Resolving the budget ‘crisis’

We definitely have a looming political budget crisis. Whether there is a fiscal/economic crisis is a separate question. First the politics.

Mark has an excellent post wherein he poses three alternative scenarios. I have only two, because I don’t see Abbott, Hockey et al being able to negotiate the maze that faces them in the senate. Nor do I see the Liberals changing leaders. There simply isn’t anyone. Hockey has broken his brand. Turnbull isn’t interested and not enough will have him. They couldn’t choose Morrison, could they, although his stocks are said to be riding high, having stopped the boats.

1. Abbott fails to negotiate important elements of the budget, such as eliminating the carbon ‘tax’, the proposed changes to Newstart and Youth Allowance, the changes to the age pension etc. As promised, Abbott would call a double dissolution election, after some bipartisan changes to senate voting practices. But note well, Antony Green for complex reasons says:

In my opinion there is not going to be a double dissolution in the near future, and even in the more distant future, I cannot see any possibility of a double dissolution before late 2015 or the first months of 2016.

2. Antony Green thinks that Abbott will only call a double dissolution if he thinks he can win. In this scenario Abbott fails to negotiate the senate, and the polls stay unfavourable. Abbott wimps out and limps on to a regular election in the second half of 2016.

I would discount the second option. Someone pointed out recently that when challenged, Abbott becomes more determined; if you like, more pugilistic. Moreover it would be manifestly foolish to struggle on with a government that lacks authority in the parliament and can’t effectively govern without Clive Palmer, who would maximise his leverage.

Of course, the polls might change. Apparently the feedback from the electorate to the party room was horrendous. For example the Oz gives us a taste:

JOE Hockey’s friends say he has been taken aback by the poor response to his budget from Coalition MPs. Well, Treasurer, you’d be horrified to know what some of them really think.

“There’s been no narrative. It’s been all over the shop. One minute we say there’s an emergency, the next there’s $8 billion for the Reserve Bank, $12bn for fighter jets, and we’re still splashing out on the paid parental leave scheme,” says one.

Now the government is considering a budget ad campaign. Except that there won’t be any radio, TV or newspaper ads. The campaign will fill our letter boxes with letters and pamphlets. Apparently the recalcitrant and benighted voters need to understand that this was the budget that the country needed. Needed, that is, to fix the “Labor debt and deficit mess”. You’ll hear that phrase a million times before the next election.

Which brings us back to whether there is a crisis in the fiscal/economic sense.

Jacob Greber and Phil Coorey had an article on the front page of the AFR Budget crisis is real, says PBO:

Parliament’s independent budget adviser has rejected Labor and Greens’ claims the Abbott government has ­concocted a budget crisis, saying ­without action Australia’s debt will grow at one of the fastest rates in the developed world.

In remarks that effectively endorse government warnings that if left unchecked, gross debt would balloon to $667 billion, Parliamentary Budget Officer Phil Bowen said it was time to begin the return to surplus to protect the economy against future crises.

“It is time to start coming out [of debt and deficit], otherwise the longer you leave it the more exposed you become and the harder it is to wind it back,” he told The Australian Financial Review.

This is sad, really sad. On page 47, buried in the middle of a tiny opinion piece by Andrew Leigh we had the truth. Labor in the Pre-election Fiscal and Economic outline had the budget coming back to surplus in 2016-17 in an orderly way. Hockey plans to do it by 2017-18, with the most horrendous cuts.

The document Leigh refers to was prepared by Finance and Treasury and released in August 2013 as part of the charter of budget honesty. Remember this table from ABC Factcheck?


Mainstrean journalists are too thick or too lazy to look at the facts. Instead they accept the LNP narrative.

With friends like that who knows what the polls will do?

Sensible people realise that there is no crisis, though we do need to bring the budget back to surplus within a reasonable time. After the confusion and sense of affairs out of control under Swan/Gillard, few seem to understand that finally, under Rudd/Bowen order had been restored. According to the independent umpire. Hockey has added the chaos and crisis in so far as it exists.

