The word budget has a long association with money. It comes from the Latin “bulga” which became Old French “bougette”, as a diminutive of “bouge” which was a type of leather bag. The word originally described a pouch or wallet and later by metaphor its contents. In the mid 18th century, the British Chancellor of the Exchequer, in presenting his annual statement, would “open the budget” and only in the last 150 years would the term be extended to other finances.
According to the Merriam Webster definition of the word, the government definition is merely an example of the fourth meaning, namely “a statement of the financial position of an administration (as of a nation) for a definite period of time based on estimates of expenditures during the period and proposals for financing them.”
Merriam Webster’s lack of attention on the government aspect of the budget is due to its American focus, where the budget is not the centrepiece of the political administration but rather administered by Congress. Australia, which follows the Westminster tradition, has kept the budget as a government tool even if unlike Britain it has dispensed with the “bougette”.
Though budgets are ephemeral things subject to huge variation and change within a short period of time, they are analysed to great extent as a health monitor of the government. Australia has been running a current account deficit since the Global Financial Crisis of 2008 and no government has been able to rein in spending within its means since.
The Rudd-Gillard budgets of 2008-2013 had to deal directly with that crisis, though it was helped by a motoring Chinese economy. Labor were continually castigated by the right-wing commentariat casting doubt on the “credible return” to surplus which Treasurer Wayne Swan would conveniently place in the fourth and last year of forward estimates.
One of Tony Abbott’s many memorable fear campaigns against that government was the “debt and deficit disaster” (swapping three words for alliteration). Labor spending was planting a “debt bomb”, Abbott and his supporters said, which would explode at some future time. This was stealing from the future, which was correct, but which would have had a lot more credibility had Abbott too not stolen from the future by taking a wrecking ball to carbon pricing.
Abbott was eventually turfed out of office as incompetent but those that followed have a lot to do to repair his damage. There is still no price signal in carbon and its lack was the elephant trading scheme in the room of Malcolm Turnbull and Scott Morrison’s second budget last night.
The media has dubbed it a “Labor lite” budget, spending big on health care, education and infrastructure and paying for it by taxing the banks. But its failure to understand the role of carbon in our economy is hobbling Morrison’s equally Labor-like promise the budget was a “credible path back to surplus”. Like Swan, Morrison predicted this would happen in four years but given Turnbull’s recent public commentary against an ETS it is just as difficult to believe about 2021 as 2016.
The fact is that since white occupation, Australia has been the lucky country, living beyond its means. It did that through the wool market and convict labour for the first 50 years , then plundering mineral wealth thereafter while subsidising agriculture with cheap Indigenous labour.
Australia’s last budget surplus was when the price of iron ore, and to a less extent coal, went through the roof. Though the prices for both have increased in the last 12 months, even the government says it is “prudent to assume” neither will return to massive revenues in the future – especially coal -unless they can somehow deal with carbon emissions.
A day before the budget, ABC Four Corners program exposed the energy crisis as a failure in public policy. But a night later its budget analysts in Canberra more or less ignored the issue.
But from talking to small and big businesses I know energy reliability and cost is becoming the single biggest burden on the Australian economy. Government plans such as Snowy 2.0 and putting a reserve price on gas will barely scratch at the surface. Cyclone Debbie was seen as a one-off disaster but one of the predictions of climate change is for stronger and deadlier storms so another Debbie, Yasi or worse in the coming years is hardly out of the question.
Solar and wind barely merited a mention in the budget but they will surely be the key to solving the “debt and deficit disaster”. Australian coal is the best in the world but it must remain in the ground for now. Similarly gas is also just a short to medium term solution and is unlikely to expand out of Queensland given the social licence issues which the government ignores in its mantra to “produce more gas”.
Funding ARENA – the Australian Renewable Energy Agency -and putting over $3 billion of debt and equity to support low emissions projects through the Clean Energy Finance Corporation are great initiatives out of the leather bag. But they merely set the framework. The budget mechanism is carbon trading and until that is brought back Abbott’s zombie energy policies continue to walk the land.