Sweet Budget Time 2014
Budget time: a sweet time for some, much angst and bitterness for others. Rocco Fazzari and Denis Carnahan get us in tune for Tony and Joe's big night.PT2M3S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-37ysp 620 349 May 9, 2014
Tony Abbott's best known dissident had a blunt message for his colleagues when he appeared on ABC TV's Capital Hill program on Wednesday. "Understand that government is tough," Russell Broadbent told them, through presenter Lyndal Curtis. "Support your leader. Support your Treasurer."
Implicit was the recognition that it was too late to block the big new tax and the other broken promises that will be announced in Joe Hockey's first budget on Tuesday night.
Having lost his regional Victorian seat twice in a backlash against unpopular decisions by Coalition governments, and been among those who forced John Howard to release asylum seeker kids from detention, Broadbent knows more than most about backbench power and how to use it.
Tony Abbott: set to unveil the budget on Tuesday. Photo: Alex Ellinghausen
His advice to colleagues, including the half-dozen who had already broken ranks, was that their best, indeed their only, tactic now is to lock in behind the budget as the hard but fair medicine the country needs.
He's right, but that doesn't mean Abbott will prevail in the biggest gamble of his political life. The man who promised no excuses and no surprises is poised to offer an abundance of both, and the pre-budget polls point to a very sour reaction from voters.
In a sense, Abbott is reverting to the traditional approach of incoming prime ministers, front-end-loading the unpopular decisions in the first budget, blaming them all on his predecessors, and expecting eventual understanding, even admiration, from the voters. "I think in the long run, the voters will thank us for doing what is absolutely necessary if Labor's debt and deficit disaster is to be tackled," is how the optimist Abbott expressed it on Monday.
Illustration: Andrew Dyson.
His problem is that he made such a reversion near impossible when he upended the orthodoxies of Australian politics, elevating the crime of breaking promises to one that carries a political death sentence, committing himself to far more than was prudent or necessary to win votes, and ruling out major changes in workplace relations or tax in his first term. Essentially what Abbott offered was a two-term agenda, where he would win the trust of the people in his first term by "saying what we mean and doing what we say", and then seek a mandate for more ambitious (and controversial) changes after three years.
The beauty of this strategy was that it married the politics of keeping faith and building trust with the big economic challenge facing national government, because the real fiscal repair task would be required in three years' time.
As one of the country's more respected economists, Saul Eslake, puts it: "If the opposition had not confected the notion that Australia faces an immediate budget problem, it ought to have been possible for Tony Abbott to keep the promises the government should not have made and tackle what is the real problem by announcing things that would come into effect from 2017/18 and giving to the people the opportunity to express an opinion about it at the 2016 election."
By eschewing this path and including income tax and fuel excise increases in their first budget, Abbott and Hockey are taking a massive punt that voters will overlook the broken promises and give them a tick for making a bold start to repairing the budget and for sharing the pain.
While there are parallels between their challenge and the one that confronted John Howard and Peter Costello, there are some big differences, quite apart from the fact that, thanks to the charter of budget honesty, the scale of the problem was known before the election this time.
Back in 1996, there was more scope for the Reserve Bank to give interest rate relief to offset the impact of cuts in spending. As Eslake observes: "People forget the impact of Costello's first budget was significantly ameliorated by the Reserve Bank cutting the cash rate by 2 per cent in that year and the currency falling almost 20 cents in 96/97 and 97/98." This time, there appears little prospect of, or scope for, movement in either area.
Back then, it was also a very different political climate. Howard was well ahead in the polls, had the overwhelming support of a party room that was kept more in the loop, and had a relatively uncluttered agenda. This time, Abbott is the most unpopular new PM in the history of polling, political capital has been squandered on a debate we did not have to have about free speech (and by the restoration of knighthoods) and the colleagues include the new and the nervous and the old and the grumpy.
There is also no shortage of former colleagues offering unsolicited and politically unhelpful advice, from Abbott's old boss in John Hewson, to Peter Reith and, most remarkably, Costello. It was Costello's former adviser, Niki Savva, who wrote this week that cabinet ministers could rationalise Reith and have grown accustomed to Hewson. "But here was Costello, the man who they had appointed only a few months before to chair the Future Fund at an annual salary of almost $200,000, publicly criticising government policy."
Costello's critique of the planned debt levy, in his column in News Corp tabloids, was an unexpected jab to the Abbott solar plexus because it is his example that Abbott and Hockey say they are following. But it was indicative of a view among economists and free-market commentators that an income tax levy on high income earners is not the most effective way of sharing the burden.
"I absolutely get the idea that fairness demands that high income earners contribute to the task of repairing the budget," says Eslake. "What I don't accept is that the optimal way to do this is to give Australia one of the highest top marginal rates, cutting in at one of the lowest top income thresholds in the OECD ($180,000)."
One change that will get an emphatic tick from the economists, and should be supported by Labor and the Greens, is the restoration of fuel excise indexation that was terminated by a panicked Howard as part of his political recovery strategy in 2001. But, once again, Abbott is caught by his own unqualified and repeated pre-election assurances that Australian families will be better off, that "no one's personal tax will go up and no one's fortnightly pension or benefit will go down".
By week's end, Hockey was declaring himself "immensely proud" of his effort, but there were other indications of many more sources of voter anger and potential backbench discontent.
While most MPs are likely to heed Broadbent's advice and crack hardy, many are bracing themselves for a fall. "It will be like Abbott falling off his bike when he’s going full pelt," one said. "He may well survive and just lose a lot of skin - or he may not."
Michael Gordon is political editor of The Age.