Former Reserve Bank board member Warwick McKibbin has suggested a new election may be needed to resolve the Senate impasse holding up key budget savings, as he lashed the political populism of the Greens and Palmer United Party.
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The Treasurer Joe Hockey says the advice from former Treasurer Peter Costello to drop the GP co-payment isn't helpful.
And Bank of America Merrill Lynch economist Saul Eslake has suggested a mini-budget was ''one of the options the government needs to think about'' as consumer confidence falls, unemployment rises to 6.4 per cent and, if the political uncertainty continues, business confidence potentially falls.
The comments came before a scheduled meeting between Joe Hockey and PUP leader Clive Palmer on Tuesday, with the Treasurer rejecting former treasurer Peter Costello's call to drop the proposed $7 GP co-payment and declaring budget critics should not write off key measures.
Professor McKibbin told Fairfax Media that by blocking a suite of key savings, the crossbench had held Australia back from tackling longer-term fiscal challenges.
''The politicking of minority parties has done damage to the economy and over time that can build up. Firms can't make decisions because of uncertainty and uncertainty is damaging consumer confidence,'' he said.
''At a macro level the budget is about right, we need to stabilise debt and trim back expenditure.''
The government ''needs to better explain why they have put in place measures'' such as the $7 GP co-payment and that Labor's adoption of Tony Abbott's opposition strategy was ''good politics but has caused damage to the economy''. But he added: ''It's the populist parties like Palmer or the Greens [blocking reform].''
''I would like to see a new election and a Senate truly representative of the Australian people.''
Mr Eslake said from a ''top-down'' perspective the budget had dealt with the growing long-term gap between expenditure and revenue, but fairness questions remained.
''They can continue to put the case for these measures and hope they can persuade people. Or they could make concessions to opposition and minor parties,'' he said.
Both Professor McKibbin and Mr Eslake said they considered a double dissolution unlikely.
Commonwealth Bank chief economist Michael Blythe said the Treasurer needed to be pragmatic about what could be passed ''either in negotiations, or in terms of recasting the budget''.
''When you add up what has been rejected by the Senate and what will be rejected, there won't be much left … business confidence has held up but business doesn't like uncertainty,'' he said.
HSBC chief economist Paul Bloxham said it was ''increasingly unlikely'' the budget would be passed in its current form but rather than a mini-budget, the government should ''negotiate on the basis of what has been proposed''.
Mr Hockey has been meeting with the crossbench for the past fortnight to win support for about $40 billion in structural budget changes, including the proposed GP co-payment, the repeal of the mining tax, the fuel excise increase and higher education changes.
''Most of the budget is actually already gone through the Parliament we are now … dealing with the major policy issues that make the budget sustainable over the medium and long term,'' he told the ABC, saying Labor had publicly opposed the deficit levy and then voted for it.
And Finance Minister Mathias Cormann is urging conservative commentators not to write the government off so quickly.
Senator Cormann says the government is going through the proper and methodical process for getting legislation through parliament.
''People just need to pause and reflect on what the usual process actually is,'' Senator Cormann told Sky News on Monday night.
''For people to put up the white flag this early just is not in our national interest.''
Ahead of his meeting with the Treasurer, Mr Palmer said the government needed to rethink its contractionary budget strategy.
''There needs to be a mini-budget to create confidence or a double dissolution. The uncertainty is bad for business,'' he said.
Mr Palmer went further on Tuesday, saying it was clear that the public had failed to warm to the budget in its current form.
''There's a general consensus across the country that the budget is unfair . . . and needs to be revised to make it more acceptable to the community,'' Mr Palmer told ABC radio.
Mr Palmer wants to see a reversal of the government's budget strategy to aim for growth rather than expenditure cuts. ''We think there needs to be change,'' he said.