I’m inclined to think that Hockey/Abbott et al have fractured the basic contract with the people, that the people will not want to go back to the world of the pre-Whitlam era, which is where Trevor Cook compellingly thinks the reactionary tea party is aspiring to take us:

When they attack the so-called age of entitlement, they are really attacking the pillars of modern, Whitlamite Australia where concerns about access were more important than reducing the tax rate for business and rich individuals.

And the biggest stalking horse of all is Abbott’s efforts to get rid of Labor’s commitment to a national system of government and revert to a pre-federation style competition between increasingly impoverished states.

The intended victims of this charade are the poor and the middle class.

Abbott knows the states will be forced to cut spending – he wants them to do it.

Australia is at a turning point. And Abbott is no moderate, no centrist, not even a genuine conservative.

Perhaps the tea party utopia is best captured in this image from an anti-liberal site via Mark’s Facebook:

save the rich_10300316_320260274792507_5516613108870449871_n_500

37 thoughts on “Resolving the budget ‘crisis’”

  1. The Government is not merely faced with obstacles in the Senate. It has apparently a rigid small government,climate change denial agenda, which limits its budget options and capacity to negotiate compromise.They may be forced to a double dissolution. One option is an outside white knight who takes on the leadership of the LNP, similar to Bob Hawke. There is nobody to fill that role. Therefore, Malcolm Turnbull steps into the breech.

  2. Now the government is considering a budget ad campaign. Except that there won’t be any radio, TV or newspaper ads. The campaign will fill our letter boxes with letters and pamphlets.

    Which of course, is a total waste of money. I mean, what do most people do with junk mail, especially political junk mail? Toss it in the garbage or recycling without reading it.

    Or, they might do what many in the electorate did with Howard’s terrorist fridge magnet warning – return it to the sender. Post Offices across Australia had rooms full of the sent-back garbage.

  3. My take is that the Senate might actually save Abbott. Firstly by blocking the real social nasties and secondly by helping reduce the deficit by blocking the shutting down of the carbon tax while allowing the debt levy to go ahead etc., etc.
    This allows Abbott to claim that he listens to the people while retaining the right to blame anything that goes wrong on being thwarted by those negative thugs in the Senate.
    Howard was stuffed as soon as Barnaby Joyce gave him a senate majority that allowed him to push through stupidities like work choices.

  4. Well, John, that’s possible, but a double dissolution will favour Palmer, voting changes or not, so Abbott may find it hard to get things through. Then it will be whether he has the balls to go to the electorate.

    They certainly have their lines well rehearsed about Labor’s debt. It’s possible though, that people will simply stop listening as they did with Gillard.

    I heard today that the PM’s office don’t listen to anyone, not even Mark Textor.

  5. Anti-budget sentiment remains strong: poll:

    Voters are maintaining their rage over the federal budget, with a big majority branding it unfair and believing it will increase cost-of-living pressures and make it harder for the young to find jobs.

    Seventy per cent of voters do not believe the budget shares the burden of cuts, benefit changes and tax increases equally, according to the Ipsos I-view Omnibus survey taken in the past week – with just 19 per cent saying it is shared.

    This is an increase from the 63 per cent of voters who considered the budget unfair when asked in the Age/Nielsen poll taken immediately after the budget was handed down. It is even higher among older voters, with 75 per cent of those over 50 saying the burden is not shared equally.

    Unfortunately it looks as though the budget is negative for consumer confidence in the economy. That is likely to affect business confidence.

  6. Lenore Taylor – Voters pass angry verdict on Tony Abbott’s leadership attributes:

    Voters are passing an angry verdict on how Tony Abbott measures up against almost every leadership attribute, according to the latest Essential poll, which shows Labor’s lead over the Coalition unchanged at 52% to 48% in two-party-preferred terms.

