Oh, and the budget deficit is still growing, but that is a much bigger problem for Turnbull than it is for the economy.

Back in the Hawke/Keating "golden age" of economic reform, the budget was usually in deficit, and no one really cared. Similarly back when Menzies was prime minister he ran deficits in eight of his 16 years in charge. As Fraser's treasurer, John Howard handed down five deficit budgets.

Peter Costello's best political trick is now Turnbull's biggest political problem. But more importantly, Costello's determination to convince the public that delivering a budget surplus was the same thing as managing the macroeconomy now prevents Australian politicians having a sensible debate about economic policy.

While Keating fronted the media every time trade data was released, Costello rarely did. While unemployment never fell below 460,000 on Costello's watch, that was the fault of the unemployed, not his economic management. While he raged against the irresponsibility of borrowing, household sector debt grew from $347 billion to $1343 billion, much of it spent buying houses made unaffordable by Costello's tax concessions for property investors. But he did deliver a few budget surpluses.

Costello's insistence that a budget surplus was the same thing as good economic management had expensive and long-lasting effects. When the Australian economy boomed on the back of a massive, and entirely unexpected, boom in Chinese demand for our resources, Costello took the credit. And because he believed his policies had caused the boom, he also believed the windfall was his to spend.

Comfortable in his belief that as long as the budget was in surplus he was doing a good job, Costello spent the peak of the mining boom overseeing enormous, and permanent, cuts in taxes and spent a fortune on what even the business community described at the time as 'middle class welfare'.

Whether you are in surplus or not, when governments pump as much money into the economy as Costello did, the stimulus puts upward pressure on inflation. And because Costello had instructed the Reserve Bank of Australia to focus on keeping inflation low, when Costello started spending, the RBA started increasing interest rates.

RBA Governor Glenn Stevens explained the rate rise in 2007: "New expenditure and revenue measures announced since the budget and in the early part of the election campaign had since reduced the projected surplus to around 1 per cent of GDP. This meant that fiscal policy was roughly neutral in its overall effect on growth as conventionally measured, the recent initiatives having offset the 'automatic fiscal stabilisers'."

Stripped of the econobabble, what the RBA was saying was that if the government wanted to use fiscal policy to step on the accelerator in the middle of a commodity boom, the RBA was going to use high interest rates to step on the brakes. If you think that doesn't sound like "good economic management", you would be right.

Costello's 50 per cent tax discount on income from capital gain delivered an expensive windfall for investors that drove first home buyers out of the market. His generous tax breaks for superannuation delivered a windfall for the wealthy and punched such a big hole in the budget that even Turnbull now agrees it needs patching.

While this assessment of Costello's performance may seem hash, it is not controversial. According to the pinkos at the International Monetary Fund, the Howard government was the most profligate spender in 50 years.

Unfortunately for Turnbull, he is now reaping the bitter harvest of Costello's strong economic narrative. The story about surpluses being proof of 'good economic management' that was so successful for Costello has finally crashed into economic reality. Tony Abbott and Joe Hockey were its first Liberal victims, and now it looks like Turnbull may be skidding into the same wall.

Not only has the budget deficit grown since the Coalition was elected, cutting spending in a slowing economy is the exact opposite of what the economy needs. And economics aside, Abbott's pre-election promise to not cut spending on health or education will not be forgotten by the electorate simply because the Liberals changed leaders.

Australia is one of the richest countries in the world and we are living at the richest point in history. In an amazing feat of politics, despite the fact that GDP has nearly doubled in the last 20 years, Australians now believe that we can no longer 'afford' to provide the same level of services that, when we were half as rich, we could afford to provide.

While convincing a rich country that it is poor is a pretty good trick, the real achievement was convincing people that if we minimised the tax paid by the wealthy we would maximise the growth of the economy. A growing economy, we were told, would then ensure that we could afford the services our parents took for granted.

But after two decades of steady tax cuts and strong economic growth it seems that Australia still cannot afford to care for its sick, its disabled, or its unemployed. Apparently we have "no choice" but to ask the young to pay more for the degrees. Yeah, right.

While Costello received the kudos for cutting taxes in boom times, it fell to Abbott, and now Turnbull, to sell the idea that we are still decades away from a society that can "afford" the services that our parents once enjoyed.

If Australia collected the OECD average level of tax as a proportion of GDP we would have an extra $156 billion to spend on services, infrastructure, and income support per year. Such revenue need not come from increases in the income taxes paid by ordinary voters, on the contrary, the simplest and most efficient way to collect more revenue is to simply close down the loopholes and concessions that Costello snuck in back when the economy was booming and the budget was in surplus.

Turnbull is under pressure to get back to the "strong economic narrative" of cutting taxes, cutting services and chasing surpluses. The problem is that the economy is weakening as fast as the Liberal's claim to being the party of "good economic management". The economy needs the government to provide stimulus, not austerity. Fairness demands that big companies pay the taxes they are due. And the voters are demanding that health and education take precedence over cuts to the corporate tax rate. It's a tough time to be PM.

As the election draws closer, and the polls draw tighter, it will be fascinating to see if Turnbull succumbs to the pressure to sing from Costello's song sheet, or whether he has his own story to tell. But ultimately what matters is not the strength of the narrative, but the strength of the economy. After seven months in the top job, both are looking shaky.

Richard Denniss is the chief economist for the Australia Institute.

Twitter: @RDNS_TAI