Last night we witnessed on the floor of the House of Representatives, a man who was staring down the barrel of not having that job in two months as well as possibly not having a job at all. With the 2022 General Election looming larger than an elephant in a china shop, Josh Frydenburg had the unpleasant task of looking into the eyes of that elephant. Let's talk about the elephant in the room. There must be at least a half-Senate election on or before the 21st of May. The Morrison Government can choose to uncouple the election until the 3rd of September but such a thing has only been done once in 122 years of the Commonwealth as far as I can tell. Mr Frydenburg faces not only the possibility of sitting on the other side of the chamber after the election but also the non-zero chance of the people of Kooyong being sufficiently annoyed with him, so as to throw him out of his own seat. You can not be number one if the people are at sixes and sevens with you. If that's the case, you're in a land of number twos. That preferential voting - like wow, daddy-o.
Frydenberg being constrained by the mechanics of circumstance, couldn't very well present a particularly ambitious budget. There was no case for reform. There was no grand plan put forward. Really, apart from the odd fiddling with the tax rates here and there and the headline Lamington sweetener before the election, this was a cut and paste job from Appropriation Bill No.1 2021 but could it have been any other way? Not really. Unless... (see the Aside below).
The only thing that will get people's attention this morning is the Low And Middle Income Tax Offset (LAMITO) adjustment for practically everyone who earns a wage, below AWOTE. LAMITO in this case will be a $420 offset which will reduce the amount of tax that people have to pay in the 2021/22 tax year.
LAMITO as applied to roughly 11 million people will cost the Commonwealth a shade over $4.6 billion in lost revenues and has been painted as temporary relief to help with "cost of living pressures". In reality though, $420 divided by the 155 weeks before the 2025 election is only worth $2.71 per week to a taxpayer. LAMITO might not even be worth the cost of a Lamington per week.
LAMITO as applied to pensioners and anyone below the $18,200 threshold is exactly worthless. As LAMITO is a tax offset, it does precisely nothing for those people who never paid any tax in the first place. As someone who does the tax returns for a number of old people, it is already weird to have to explain to people that they do not get a refund for the tax that they never paid in the first place and this special LAMITO sweetener will mean that they will also get an offset for the tax that they never paid in the first place and still not get a refund.
The other major thing from this budget which is likely to get people taking is a cut in the Federal Government petrol excise of 22 cents per litre. The war between Russia and Ukraine has temporarily sent the price of a barrel of oil and by extension the price of petrol, to above the $2/L mark at the bowser. As far as oil shocks go, this isn't even close to the 1970s oil crisis, the weird correction that happened after the first Gulf War in 1991, or the 2008 Global Financial Crisis.
My Frydenburg looked around at all things that he could do and decided that the most visible one was the best policy. He can conveniently sell this as a thing to take to the election and then because he has personally and permanently thrown an axe into the tax base, he can conveniently blame Labor if they get elected, for their poor economic management. 22c/L is a perfect price to pay; especially if you're not paying it. I also do not think that even if the Morrison Government was returned that this cut can be justified to be extended beyond September.
No doubt the Australian, Daily Telegraph, Courier-Mail, Herald-Sun and Adelaide Advertiser will all praise Mr Frydenburg's budget as being "the golden fleece which fell out of the sky, like oh my goodness where did it come from?" though really, this budget is not particularly exciting and was never going to be.
Aside:
The clock is ticking. As this budget is a parliamentary bill, being Appropriation Bill No.1 2022, then the provisions of the Constitution will apply and the hidden time bomb is that a particularly spiteful Coalition could block its own budget in the Senate and force another General Election under the six month provision for the dissolution of parliament from 29th Sep. This would cause as much of a ruckus as what happened in 1975 and the chances of this happening are close to one in a million but they are still not zero.
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