    Tony Abbott’s score on almost every negative attribute has jumped and on every positive attribute has declined since the questions were last asked on 15 April, before the federal budget.

    More than two-thirds of respondents (67% – an increase of 11 percentage points) said Abbott was “out of touch with ordinary voters”, 29% (down 11 points) agreed he was trustworthy, 41% (down nine) agreed he was a capable leader, and 63% (up five) said he was arrogant.

    On all these measures the Labor leader, Bill Shorten, outranked Abbott –

  7. Straw poll – daughter and partner have been unsuccessfully bidding on houses for some time (there has been a bit of a boom going on around here). Saturday after budget, got one for $20K less than expected.

    Local cafe owner (nice person but quite conservative politically I think) says business down since the “so-called budget”.

    I have been a bit surprised by the reactions but it’s just the usual thing – we who thought Abbott was a disaster probably also expected a disastrous budget, whereas others may have been more shocked. Although I have been surprised by the public health cuts – they go beyond any sense of rationality, and appear to be motivated by revenge. It’s no way to govern a country. There has to some way of getting rid of this government.

    Brian please don’t try to go back to the old ‘Rudd would have saved us’ line. People did not vote ‘for’ the LNP so much as ‘against’ Labor. I did an analysis on my blog, which holds up well I think If you look at the Crosby Textor research on marginal electorates linked in that post, you will see that not liking Labor/Rudd was the biggest single spontaneous vote influence mentioned.

    We will never know what Gillard could have done if she’d ever had clear air, but two years of destabilisation by Rudd and his supporters would definitely have contributed to the poor public perception of Labor. I still hope that one day you will all wake up, take responsibility and learn from this.

  8. Vak, where have I gone back to the ‘Rudd would have saved us’ line, which, incidentally, is a place I’ve never been?

    I thought at the time of Rudd’s removal that he had to go, and haven’t changed my mind. The manner of his removal was problematic, as it turned out.

    All I’ve said is that at some point people stopped listening to Gillard. The reasons are complex and I don’t want to revisit them.

    I’ve also stressed over and over that Bowen and Rudd had the budget in good shape going into the election. It’s just a fact. After Bowen became treasurer, the only one with an economics degree to hold the job, I’ve had increased regard for him, and admired the way he handled the acting leader job when the leadership election was taking place.

    Rudd’s second coming was also problematic. In the end the election was 53.5 to 46.5 to the LNP, which is pretty much where Gillard was when he took over. He may have saved the furniture, but Gillard was a good campaigner in 2010 and we’ll never know how well she may have done.

    Please believe me, I’m not carrying a flame for Rudd. Looking at Labor’s internal ructions, whoever was at fault, it was perfectly understandable that the voters threw Labor out. They just didn’t look too closely at what they were buying instead, and have now had their ‘wake up in fright’ moment.

  9. BTW, in the first part of 2011 the Gillard government went from about even to 41-59 on one poll and I think 40-60 on another. During that time Rudd was very quiet and not identifiably active at all. It was in part about the carbon ‘tax’ but also what the press and the LNP were doing to Gillard, which was disgraceful.

    During the later Gillard period the best book I’ve read was by Mungo MacCallum. A simple ‘Rudd did it’ analysis doesn’t get you there IMHO, but really I don’t want to revisit that patch and won’t until I’ve read Maxine McKew’s book, which is on my list.

    Gillard herself said the reasons for what happened were multi-causal, and she has identified some of her own mistakes. I wish people would accept that.

  10. Fair enough on the first post Brian, I always thought you at least tried to be even-handed on Rudd Gillard issue, though I still don’t see why you think Rudd and Bowen changed Australia’s financial position in some meaningful way prior to the 2013 election. How could they? Doesn’t make sense. If you mean they presented it more credibly, that’s a different issue, but I think the argument is much more complex than you have presented here.

