FEDERAL BUDGET 2011: Swan takes the politically safe approach

In truth Wayne Swan has produced a budget that is hard to distinguish from his effort last year or in 2008. There’s the same unwillingness to cut deeply into sensitive spending areas, in favour of fiddling at the margin and cutting rats-and-mice spending.

There’s the same lingering revenue impacts of economic disruption that we saw last year, albeit this time it’s not just the aftereffects of the GFC but the impacts of natural disasters here and overseas.

But there’s also the fiscal discipline to which Labor committed itself after the GFC. It may be not be very good at hacking into spending, but since the stimulus packages ended, Labor has been tolerably good at restraining itself from locking in new spending, a change from the last years of its predecessor when, seemingly, no spending proposal however harebrained was rejected.

But there’s also a distinctly Gillardesque stamp on it, courtesy of the skills-welfare reform package that devotes over a billion dollars to shifting people back into the workforce (“giving them a nudge” in Wayne Swan’s unsubtle parlance) and training them in areas that are priorities for industry.

The influence of Gillard’s obsession with rising early and working hard is clear. Whether Gillard and Swan are any more successful at ending the growth in the numbers on the disability pension than Howard and Costello, or Hawke and Keating, were remains to be seen.

At least Labor has recognised the need to invest substantially in re-equipping the long-term unemployed with the skills to join the workforce – over $200 million to both encourage and compel the “very long-term unemployed” to get back into work. A smarter policy, of course, is to ensure that no one becomes “very long-term unemployed” in the first place and loses their skills and employability.

There’s another positive. Labor has elected not to try to salvage its fiscal position this year and 2011-12 in the face of another substantial hit to revenue – $16 billion plus. It has drawn a line under the impacts of the floods and accepted that a further deterioration in revenue will simply be taken on the chin via bigger deficits.

Instead, it has aimed for quality spending cuts – albeit too few – that will grow over time. The higher deficits will doubtlessly yield plenty of criticism from the Opposition but it’s hard to know what steps the Government could have taken in the absence of being able to control the weather.

Some individual savings initiatives will no doubt incur the wrath of interest groups, but otherwise this is the sort of dull-but-worthy budget that appears calculated to ensure the Government’s parlous political position is not made worse in the way that a truly fiscally-rigorous budget would have.

The overarching goals – greater workforce participation, spending restraint, some cuts at the margin to some of the poorer spends in the budget – are sound, unspectacular goals for a government so often accused of incompetence.

Inevitably, some cuts will have to run interference through both the Reps and the Senate – for all the Coalition’s talk of the need to cut the waste, it apparently rarely feels strongly enough about the issue to back Labor spending cuts.

But the Gillard Government, in its short life, has demonstrated an intriguing capacity to get key legislation through.