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I don’t have time to do any in-depth analysis on the Budget as of now, but I will make a few brief comments doing my best to separate the economic, political and constitutional questions that may arise. Too many people merge discussion of all three so that it is difficult to tell what is good for the country and what is good for the Labor Party.

Constitutional aspects:

If you are uninterested in the fine-points of Constitutional law, here’s a one paragraph summary: If even a minor part of the Budget is rejected by the lower House, the Gillard Government may fall. If the Budget is reduced by a single dollar, the Government may fall. Therefore, the lower House independents and Green MP will be incredibly reluctant to vote down the Budget in the lower House, since they have a vested interest in continuing in minority Government.

Most people have a vague understanding that rejecting ‘supply’ (ie the Budget Bills) might topple a Government after the Whitlam Dismissal in 1975, but because it is only a vague understanding they do not wholly grasp the implications of it.

When might a Governor-General dismiss a Prime Minister? The answer is when s/he loses the confidence of the lower House [and also for illegality, and a few other potential reasons]. Law students, having studied constitutional law, usually assume that this means the House passes a ‘motion of no confidence’, a non-binding motion passed by the lower House saying “We no longer have confidence in Julia Gillard as Prime Minister”. That is incorrect.

In practice, Prime Ministers will resign before that stage is ever reached because the House refuses to pass a crucial Government Bill, or even very minor procedural motions. I’m not sure (and I don’t know if anyone is sure) whether these motions are themselves motions of no confidence, or whether the Government resigned before a proper motion of no confidence was passed. So there is uncertainty over the result; if Gillard refuses to resign, can the Governor-General dismiss her without a well-spelt out no confidence motion?

The Gillard minority Government has lost votes on various procedural motions and even on substantive Bills (I think?) already, without losing confidence of the House. That is because of the unique coalition agreement with the independents that allows them to vote on every measure like a conscience vote. But crucial Government Bills (like the NBN Bills) have always passed. The most crucial Bill of all will be the supply Bill. One Federal Government was toppled by having supply cut by a single dollar. So, if any Bill is tantamount to a confidence motion, then the Budget will be it.

This segues nicely into my political discussion:

Political issue #1: The independents

I have said before, the rural independents (and to some extent, the Greens) have a strong vested interest in keeping this minority Government going so they will maintain their balance of power.

You can bet that the Government will have people (and lawyers) waving pieces of paper in the independents’ faces telling them of all the horrible constitutional problems if they vote against any little part of the Bill. I don’t know if they are right; it may be that the Governor-General will wait until a full motion of no confidence before she dismisses Gillard. But I doubt the independents would take that risk.

The Greens have said that they would not block supply, but that they might amend the Budget. If their lower House MP is the one who successfully passes an amendment to the Budget, that could trigger a dismissal. It will have to be their Senators who pass this amendment. But, remember the Greens do not have the balance of power yet. That is currently held by Steve Fielding, Nick Xenophon and the Greens combined.

I think that if the independents and Greens wish to make any changes, they should start lobbying the Government now so that whatever Bill is put before Parliament does not have to be amended on the floor of the House. I believe that if the government votes for certain amendments (rather than voting against them and losing) then that will not be a vote of no confidence.

Political Issue 2: Cost of Living

Reading through the Budget, one thing leaped out at me. The single biggest issue in the electorate right now is cost of living. Any sensible economic analysis will tell you that cost of living has actually gone downwards in the past decade, that there are no cost of living pressures etc. But the fact remains that every MP, when they return to their electorates is inundated with complaints about cost of living concerns – my mortgage payments are too high; food is too expensive etc etc.

I would never advocate for Governments to making sweeping policy reforms based upon ill-educated voter sentiment, but to sweep the issue under the carpet is bad politics (though good policy). I predicted on Budget night that this would be the greatest weakness in the Government’s Budget. To some extent, Tony Abbott proved me right. Instead of hammering the fact that this was not a “tough Budget”, he (sort of) suggested it was too tough. He complained that the Government was withdrawing money from poor working families (the Forgotten families, he called them). In fact, the whole thrust of his arguments, the theme linking all his arguments was essentially based on cost of living concerns.

Putting aside the fact that Abbott had been yelling for harsher cuts two days earlier, and the fact that he didn’t oppose a single measure in the Budget (nor propose alternatives), I think he’s onto a winning line.

The problem I see with Abbott’s strategy is that he doesn’t provide any positive alternative beyond constant criticism of the Government. Let’s assume he forces the Government to declare an election tomorrow, he has no base upon which to stand. He provides no reason to vote for him; only to vote against Gillard.

I don’t think Abbott’s strategy is to force an election. His strategy is to keep Gillard’s poll numbers astronomically low and hope the ALP blunders again. He may well be right. The modern ALP is not well-known for courage in the face of abysmal polling.

Economic aspects:

I think I’ll discuss the economic aspects in a later post since they deserve a separate post of their own. I’ll just say that I broadly agree with the Government’s changes.

It’s not a tough Budget. I wish it went further, especially taking savage cuts to middle-class welfare, but that’s politically unrealistic. I wish it took a very large axe to the Immigration Department, because that is a disproportionate part of Government spending considering how few asylum seekers Australia gets. Overall, I think the $22bn in spending cuts were mostly cutting spending to two categories of spending, rather than stopping genuinely wasteful Government spending:

(1) Stupid ideas introduced by the Rudd and Howard Governments

(2) Good, long-standing programs that don’t have any loud political voices to defend them. They cut spending to various museums in Canberra, to this and to that which noone would pay attention to. Like it or not, Government does play a role in supporting the arts, education and a few other areas.

That said, many departments did find genuine waste in their departments (particularly the civilian arm of the Defence Department). Good on them.

I am not a macroeconomist; I don’t know if the Government is withdrawing spending too soon after the GFC or whether its placing upwards pressure on inflation in anticipation of the next boom.

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