Budgets are rarely make-or-break affairs. Yet this year’s federal budget, to be delivered on May 12, is a critical test for Tony Abbott and his government. After Abbott’s near political death in February, when he faced a vote in his own party room on whether to allow a spill motion, the Prime Minister declared that this year’s upcoming budget would be boring: “It’ll be prudent, it’ll be frugal, it’ll be responsible, but I think when it comes to savings, people will find it pretty dull and pretty routine.”
The declaration of a doctrine of dullness represents a critical turning point for his centre-Right government. It comes as a direct response to the soap opera in the Senate, a drama played out over the last twelve months by independent and minor party senators who turned the rejection of the government’s structural reforms into a Punch-and-Judy pantomime.
It was an extraordinary reversal of fortune. When Abbott won government in September 2013 with 53.49 per cent of the two-party preferred vote, he raised the hopes of many on the centre-Right, not just in Australia but elsewhere in the English-speaking world. His muscular conservatism leavened with classical liberalism and antipodean pragmatism inspired admiration on the Right even as the Left damned him as a Tea Party extremist. Here was a leader who was not afraid to take on the shibboleths of the progressives—he campaigned on the abolition of a carbon tax and a mining tax and did not mince words in promising to defend Australian sovereignty and its borders, turning back unauthorised boats of asylum seekers and running instead an orderly, offshore refugee program.
Yet in February, Abbott’s leadership crisis prompted former British Conservative MP and Times columnist Matthew Parris to write the Prime Minister’s political obituary, assuming that his leadership had already begun its “ill-tempered walk to the gallows”. Parris was not alone. The Left-leaning commentariat also wrote off the Prime Minister they had earlier claimed was unelectable. Yet, two months later, Newspoll, the most authoritative opinion poll in Australia, has Abbott improving his net satisfaction with voters from minus 44 to minus 26 points and the government opening up a five-point lead over Labor in the primary vote of 41 per cent to 36 per cent. Although Labor is still ahead of the government by 51 per cent to 49 per cent once preferences are distributed, the trend, if it continues, favours Abbott and has put him back in the game. What was seen as a unique calamity now looks much more like a standard mid-term slump.
This essay was first published in the May, 2015, edition of Quadrant.
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Central to this turnaround has been what Times columnist Tim Montgomerie called in June 2014 the rise of “Boringsville Conservatism” or “BoreCons”. Montgomerie, a British Conservative Party activist, says that while ideological conservatives in think-tanks and newspapers hunger for the bold conservatism of Ronald Reagan and Margaret Thatcher, calling for regulations and bureaucracy to be rolled back and government spending to be slashed, what voters want in these troubled times is not radical rhetoric but reassurance, not hairy-chested stand-offs but sound economic management and not big-bang reforms but improvements by stealth.
In September 2013 Montgomerie claimed Abbott’s election victory as a triumph for the BoreCons partly because he wasn’t promising to slash spending. By February 2015, however, Parris labelled Abbott the kind of right-wing populist that Tory toddlers could “paint by numbers, a politician that No Turning Back focus-groupers could have stitched together with canvass returns, polling data and steel wire”, and warned that if British conservatives followed his example they would be punished in the polls.
The truth is that Abbott is a complex politician with contradictory tendencies. Montgomerie is right that “nearly every time he finds a way of cutting Australia’s budget deficit, he finds a way to spend it”. But Abbott is also a great admirer of Thatcher and Reagan and despite the fact that $20 billion worth of government savings have been blocked by the Senate, he has still been able to chalk up significant savings or measures to strengthen the economy. For example, apart from repealing the carbon tax and the mining tax and stopping the boats, Abbott ended subsidies for the car industry, refused to bail out Qantas or to give a handout to Coca-Cola Amatil, is privatising Medicare Private, has abolished the Department of Climate Change and has been waging a war on red tape.
It was not these bold measures that led to plunging opinion polls but the combination of the usual first-term errors added to a toxic air of chaos created by inexperienced, populist crossbenchers and an imploding minor party in the Senate. It forced a resolution of Abbott’s conflicting political impulses and led to the triumph of tedium.
This manifesto of the mundane was no doubt inspired by New Zealand Prime Minister John Key, the poster boy for the BoreCons, re-elected in September for a third term with an increased majority, promising nothing more exciting than “a strong and stable government” and “a brighter future for all New Zealanders”. What could the country look forward to? “I can assure New Zealanders,” Key told journalists, “that everything will continue ticking over as usual.”
Labor’s shadow Treasury spokesman, Chris Bowen, noted Abbott’s new strategy of not frightening the horses and set about sabotaging it. In a preview of Labor’s attack strategy, Bowen painted the forthcoming budget as scary and unfair, saying, “the Prime Minister [is] reassuring people, reassuring his party room, that everything will be all right, we’ll still get back to balance, that can only mean more deep cuts in the budget”.
The business community, on the other hand, fears that in committing to a dull budget, the government won’t make the necessary cuts. In early April nine industry lobby groups went so far as to issue a joint statement calling on the government not to shy away from major economic reform without which the country would be on a “path to economic despair”.
Steering a course between these conflicting demands was never going to be easy, particularly as those who want reform do not have a united position on what they would like the government to do. For example, the classical liberal think-tank the Centre for Independent Studies has called for an end to financial assistance for industry, estimated by the Productivity Commission in 2012-13 to cost approximately $9.4 billion per annum. Since approximately 30 per cent of this corporate welfare goes to the manufacturing industry, it is a safe bet that the Australian Industry Group, a signatory to the letter calling for reform but whose members include many who receive industry assistance, might resist such a savings measure.
