In tax terms, hypothecation is the dedication of a particular tax for a particular purpose. This can make perfect sense. For example, a tax on fuel may be used to fund roads. In this case, it's a variant of the user pays principle and can offer real advantages over tolls. However, if the tax on fuel is part of a general tax applying to all or most inputs such as the GST, then it doesn't make sense; revenue is simply part of the general tax system.
Generally with a hypothecated tax, the amount you spend depends on the tax. No money, no spend unless you want to make it up from the general budget.
In the case of both the Minerals Resource Rent Tax and the Carbon Tax, the Australian Government effectively hypothecated a significant projection of the potential revenue to compensation and other activities. However, the scale of that spend was not flexible. The Government allocated revenue to fixed spend based on what now appear to be, at best, Commonwealth Treasury guesstimates. It's a bit like buying complex derivatives. You need to be aware of the assumptions or you will end up losing a lot of money. Now we all pay a price.
There was another problem as well. The Government committed a fundamental error. Instead of arguing the merits of the particular tax and articulating the issues involved including costs and possible compensation principles, the Government combined tax and spend in those pretty but boring paste graphic packages so beloved by all Australian Governments at all levels and then tried to sell the spend. How very NSW!
The commenters on this blog appear to share the general view that the policy positions of the current Gillard Government no longer count, but the opposition doesn't count either because, with the exception of the NBN, it doesn't have any articulated policies. With such a long period to the Federal election, a policy vacuum has been created. Into that vacuum others are now rushing to enter, including most recently the Business Council of Australia.
Maybe that's not a bad thing. The PM's decision to provide such a long lead time to an election has created a very rare position, one I think unique in Australian history. It's end April now. The current Government will probably go into caretaker mode in August. We have a number of months where neither Government nor opposition can control the policy agenda. Essentially, we can now chat among ourselves on what we consider to be important.
Of course, there will be special pleading. Both the Financial Review and the BCA are demonstrating elements of that at present. But seriously, there is a fluidity now in national debate that is most unusual, one in which the focus group driven atmospherics that usually drive high level political and policy debate actually don't count!
As the final election campaign kicks in, things will change. In the meantime, let's make the most of it!