, must apply a short-term electoral fix to enhance its chances of survival. Mr Turnbull has also been forced to preside over a fragmented and fractious party room, with former leaders Tony Abbott and Barnaby Joyce perpetually carping on the sidelines.

“They're in a mess electorally and they have to find a way out of it,” Dr Ghazarian says.