Budget boost, but dangers for Turnbull

If Malcolm Turnbull does not get a poll jump out of the 2017 budget there is no hope for his government.

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The stand-out political winner in Tuesday’s budget was a new permanent tax on the big five banks.

This was the finest hour for Australian populist politics and came as a complete surprise to bank executives, but will make a long-term dent in the budget deficit.

It has the added benefit of telling voters – many of whom would like to see bank chiefs hauled before a royal commission – the coalition is listening.

Faced with the prospect of the banks fighting back by telling shareholders and customers they’ll be slugged, Treasurer Scott Morrison has delivered a blunt message to CEOs.

“They already don’t like you very much. They don’t like us as politicians universally that much either. So we understand your pain,” he said in the traditional National Press Club post-budget speech on Wednesday.

“But prove them wrong on this occasion. Don’t confirm their worst impressions. Tell them another story. Tell them you’ll pony up and you’ll help fix the budget.”

Pledging to lift the Medicare rebate freeze and guarantee long-term funding of Medicare, promising more than $18 billion extra in school funding, and fully funding the national disability insurance scheme will also be popular.

Much of the rest of the budget – investing in roads and rail, a new Western Sydney airport, hydro power and some modest policy around housing affordability – will likely be seen as business-as-usual. The stuff that governments should be doing.

Much of the budget will be passed without too much fuss, as it was designed to do.

The budget effectively resets the political agenda for Turnbull and proves a coalition government can be a starkly different beast to that led by Tony Abbott.

It will also lift Scott Morrison’s stocks in the electorate.

His transformation from a policy hard-head to a pragmatist with a listening ear is almost complete, and having him deep in the heart of the electoral battleground of NSW can only help Turnbull’s fortunes.

In the longer term it may give Morrison – who turns 49 on Saturday – scope to be a palatable Liberal leader, either in government or opposition.

It’s a budget that Liberal and Nationals backbench MPs believe they can confidently sell to their constituents.

But there is a downside.

Health and education have long been seen as positives for Labor.

Labor has gained some traction over its school funding message – that the government has effectively cut $22 billion from schools, and the Catholic system in particular will be hard-hit.

Linking it with the government’s unpopular plan to hike university fees is an effective way of hammering the “Labor is best for education” line.

Shorten also maintains Labor is the party that built Medicare and the only party that can be trusted to protect it, despite Turnbull’s pledge to enshrine its funding in law and set up a special fund.

With the government having used the budget to dump its two per cent levy on the highest income earners, Labor can also argue politicians shouldn’t get a tax cut (almost $7000 a year for Turnbull himself) while average workers face flat wages, cuts to penalty rates and a rising cost of living.

Labor strategists believe the issue of “fairness” remains fair game, despite the budget reset, and is a battle the opposition can win.

Labor frontbencher Jim Chalmers points to the language used by Finance Minister Mathias Cormann about having dumped $13 billion in so-called “zombie” savings, which included cuts to paid parental leave, waiting times for Newstart and scrapping some family payments.

“Regrettably we had to make these judgements, but that certainly wasn’t our first preference,” the minister said on Sky.

Chalmers says it shows the government remains committed to its “unfair cuts” and there’s plenty of scope for political positioning.

“We wouldn’t have given the $50 billion company tax cut, we wouldn’t have taken the deficit levy off the highest income earners, we wouldn’t have cut schools and universities and TAFEs … so there are still important differences between us on the Labor side and the government.”