    On your second post, Bolt and other conservative commenters had mounted their war against Gillard earlier than that – I think Bolt called for her to step down in December 2010. However people on the left soon joined. John Quiggin (a Rudd supporter) started attacking her vehemently in his blog from as early as April 2011 and was calling for her to step down by July 2011. Graham Richardson was saying similar things (ok he’s not progressive, but nominally Labor). As I’ve always said, what Gillard faced was a two pronged attack. Who knows what would have happened if she hadn’t?

    Of course the problems were multi-causal, but Gillard also was fighting on two fronts the whole time. You can’t just dismiss that.

    Can I suggest you should also read Power Failure if you haven’t already? I don’t agree with everything in it, and I am very disappointed that he has not addressed the issue of sexism, but I think in other ways it is an interesting analysis of the strengths and weaknesses of Gillard and Rudd.

  11. There is also some (fairly brief) discussion about Maxine McKew, I think she was one of the people Chubb spoke to, so it’s worth reading that as well as McKew. I haven’t read McKew actually, in the interests of balance I should read her also. However I just managed to get hold of a copy of Piketty from the Monash Library so should read that first!

  12. Brian @4: What I said @3 assumed that Abbott wouldn’t call a double dissolution and, just like Howard, would be saved from his extremism by the Senate.

  13. on the budget crisis : Did anybody else find Malcolm Turnbull’s dinner with the Treasury Secretary and Clive Palmer last night intriguing? Do we hear the tumbrils rolling for a leadership change that will see Abbott gone, Turnbull installed and the budget significantly changed to Clive’s liking?

  14. Paul @ 13
    Bob Ellis predicted a leadership change, Paul! He may be one of the world’s most unreliable witnesses, but apparently he also predicted Rudd stepping down, which took most people by surprise.

    It is extremely intriguing that meeting, especially with Parkinson. It is also intriguing that Abbott at first tried to get rid of Parkinson but now seems to be keeping him on on a temporary basis. You can’t think that the relationship between them would be good.

    Everyone I read says that Turnbull has no chance of being reelected as LNP leader though. Totally intriguing all round.

  15. Paul @ 13
    Changing PMs, and Premiers for that matter, mid term as a reaction to polling is more an ALP thing.
    Don’t get your hopes up again, for your sake.

  16. Jumpy @ 15
    Don’t let facts get in the way of a good story eh Jumpy? But I happen to live in a state where the LNP got rid of a first term Premier – remember him – Baillieu? Last year?

    And the NT, now what happened there again?

  17. I’m hanging out for crash-through-or-crash Sir Pository to call a double dissolution. (and I don’t think it would benefit the ALP)

  18. Val @ 10, on the budget, what I said was:

    After the confusion and sense of affairs out of control under Swan/Gillard, few seem to understand that finally, under Rudd/Bowen order had been restored. According to the independent umpire. Hockey has added the chaos and crisis in so far as it exists.

    Reality is always more complex than what we say about it. Under Swan/Gillard the obsession with bringing the budget back to surplus, the changes that had to be made because of falling revenue, then the abandonment of the oft-repeated assurance that a surplus would be achieved, plus further changes to accommodate new policies, all gave a sense of chaos and poor economic management.

    Rudd/Bowen had to rejig the budget to accommodate the early change from a fixed carbon price to carbon trading, and to accommodate some new policies. They also benefited from some recovery of the revenue stream.

    In saying that “order had been restored” I’m referring to the reality that Treasury and Finance, working independently in the PEFO statement as part of the ‘charter of budget honesty’ during the election process, showed a path not only to a surplus of $4.2 billion in 2016-17 but also if you look at the graph in this post a surplus of about 1% of GDP from 2020. That’s about $16 billion pa.

    Hockey/Abbott have added $68 billion of debt over the forward estimates (four years) then projected that out for 10 years and come up with the story that Labor was on the path to debt of $667 billion. They repeat that at least a dozen times a day and have now talked about it as something achieved. Now they’ve turned it into $25,000 for each man, woman and child as an accomplished Labor deed.

