Perhaps it’s laziness, but much of the coverage of the government’s suddenly discovered extra tax revenue, which has enabled it to ditch last year’s NDIS-linked Medicare levy increase, has focused on the politics of which side can propose what personal income tax cuts. True, the government has traded the eccentricity of abandoning what it paraded as a moral duty just twelve months ago — paying the increased levy was each Australian’s responsibility to their disabled fellow-citizens — for the arguably greater eccentricity of telling everyone in two weeks’ time they were getting a tax cut while also having a tax increase left over from the 2017 budget.

But the whole discussion starts from the wrong point — a point created when journalists accept the Liberal Party’s claim to be the party of lower tax. It’s not merely that, under Hawke and Keating, tax as a proportion of GDP only exceeded 23% in two years, while under Howard it exceeded 23% in seven years. It’s that, under Tony Abbott and then Malcolm Turnbull, tax has averaged 21.8% of GDP (including this year, which is likely to see a rise from the MYEFO forecast) compared to an average of 21.3% for the Labor years, if you include 2007-08, which saw the last strong tax revenue before the financial crisis. Maybe 0.5% doesn’t sound much, but in current dollars that’s over $9 billion a year. 

Under the government’s forecasts from December, this increase in the tax burden on the economy will continue, all the way to 23.8% of GDP in 2020-21 — up 3.9 percentage points from the nadir of the tax take under Labor in 2010-11. The government’s self-proclaimed hard limit of tax to GDP of 23.9% represents a massive increase from the Labor years, locking in the tax burden of the Howard era.

All the coverage about tax cuts, and not proceeding with tax increases, misses the point that the government is only talking about handing back to taxpayers a small proportion of what they’ve taken from them since they replaced Labor.

So why do we still have a deficit despite this dramatic increase in our tax burden? Because the government has increased spending as well. There’s a line being pushed by a number of gallery journalists that the government has presided over remarkable spending discipline. In fact, that’s only true compared to the profligacy of the Abbott years. In 2010-11, Wayne Swan got spending back below 25% of GDP after the GFC stimulus, as part of the Rudd government’s “Keynesians on the way up, Keynesians on the way down” mantra, kept it below 25% in 2011-12 and got it down — with lots of fiscal sleights of hand — to 23.9% in 2012-13. But once elected, the Liberals promptly jacked spending up over 25% of GDP in the 2013 MYEFO and have kept it there ever since. It bottomed out at 25.0% of GDP in 2016-17, but is forecast to rise this year to 25.2% of GDP and then rise again next year.

The only “discipline” in all this is that Mathias Cormann and Scott Morrison have — to their credit — managed to push spending back below the 26.2% of GDP that it was briefly at when Tony Abbott was ousted — Abbott and Joe Hockey had presided over ruinous levels of spending that blew out the budget deficit. But they haven’t come within cooee of matching Labor’s spending discipline.

And while we might all want some income tax relief given stagnant wages, there’s still the problem of our net debt, currently forecast to peak at $365 billion in 2020, but which will probably come out at $340-50 billion, or just under 19% of GDP. If another financial crisis erupts, or Trump plunges us into a trade war, or for whatever reason the global economy enters recession, we’ll again need fiscal firepower to protect jobs, like we did in 2009. But we’ll have much less ammunition if we still owe the world near enough to a fifth of GDP. And given the current state of monetary policy and inflation, it’s likely we’ll have far less scope to use interest rates for stimulus than in 2009. That extra spending of the last five years might prove very costly indeed.