While shaking off some of Tony Abbott's populist baggage will help the country in the long term, it's not clear that the current Treasurer is equipped for the long walk from the budgetary wilderness necessitated by Abbott and Hockey's determination to head so far in the wrong direction.

Meanwhile, children at Artarmon Primary have been told not to run in the playground, because the school is too overcrowded. Citizens waste weeks of their life on hold to Centrelink trying to access benefits to which they are entitled. Women fleeing domestic violence join a queue for crisis accommodation and we can't even run a census any more.

Australia is one of the richest countries in the world, but the combination of our low levels of tax and our high level of corporate welfare mean that we have run down our essential services to solve fiscal problems that even the Coalition now admits never existed.

While Tony Abbott jumped the shark by declaring a 'budget emergency', Treasury and PM and C have, for decades, orchestrated a systematic national deception to lower the expectations of those demanding better funding for services and more investment in infrastructure. The deception was as simple as it was effective; pretend we were broke in the lead up to the annual budget and then, on budget night, announce that the Prime Minister's preferred constituencies would get some lollies.

Prime ministers always liked the game, and treasurers rarely did. Treasurers did the 'hard work' of telling everyone there was no soup for them, and prime ministers came along and gave pudding to their pet projects. Prime ministers loved the game as it set the treasurer, usually their biggest internal rival, up as the bad guy while giving the boss the freedom to play good cop. Peter Costello never got it. He spent a decade angering his colleagues and, in turn, helped endure Howard's long reign. He also killed the goose that once so reliably laid the golden eggs.

As the mining boom gathered pace in the mid-2000s, Costello used the temporary budget windfall to justify permanent cuts in tax revenue. His structural changes to our tax system were 'funded' by a cyclical upswing in revenue. What could go wrong?

The 2007 election loss meant that Costello never had to deal with the long-term costs of his short term thinking. Better still for the Coalition, because it was the ALP that had to manage the legacy of Costello's tax cuts and the impact of the GFC, and Tony Abbott and Joe Hockey could spend six years in opposition pointing the finger of blame in the wrong direction.

But now the Costello Curse is haunting the Liberals. First the Senate, and then the Liberal backbench rejected the savage cuts to welfare, health and education that Joe Hockey hoped would balance his budget back in 2014. Then commodity prices came back to their long run average. And now the economy is contracting and even the IMF is urging the Coalition to spend more.

Poor ScoMo. After years of raging against Labor for borrowing to fund a deficit, this week he had to admit he was planning to do the same. But while his concession that not all debt is bad is welcome, his simplistic notion of good debt and bad debt will cause significant economic and political pain. Let's start with the economics.

The idea that borrowing for infrastructure is 'good' but borrowing for recurrent spending is 'bad' is meaningless and wrong. The government is spending hundreds of millions of taxpayer dollars to build 'beef roads' to lower the transport costs for cattle farms like Gina Rinehart's new $300 million Kidman station. Is a road infrastructure? Yes? Do beef roads provide the highest possible return on public spending in Australia? Not even close.

Is spending on research, education or preventative health infrastructure? No. Does it deliver long lived benefits well beyond the year in which the money was spent? Yes. Would the returns on investment in preventative health be higher than grading 'beef roads' in the Pilbara? Yes.

There is good debt and there is bad debt, but there are also good investments and bad investments. Defining all spending on Barnaby's boondoggles as 'infrastructure' and all spending on infrastructure as 'good' is as dangerous as it is banal.

The idea that recurrent spending needs to exactly equal annual revenue is also as simple as it is wrong. While it takes 365 days for the Earth to get around the sun, there is no reason to think that the Australian or world economy operates to a solar rhythm. The business cycle, the commodity cycle and global shocks like the China resource boom have a much bigger impact on our budget than the length of our orbit around the sun. Put simply, efforts to cut or expand government spending to 'match' annual fluctuations in revenue make economic fluctuations worse, not better.

These days even the IMF and World Bank advise against 'austerity policies' which seek to cut government spending when economies are shrinking. Stimulus spending, on the other hand, which pumps larger amounts of public spending into a shrinking economy, is back in vogue around the world. The timing for the Coalition couldn't be worse.

In this week's backflip, Morrison proposed an innovative, but meaningless, compromise between his 'new philosophy' and his old messaging. Having created the notion of good debt and bad debt, the Treasurer went on to say that he would fund a 'stimulus package' by cutting other areas of governments spending. Oh dear.

Pumping additional public money into a shrinking economy will stimulate additional economic activity. But cutting money from welfare to spend more money on beef roads isn't a fiscal stimulus, it's just a redistribution from political enemies to friends.

The real purpose of the good-debt/bad-debt language isn't to plot a new course to help us out of Costello's budget wilderness, it is simply to rebrand Joe Hockey's failed strategy of spending cuts. If you believe welfare is 'bad' and beef roads are 'good' then all of a sudden you can start claiming that giving money to your friends is 'stimulating' the economy.

The political problem with the government's 'new' strategy is even simpler. History suggests the Coalition are better at blaming the Opposition than building support for their own agenda. Now that the public knows that it is 'good' to borrow money to invest in 'good' things it will be much harder to convince them that investing in schools, hospitals, universities, public health and renewable energy is a bad idea.

Many argue that Joe Hockey was our worst-ever Treasurer. Perhaps we shouldn't rush to judgment on that.

Richard Denniss is the chief economist for the Australia Institute.

Twitter: @RDNS_TAI