Big, ugly savings measuresface big ask in ugly Senate

Having thrown the ratings agencies enough red meat to win a reprieve on a credit downgrade, Scott Morrison and Mathias Cormann now want us to understand the grim reality — and quickly.

To achieve that slippery surplus, ever so lightly pencilled in for 2021, there has to be a lot more pain.

The sober commodity price forecasts and trimmed predictions for growth tell us the Federal Government is not expecting a miraculous recovery through an export demand surge or a sudden spike in iron ore or coal prices.

While this is prudent, it makes the Government’s job all the harder if it turns out to be true.

Not helping matters is that the figures in the mid-year Budget update do not fully outline the extent of the Budget challenge.

The Government assumes, for example, that billions of dollars in proposed welfare savings and university funding changes will eventually go through Parliament when they won’t, at least in their current form.

So just to achieve the state of play already assumed in the Budget papers requires equally unpalatable options being proposed. And that’s before the hunt starts for more savings.

This points to a very difficult year for Malcolm Turnbull’s Government next year.

The Prime Minister and the coalition are in an invidious situation of requiring big, ugly savings, with a big and ugly Senate crossbench and little political capital to spend doing it.

If the Government asks Treasury for ideas, it’s very likely we’ll be in familiar territory.

There aren’t many places to find big bucks. And the ones that exist were either pursued in the politically disastrous 2014 Budget or ones Labor has its stamp on.

Medicare, fuel taxes, superannuation, negative gearing, capital gains tax, the 2 per cent deficit reduction repair levy on rich Australians, tax deductions and defence. These are areas that have already seen mortal combat between the coalition and the ALP.

Whether there can be compromise or grand bargain on any of these areas between the two major parties looms as the test for a political system that appears to value tactical victory over national interest.