One of the government’s chief errors with its first budget was to make almost every reform contingent on legislation, which it was unable to get through the Senate. This year it needs to uncouple reform from the budget process and work on it elsewhere. The government should have done this last year, for example with the Medicare co-payment, sending it and a broader health-care reform agenda to the Productivity Commission to allow stakeholders to wage war over the policy and only deciding what measures it would adopt once it was clear what the community—and the Senate—were likely to support. The government has done this with the Productivity Commission inquiry into workplace relations, which is looking at contentious but potentially vital reforms in areas like penalty rates, youth wages and individual bargaining agreements that could make a big difference to levels of employment.
Stripped of the task of economic reform, the budget can be returned to a more traditional accounting exercise. Yet already the government has signalled that reform to childcare payments is likely to be announced in the budget, using the money the government planned to spend on paid parental leave to provide greater assistance. While this was studied by the Productivity Commission there is still considerable uncertainty about what the government will announce, how much it will add to the budget bottom line and whether it will win the support of families and of the Senate.
But is it really possible, or even desirable, to make budgets boring? John Maynard Keynes hoped so. He thought it would be splendid if “economists could manage to get themselves thought of as humble, competent people, on a level with dentists”. The idea was presumably to make budgets as boring as dentistry even if they were as painful as root canal therapy. The Swedish political scientist Herbert Tingsten thought the rise of technocratic government would turn politics into “a kind of applied statistics”.
Certainly, few people get as excited as former prime minister and treasurer Paul Keating at seeing a “beautiful set of numbers”, but budgets nonetheless are about who gets what and how much, and because such decisions always leads to a clash of values and conflicting interests, controversy is inevitable. In an era without windfalls to throw around, budgets must create winners and losers, and the losers will protest.
When it comes to reducing expenditure, the strategy of the government will be to rely on innovation and on eliminating waste and fraud. This flows from the recognition that there is no easy path to cutting expenditure. With the government already in debt, there are no “rivers of gold” flooding in with which to buy off the losers from any reform. Nor does the government have much political capital on which to draw which might help convince the electorate that it’s a matter of hard bread today for jam tomorrow. With no obvious easy targets or politically painless cuts, what is required is what Max Weber referred to as “strong and slow boring through hard wood”, which will be genuinely dull.
In health, for example, there is no silver bullet or prospect that a big-bang reform could be introduced to rein in expenditure. So it will require line-by-line reviews of individual expenditure items to cut fraud, better target services and eliminate waste. But there is much work that has been done identifying problems in this area. For example, Dr Tony Webber, the former head of the Professional Service Review, the watchdog in charge of policing the abuse of Medicare, wrote in the Medical Journal of Australia in 2012 that the creation in 2005 of Medicare rebates for General Practice Management Plans (GPMPs) and Team Care Arrangements generated a bonanza for unscrupulous practitioners and corporate owners to claim for clinically unnecessary GPMPs. It also created a whole industry of allied health practitioners and dentists who were able, for the first time, to shift the cost of podiatry, physiotherapy, psychology and dental care onto the taxpayer.
Jeremy Sammut, a research fellow at the Centre for Independent Studies, calculated that between 2005 and 2013, the total real cost of these expenditure items increased by 327 per cent and by 2012-13 the total expenditure on these items was at least $720 million. Three years on, Sammut says nothing has been done to eliminate the abuse in this area.
Voters know that this sort of waste exists throughout the health sector and the public sector and expects the government to crack down on it before raising taxes. Properly done, it should save more money than a modest co-payment.
Of course, even when it comes to eliminating the abuse of Medicare, an area in which the government indisputably holds the moral high ground, doctors and allied health professionals will still make the case against change. Yet by harnessing the knowledge and critiques of insiders, such as Dr Webber, the government gives itself a fighting chance of winning the argument.
The government should not make the mistake however of assuming that public service mandarins will be an ally in this task. Some will no doubt find it easier to ask for additional revenue rather than go through the hard work of making savings the way a private sector company would in search of increased profitability.
The holy grail of reining in government spending is to improve services while reducing costs. Usually this can only be achieved by finding whole new ways of doing things, much as Uber has revolutionised taxi services. The government could facilitate this by making public sector data available to the general public and inviting the private sector to come up with innovative ways to improve services and reduce costs, while increasing transparency, accountability and efficiency.
Is it possible to have boring budgets when spending already exceeds revenue? The recent state elections in the eastern states provide grounds for both optimism and pessimism. While the Queensland government narrowly lost an election fought on the leasing of state assets to pay down debt and fund new infrastructure, the New South Wales government showed that it was possible to take the same unpopular policy to the electorate and comfortably win an election.
Perhaps the easiest way to take the excitement out of a budget is to have nothing new in it. The whole tradition of a budget lock-up has become increasingly artificial. Paul Keating may have liked throwing the switch to vaudeville, but with no bread and circuses to give away perhaps the government should leak absolutely everything beforehand. What could be more boring than that?
The true test of the success of the budget should perhaps be that on the second Tuesday in May most people choose to watch My Kitchen Rules. Then again, they probably always have.
Rebecca Weisser is the former Opinion Page Editor for the Australian.