'Very, very weird': Peter Costello lashes Liberal leaders over economic policy
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'Very, very weird': Peter Costello lashes Liberal leaders over economic policy

Former treasurer Peter Costello has launched an excoriating attack on the Liberal Party leadership, warning the government is "operating in a parallel universe" by promising voters it would deliver reforms in 10 years' time.

The government's inability to produce a coherent economic story meant the Liberal Party had splintered along the social lines that ultimately contributed to the demise of Malcolm Turnbull as prime minister, he also said.

"I was deputy leader of the Liberal Party for 14 years and I didn’t know that we had a right faction and a left faction and, if we did, nobody invited me to join either of them," Mr Costello said.

Former treasurer Peter Costello.

Former treasurer Peter Costello.Credit:Josh Robenstone

"One thing you could always unite the Liberal Party around in my time was the economic narrative.

"[Turnbull's] failure to develop the economic narrative that he said he would meant [Liberal's] defined themselves on social issues."

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Mr Turnbull faced bitter division over issues such as gay marriage and energy throughout his time in office.

The split between the conservative and liberal factions of the party ultimately led to him losing the support of key MPs before he was challenged by Peter Dutton and eventually replaced by Scott Morrison in August.

Mr Costello described the 10-year plan to implement the Coalition's signature income and company tax cut policies as "very, very weird".

"We can't deliver in this term so we will make you promises on what we will do three terms from now," he told the Melbourne Institute's outlook conference.

"It’s a parallel universe and if anybody believes it you are silly. The only chance of holding a government accountable is something that they will do during their term.

"I can promise you anything for 2026. The one thing they know is that they are not going to be in government in 2026."

The $144 billion income tax cuts passed Parliament in June. The full $65 billion company tax cut package was shot down by the Senate, with crossbenchers allowing only $30 billion through in tax cuts for businesses earning up to $50 million over 10 years.

"If you want change, you have to argue for it, and then you have to convince the public about it," Mr Costello said.

"I kept on waiting for the economic narrative to come. I think that is the problem today, I'm not sure what the narrative is among those who are making these decisions for us."

The Nine Entertainment chairman recalled an anecdote of being invited to the G8 - made up of the eight largest economies in the world - to give a presentation on how to balance a national budget in 2004.

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"If the International Monetary Fund was to turn to Australia and ask it to share a successful case of reform in the last decade, what story would we tell?" he said.

Arriving at Thursday's event half-an-hour after Mr Costello spoke and, unaware of his comments, Mr Morrison praised Mr Costello's record as treasurer.

"Our government has continued [Mr Costello's] legacy and acted in accordance with that legacy," he said.

Asked to respond directly to Mr Costello's comments, the Prime Minister signalled a change in tactics ahead of the next federal election to get the economic narrative back on track.

"An economic narrative should be about what you believe as well," he said.

"Why we think taxes should be lower, why we think people should not be demonised for creating jobs."

Eryk Bagshaw is an economics reporter for the Sydney Morning Herald and The Age, based in Parliament House