February 2015

Comment

Year of the dog

By Nick Feik
Tony Abbott and the Coalition government face a tough 2015

At the height of the resources boom, Australia’s economy exceeded all expectations. At such times, as Ross Garnaut put it, “poor policy looks good enough, and ordinary policy looks celestial”. Those days are gone now.

Writing in 2013, Garnaut predicted that we were entering the “Dog Days”, “when celestial policy looks ordinary, and ordinary policy diabolical”. If the incoming government were to occupy the political centre and govern in the public interest as the boom ended, it could conserve most of the gains in our standard of living from the past 22 years. Difficult reforms could only be achieved with the approval, tacit or otherwise, of broad swathes of the electorate. If, on the other hand, the government acted only in the interests of its supporters, what was necessary would be impossible.

Readers can judge for themselves which path our leaders chose. What’s beyond debate is that the government hasn’t won public or parliamentary support for its economic program. This political failure not only shaped 2014, in the form of the disastrous budget, but also hangs like a black cloud over the government’s prospects in 2015.

Last December’s Mid-year Economic and Fiscal Outlook showed that the budget forecasts had deteriorated badly since May 2014, with the deficit blowing out to $40 billion. Unemployment is at a 12-year high, growth is below par, consumer confidence is low, and capital expenditure is in decline, mainly due to the rapid fall in mining investment. The news from offshore brings little comfort. China’s growth is slowing, particularly in the areas that matter for us: manufacturing and real estate. Japan’s economy continues to stagnate, and Europe is again in a whirl.

The Coalition has a tougher budget task than it did last year, but approaches it with a fraction of the political capital. Having blown that goodwill on surprise raids on health and education funding, cuts to the ABC and SBS, the fuel excise increase and more, the government has fewer options, and, in bookkeeping terms, there are lines from last year’s budget that still can’t be itemised. Worse, the political pain produced minimal economic pay-off, and internal tensions are rising.

The government is in a bind as predictable as it is deserved. Debt and deficit are now its millstones. The carbon tax is a lost revenue source, and cutting emissions will instead be a drain on general revenues. The pledge to introduce no new taxes is an embarrassment now that Coalition leaders have finally admitted that there is a revenue problem. Cue the GST debate, and more talk about the cost of doctors’ visits and higher education.

Abbott pledged to put “jobs and families” at the heart of his agenda for 2015. He heard the message from the electorate, apparently, or at least read the polls at the “ragged” end of the year. The word being bandied about everywhere was “reset”.

Yet early indications are that the government is set to repeat its mistakes.

A government which is fighting perceptions that it has no sense of fairness and no understanding of genuine financial hardship has opened discussion on taxing fresh food, health, education and childcare. You could hardly conceive of a worse strategy, by these measures. And would the lead-up to the May budget not be better spent laying the foundations for things the government aims to do in the May budget?

Other signals of recent weeks make a nonsense of the “reset” message and are devoid of political sense. Health and higher education policy remain disaster zones. Scott Morrison’s appointment as social services minister and his subsequent tough talk suggest cutting social spending will be a priority. The government has also asked for a Productivity Commission inquiry to examine the workplace relations framework – despite national wage restraint and solid productivity gains. Here the government goes to work again in an area in which it promised not to meddle, in which it has no public support.

If it has any policies that don’t hit low-income earners first, and hardest, it is yet to deploy them.

Government leaders continue to blame the Senate for being obstructive, but when negotiations recommence such recriminations will be futile. If anything, political logic suggests that senators are even less likely to play nice, especially when it comes to notably unpopular proposals.

Perhaps the government could look to a conservative example from elsewhere for inspiration. The New Yorker reports that when Angela Merkel narrowly avoided losing to Gerhard Schröder in 2005, the newly elected German chancellor told herself, “I’m going to be all things to all people.” She moved to the centre, paying close attention to public opinion, dropping any ideological baggage and concentrating on the fundamentals: stability, security and economic growth. Now she has no serious contenders for the nation’s leadership. “Merkel took the politics out of politics,” as one commentator put it.

Tony Abbott has never shown any such desire. It’s the one thing he hasn’t tried yet.

It’s time, Tony.

Nick Feik

Nick Feik is the editor of The Monthly.

@nickfeik

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