    It’s utter bullshit and a huge con, which the MSM are sucking up.

    That’s the story, not contrasting Bowen/Rudd competence with Swan/Gillard incompetence. That’s a red herring, albeit self-inflicted. I could have stated my argument better.

  19. Val, on Gillard, I’ve never dismissed the fact that she was fighting on (at least) two fronts. In the past I’ve highlighted what Anne Summers said. From the pre-election leak about Gillard opposing the age pension and the ‘old Julia’ photoshop job on the front page of the Tele, she took a hit in personal approval from which she never recovered. It was all desperately unfair and a major blot on our national affairs.

    But some made a judgement early on her potential to be a good PM and they are entitled to do that. I wished her well and desperately wanted her to succeed.

    But take a look at this poll trajectory in the first half of 2011. Nielsen had Labor under Gillard at 39/61. I think Newspoll was 41/59.

    People had to be thinking leadership under those circumstances. Whether Rudd was the answer is a separate question. Personally I think Quiggin and some others overlooked defects in Rudd’s leadership and administrative style.

    I’ll try to get hold of Chubb. I’m reading about the Habsbergs right now.

  20. On Turnbull, Laura Tingle the other night said he was busy smoodging backbenchers and being super helpful.

    I think he’s just enjoying himself, which might include seeing Abbott take a few hits.

  21. Val @ 14,
    You and I are probably reading the same stuff. If Malcolm Turnbull is reading it, methinks he ain’t getting the message.
    The Abbott/Hockey/Corman/Bernardo faction have done so much damage to the Liberal Party brand with his unduly harsh budget – Howard/Costello did many foul things in their first budget but nothing as bad as this – they can’t get back the electorate’s confidence. Their only way out is to move a bit to the Liberal left and they can only do that with Turnbull.

  22. Val @16
    I said
    “””Changing PMs, and Premiers for that matter, mid term as a reaction to polling is more an ALP thing.”””
    Care to point out the ALP examples, in the interest of accuracy, to compare ?
    I don’t think you will but being the nice kinda bloke I am, I’m giving you the opportunity , publicly, to lay out the facts ( as you see them).
    Obviously anyone else is free to help Val out if they see fit to do so.

  23. Actually Brian is giving you the opportunity, not me, as this is his blog.
    Beg pardon Brian.

  24. Jumpy @22
    I was just looking at recent history Jumpy, but I’m happy for you to run the numbers. Just to give it some boundaries, let’s start from Federation. Over to you.

  25. Jumpy @ 22
    You have to take into account all the relevant historical factors though. That’s what we historians do.

  26. The Australia Institute pointed out that Christopher Pyne

    Made a speech to the Policy Exchange think-tank in London where he proclaimed the virtues of the USA’s tertiary education model. He heaped praise on the “competitive nature” of its offerings, declaring we have “much to learn” from its free-market fundamentals.

    The institute also pointed out some of the features of this academic utopia the Minister was referring included:

    The cost of education in the USA is skyrocketing. Tuition costs have expanded at a rate three times higher than inflation, every year. Between 2001 and 2011, the cost of a degree rose 70 per cent. It’s rising faster now.

    Student debt surpassed $1 trillion US dollars in 2011. That figure’s growing at around 10 per cent a year, compared with 1.6 per cent for non-student debt levels. At this rate, US students will owe more than Australia’s total GDP by 2020.

    But these figures don’t really tell the full story. There’s a human cost to this free-marketeering that doesn’t show up in the aggregate.

