By ABC's Barrie Cassidy Friday 20 March 2015
Photo: The Prime Minister's news conference Wednesday was the most important he has held all year. (AAP: Lukas Coch)
The Prime Minister signalled a new approach to economic management this week that will have an enormous impact on how the Government is regarded by business and economists, writes Barrie Cassidy.
After 18 months of rejection by the public, and more importantly the Senate, the Abbott Government has decided to declare victory and move on - or more accurately, stand still.
The Prime Minister's news conference on Wednesday was the most important he has held all year, signalling not only a change to the spin but a fundamental switch in economic management.
First the spin. The Government will now claim they have essentially addressed the budget emergency, taking the situation "from out of control to manageable".
The Prime Minister offered up the Intergenerational Report as evidence of that saying: "The document shows that we have halved Labor's debt and deficit going forward. Debt as a percentage of GDP which would have been 120 per cent under the policies of the former government is about 60 per cent under the policies of this government."
So the Government plans to ignore the raw figures that will in the near term at least show bigger deficits than they inherited; and they'll argue instead that they have done better than Labor would have done had they got re-elected and did nothing further to address the deficit.
That's a somewhat hypothetical argument but nevertheless the glass half full analysis that he prefers.
More to the point though is the declaration - and that's what it was - that the heavy lifting is over, at least until after the next election. That will have an enormous impact on how the Government is regarded by business and economists.
The direct question was put to the Prime Minister: "What's your response to people who may fear that that means you're easing up and resting on your laurels rather than doing more on structural reform?"
Good question.
The answer: "Well this budget certainly will be much less exciting than last year's budget because the task this year is at least 50 per cent reduced from the task last year. So inevitably it will be a much less exhilarating budget for those who are budget devotees and structural reform enthusiasts."
That was his response to the "structural reform enthusiasts"; a breathtaking abandonment of both previous rhetoric and economic strategy; a virtual acceptance that they are "easing up" and "resting on their laurels", such as they are.
And then the coup de grace. To the question, what happened to the promised surplus? or, as the journalist put it, "that graph that you showed us ... isn't it true that when you look at it, at no stage do you reach a surplus in the next 40 years?"
Abbott: "We get very close to balance."
Very close - in 2019-20 - and then, according to the document and the enclosed graph that he referred to, it all goes south again, in a big hurry.
And even that outcome is based on the assumptions that growth will average out at about 2.8 per cent; that Australia will have favourable terms of trade; and that the Government will keep bracket creep for at least another five years.
It has come to this partly because most Government ministers are incapable of dealing effectively with the eight crossbenchers.
Rather than build relationships and reach out and find compromises, the government instead whinges and complains about the "feral" Senate.
The Australian in its editorial Thursday raised a classic example.
The newspaper pointed out that Abbott, faced with hostility from Senator Jacqui Lambie, increased military pay.
But Abbott "saw the issue ... as merely another barnacle to be removed. He simply changed his position."
"A more productive play would have been to extract a quid pro quo, tying the policy change to support for stalled budget measures. That's politics."
Indeed.
Rather than build relationships and reach out and find compromises, the Government instead whinges and complains about the "feral" Senate.
The failed reforms to higher education is the latest example. That a problem exists is beyond debate. Governments are no longer prepared to adequately fund universities, and yet the Senate now denies the universities the means to make up the shortfall. The Government failed to meet the crossbenches even half way, and so the breakdown in the political system continues unabated.
Against that background, the crucial pre-budget debate begins in earnest, and as Chris Uhlmann reported this week, there are already ominous signs.
The ABC has spoken to senior officials across several portfolios who say they are confused by what the Abbott Government wants to achieve with its second financial blueprint, as it struggles to settle key elements from its first.
Time is fast running out for ministers to set a clear direction.
"It's five minutes to midnight," one said.
Further exacerbating the problem, the Government plans to cloud the pre-budget period with the release of a landmark report on taxation that deserves its own timeframe free of the budget. That discussion - like the faux debate on accessing superannuation - will now go on without any real prospect of short or medium term outcomes, and will only serve to confuse the message between now and May.
Likewise, the Government is also close to releasing the Grants Commission report into GST distribution. That will have a separate and just as unhelpful impact at a critical time, especially in Western Australia.
The direction has changed but the new pathway is no easier to negotiate.
Barrie Cassidy is the presenter of the ABC program Insiders. He writes a weekly column for The Drum.
Abbott's breathtaking shift in economic management - The Drum (Australian Broadcasting Corporation)
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