Today is Budget Day.
I have a confession to make though – I kinda like it.
Actually, that’s a slight understatement. I really like it.
Back in the day, living in Melbourne, I might, possibly, have paid for a taxi to get home from a late finish at the office, because the tram would have got me home too late to see the beginning of the Treasurer’s speech.
I’ll give my wife your condolences.
But indulge me just for a minute.
See, to me, the Budget is an annual example of what we otherwise see only every few years: Australian democracy in action.
Now, our democracy isn’t perfect (don’t get me started on the need for a Federal ICAC and the lack of long term thinking in the halls of Parliament House!), but for all its faults, it’s pretty bloody good.
The Australian Electoral Commission is perhaps our most underappreciated national treasure (followed closely, in the politics category, by the ABC’s Antony Green).
We have elections free of tampering, intimidation, and violence.
Our governments are about as transparent as any (if still not enough).
And so Budget Day — and the Treasurer’s Budget speech (no matter what party) is just a really great, prominent, example of our democracy in action.
Plus, because I’ve always been a politics and economics nerd, it’s really important.
Budgets set out the taxes we’ll pay, and how we’ll pay them, as well as on what they’ll be levied.
They set out how the government is spending those taxes (and what the national balance sheet looks like, as a result).
These policies — known as fiscal policies — shape our government, now and in the future, and they tell us a lot about our national priorities.
And that, in a mid- and post-COVID world, is important.
The recovery has been unexpectedly swift. Economic forecasts keep getting better.
The government should — and has, from me — get a lot of credit. The actions were imperfect, but the results have been very, very good.
Tonight, the Treasurer will set out what the ongoing recovery will look like, in terms of not only the level of taxes and spending, but who will be taxed, and how much, as well as the areas in which spending will be increased and decreased.
It’s nowhere near as important as the COVID recovery policies of last year, but they were extraordinary times. Still, it’s possible that tonight’s budget will be the most important non-COVID budget in more than a decade.
It’ll set a path for what the budget deficits will look like in the next few years.
It’ll tell us how much debt the country will be likely shouldering at the end of that period.
It’ll determine how structurally sound the government’s finances are.
And it’ll tell us how much action (or otherwise) will be taken in important non-financial areas like early childhood education, health, welfare, the environment and plenty more.
Now, as writer Andrew P. Street tweeted this morning, “Budgets are theatre”.
I agree, but not entirely — there are very real impacts, as I mentioned above.
Still in these days of the 24/7 news cycle, and a need to ‘control the narrative’, there’ll be plenty of theatre: mentions of what the Treasurer wants you to know about the recovery (hint: they’ll take credit), the announcements (hint: they want you to like what’s announced and vote them back in), and the future (hint: they want you to think the other guys are terrible and would do a worse job).
This is a pre-election budget, after all.
And yes, both parties do the same thing, as we’ll see with the Opposition Leader’s Budget Reply speech on Thursday night.
(STOP PRESS: as I was editing this, I saw a tweet from The Guardian‘s Amy Remekis, with a photo of a pallet of fake money in the Mural Hall at Parliament House. So, maybe Andrew is even more correct than I thought.)
Anyway… to the extent they’re theatre, you should ignore it. Or, at the very least, look through them.
Indeed, speaking of theatre, some policies have already been selectively ‘leaked’ (I think we can dispense with the word ‘leaks’ and just call them pre-announcements, these days) for maximum coverage and electoral impact.
(We’re already seeing it being called the government’s ‘plan to secure Australia’s economic recovery’, so whatever you do, don’t use that phrase if you’re having mates around for a Budget Speech drinking game… it could get ugly!)
But don’t dismiss the budget out of hand.
It will — to a larger degree than usual, given it’s being delivered in the shadow of COVID — shape the next 5 years.
I don’t blame you for not choosing to watch it, if you’re not as into it as I am.
But I hope you’ll at least recognise the value of the process and the institution, and pay it — the real policies, not the PR spin — some attention.
As a citizen, and as an investor who believes strongly that my returns will be best if the government thinks long term, here’s what I want:
I hope the government supports those workers and industries that haven’t bounced back from COVID-induced slumps.
I hope the government supports not just childcare, but early childhood education (there’s a very real difference between the two, for the kids in question.)
I hope the government charts a course of out deficit and into real and meaningful surplus (to help pay down the debt), as soon as the economy can absorb it.
I hope the government commits to real action on climate change.
I hope the government makes it easy for people to transition back into work.
I hope the government spends wisely on infrastructure projects, given we are already likely to have unemployment around 4.5% by year’s end.
I hope the budget has real substance, and isn’t too distorted by electoral considerations.
I don’t know how many of my wishes will come true, tonight.
What about for investors? While lots of attention will be paid to this spending, that tax or those programs, I think that’ll be missing the forest for the trees.
As I said above, I hope the government does things that makes Future Australia a much better place in which to live, work, run a business and invest.
(That’s far more important than a single year’s tax rates or infrastructure plans, by the way, because they impact our compound returns over decades, not just the share price in 2021!)
I hope that’s what you want, too.
But, whatever my view on the details, I’ll be watching with a smile on my face, especially as Treasurer Frydenberg finishes his Budget speech with the words spoken by (I assume) a dozen or so Treasurers since I started watching them: “I commend the Budget to the House”.
(And if you’re as much of a politics and economics nerd as I am, I’ll almost certainly be tweeting during the speech @TMFScottP, and I’m joining Nine’s Late News with Peter Overton this evening to share my views. So, if you’re still up — or, hey, why not stay up especially! — don’t forget to tune in.)