Voters typically rank economic issues among their top concerns. And campaigning politicians regularly make bold (but vague) pronouncements regarding their competence and credibility as “economic managers.”  In popular discourse, economic “competence” is commonly equated with being “business-friendly.”

For someone who piously bemoans an “us versus them” mentality in political culture, Treasurer Scott Morrison certainly drove a deep wedge into the social fabric with one of the centrepieces of his budget. There are four thresholds in the personal income tax system; Morrison chose to increase one of them, supposedly to offset the insidious effects of “bracket creep.” The third threshold will be raised from $80,000 to $87,000.

In the lead-up to tomorrow’s pre-election Commonwealth budget, much has been written about the need to quickly eliminate the government’s deficit, and reduce its accumulated debt.  The standard shibboleths are being liberally invoked: government must face hard truths and learn to live within its means; government must balance its budget (just like households do); debt-raters will punish us for our profligacy; and more.  Pumping up fear of government debt is always an essential step in preparing the public to accept cutbacks in essential public services.   And with Australians heading to the polls, the tough-love imagery serves another function: instilling fear that a change in government, at such a fragile time, would threaten the “stability” of Australia’s economy.

The latest “big idea” on tax policy from the Coalition government is to grant independent income tax powers to the states.  This would be accompanied by a devolution of funding responsibility for big-ticket services like health care, hospitals, and schools.  Prime Minister Turnbull argues that forcing state governments to raise the money they spend will

Was it really the Treasury’s economic modeling that convinced Prime Minister Turnbull to abandon his plan to raise the GST and cut income taxes? Treasury simulations indicated the trade-off would have no significant impact on growth. Or perhaps it was another kind of calculation – electoral – that convinced the Coalition to drop the idea, and the economic numbers just provided political cover.