The Reserve Bank's decision to cut interest rates to a record low on Tuesday undermined the Treasurer's narrative for his budget. Scott Morrison wanted to talk to us about an economic plan for the future while the RBA was sending a message that the economy needs a serious jump start.
The budget was framed to be "steady as she goes" and inspire trust in the electorate, but now it seems strikingly inadequate to deal with the economic realities we are confronting.
This is not a normal budget, it is modest in almost all respects because it is the starting point for an election campaign. We understand there are political realities around the need for careful messaging during election campaigns and that real reform can be challenging.
We also understand the RBA, which has access to every lead and lag indicator, modelling and trend data, would not have taken its decision to cut rates to stimulate the economy lightly. There are real concerns about the pulse of the economy.
The government needs to help the RBA and look at the reforms it can make to get the economy moving.
It is the job of our political leaders to make hard decisions, at the right times, not just give themselves a leave pass when it becomes politically inconvenient.
The consequences of not engaging in meaningful reform are writ large across the economy. It is not as though they are unaware of the need to engage in these reforms – the Government started a tax white paper process to drive these very changes.
The Turnbull government's decision to abandon the process was purely political – it was too difficult.
The only outcome to be salvaged from that $5 million investment is Tuesday night's announcement of a 10-year time line for corporate tax reduction.
When you consider we are in a region with some of the fastest growing economies in the world, the ultimate target is not aggressive enough and the timeframe is much too long. In 10 years we might get to 25 per cent and find ourselves to be just as uncompetitive as we are today.
Some of the measures announced in the budget show a level of innovative thinking that we would like to have seen applied more broadly. In particular, the income tax relief for small to medium companies is well targeted to deliver on the jobs and growth mantra.
Superannuation will also see some beneficial changes, recognising the need for a more flexible system that reflects modern work practices, however, there are also underlying "nanny state" tendencies that are of real concern.
Telling people how much of their own money they can have in their super funds and how much they can have for their retirement feels like an unnecessary overreach. It is a quest for revenue triumphing over actual retirement policy.
The retrospective nature of these changes will grate badly with a lot more people than the tiny percentage the government is indicating.
Tinkering around the edges of our significant reform challenges is not the answer. The RBA's decision to cut rates has amplified the truism that tax change is not tax reform.
The budget has effectively fired the starter's pistol on the big race – let us see who is prepared to have the hard conversations with the electorate during the election campaign.
Alex Malley is chief executive of CPA Australia.
