The sales job on this budget has been such a train wreck it’s almost as if the government needs a public service announcement about how to avoid obvious political pitfalls – kind of like that catchy ditty made for Metro Trains in Melbourne called Dumb Ways to Die.



Members of the government have not yet set fire to their hair or poked a stick at a grizzly bear, well not literally anyway, but “Dumb Ways to Sell a Budget” would have to include several things they have already done, including these three:

1. Using the “astonishing” fact that rich people spend more money than poor people, and own more cars, as an argument to sell a regressive petrol excise rise.

Joe Hockey tried this one when he explained that poor people “don’t have cars or don’t actually drive very far” and therefore would not be disproportionately hit by the proposed increase in fuel excise. To back this the treasurer produced Treasury figures showing that absolute spending on petrol is higher in high-income households, and showing that high-income households tend to have more cars.

The same figures, expressed as a percentage of income, which is the obvious and accepted way of measuring the relative impact of a household cost, shows that households in the highest quintile spent 1.37% of their income on petrol and those in the lowest quintile spent 4.54%. In other words petrol eats up more than three times as much of an average poor household’s income than a rich household’s, because the rich household has 11 times the income from which to pay its petrol bill. So whatever its other merits, an increase in petrol excise will have a bigger impact on the poor household’s budget than the rich household’s, not the other way around. Which was already pretty obvious, really.

2. Using the fact that wage rises have been very low in the past year to justify the decision to save money through indexing pensions by inflation rather than average weekly earnings for ever more.

Hockey said on Wednesday:

In net terms out of the budget it is strongly arguable that pensioners are going to be better off, even with potential changes from male total average weekly earnings increases to consumer price index inflation, because inflation increases are bigger than increases in wages.”

Actually under the current system pensioners cannot be worse off because pensions are indexed by male average weekly earnings or inflation (the consumer price index), whichever is higher.

Under the proposed system the government assumes and forecasts they will be worse off because it budgets to save millions of dollars in the first nine months after the change is introduced in September 2017.

According to the Council of the Ageing, CPI increases have outstripped average earnings only twice in recent decades. And it is precisely because wages increase at the higher rate that the aged pension is now worth more than $7,500 more a year than unemployment benefit, which has for the past 23 years been indexed to inflation as the pension now will be.

Bottom line, this is a savings measure, and the whole point of introducing it is to gradually reduce the cost to the budget from aged pensions over time. Arguing that an unusual situation this year means it could be good for pensioners is an insult to their intelligence.

3. Preparing the way for a tough budget by arguing that it would “share the load” and the “heavy lifting”, then deliver a budget that loads the “heavy lifting” on to the less well off, and then attacking those still suggesting that the burden should be fairly shared.

The disproportionate impact of this budget on lower-income households has been shown in economic modelling by the National Centre for Social and Economic Modelling (Natsem) and separate modelling by the Australian National University, both of which found that that low-income earners were hit hardest by budget measures and high-income earners would feel very little pain. Most people had reached the same conclusion by reading the document.

As well as making the valid point that spending needs to be reduced in the medium term, Hockey also argues these particular decisions in the budget to reduce spending are not unfair because the budget should not be judged by the incremental difference it makes to people’s lives but rather by the whole pre-existing tax and transfer system, including the fact that our tax system remains progressive and elderly people still get the pension.

In a speech in June to the Sydney Institute he said:

Tonight I want to address the claim that the budget is unfair and exacerbates inequality. This misguided cry is made on the claim that not everyone is asked to contribute equally and that in the future some people will pay more for government services or receive less in payments …

The truth is governments have never been able to achieve equality of outcomes. Some governments try but they always fail. Only in a closed economy, based on old-style socialism, can a government hope to deliver uniform equality of outcomes …

Whilst income tax is by far our largest form of revenue, just 10% of the population pays nearly two-thirds of all income tax. In fact, just 2% of taxpayers pay more than a quarter of all income tax. Maybe these taxpayers would argue that the tax system is already unfair.”

Yep, and they probably pay more, in absolute terms, for petrol. But that’s not the point.