    Consider this hypothetical American scenario: two students get the same score on the SAT exam. The first comes from a family in the top-income quartile, the second comes from the bottom quartile. The first student is four times more likely to graduate with a degree than the second, poorer student….. Undergraduate dropout rates are higher in the United States than anywhere in the world, except for Hungary. The number one reason given for dropping out? Financial strain.
    The Abbott government insists the deregulation agenda will finally free higher education institutions to become “Australia’s Harvard”. Nearly half of Harvard’s undergraduates come from the USA’s wealthiest 4 per cent of families….

    I guess if what you want is to stop the smart children of the un-entitled poor competing with the children of the entitled rich then the US system has a lot going for it.

  27. Dear Val,
    ” Over to you ”
    I don’t see it that way at all.
    I simply made a statement I believe to be correct and you seem to disagree. That’s fine but I see it as your responsibility to present evidence to the contrary.
    My statement again;

    Changing PMs, and Premiers for that matter, mid term as a reaction to polling is more an ALP thing.

    So the only parameters are were they a sitting PM or Premier at the time they were replaced by their party and what the published voter opinion polls position was at the time. ( bottles of wine and ” family reasons ” not withstanding )
    A site that may be of assistance to you HERE.
    Me not being ” An Historian ” it’s a bit gobbledegookish but you’ll surly understand.
    Anyhoo I’m happy atm with my original.

  28. Jumpy @ 27

    Here’s your original comment

    Paul @ 13
    Changing PMs, and Premiers for that matter, mid term as a reaction to polling is more an ALP thing.
    Don’t get your hopes up again, for your sake.

    I think that pretty clearly reads as slagging off the ALP and suggesting that the LNP is better. My original response was to that.

    If you now want to claim that it’s a comment about the statistical probability, based on previous evidence, about the likelihood of that happening, then it’s up to you to produce the evidence. Just providing a link that shows how each government or opposition leader came into the leadership is not evidence of your claim.

  29. I note Abbott has said here that Turnbull is not after his job.
    Since Dear Leader is a pathological liar I take that as predictive of an imminent change of Prime Minister.
    Just sayin’.

  30. zoot @ 29,
    Whether Abbott is a liar or not, (which he is of course) its immaterial in this instance.
    Whenever a PM or an Opposition leader makes a public statement that someone is not after their job. you can guarantee that that someone is definitely after their job.
    I suspect Clive is letting it be known he’ll back Turnbull if the big nasties in the budget are removed + a few deals that are good for his business.
    Time will tell if I’m right.
    The idea that the Libs won’t do this because of what happened after Rudd was stabbed in the back is ridiculous. If they don’t do it, their results at the next Federal election could very well mean the beginning of the destruction of the Liberal Party.

  31. Jumpy: Since I became an adult, the LNP dumped Gorton in favour of McMahon as a reaction to falling support in the polls. (McMahon lost) Labor dumped Rudd in favour of Gillard for the same reason (Gillard won) and Rudd replaced Gillard (Rudd lost). My recollection is that Joh was dumped. Not sure if there are any more.
    Bit hard to see a pattern here. You could argue that there were more who should have been dumped because of the polls. Think Howard and Keating.

  32. Paul Burns @ 30, I think Palmer has a concept of the public good which goes beyond his own business interests. Also he’s more ‘liberal’ than most Liberals. He’s a complete shocker on the environment though.

  33. He’s a complete shocker on the environment though.

    Which at some stage or other is surely going to cause some problems with the Greens. One can only hope Milne doesn’t take a line of “Do this – or else” with him, and refuse him support on some of his more humane policies. .

  34. In some areas such as refugees Palmer is a lot more humane than the Labor party.
    In addition there are times when he really cuts through the bullshit. Then again…..

  35. Morgan has Labor on 56.5/43.5, which is down half a per cent, which is basically noise.

    PUP is on 7.5, up 1%, a record high.

  36. Newspoll had Labor 54/46, down a per cent. Labor on first preference was 37, down from 37, but still ahead of LNP on 36. The Greens gained one to be on 12.

    Shorten is better PM 45 to 35.

    The good news for the LNP is that things didn’t get any worse.

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