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July 22nd 2014 print

Peter Smith

Deaf and Blind to the Budget’s Mistakes

Joe Hockey's appallingly inept budget is no longer the real problem for a government the polls suggest is on the ropes and quite likely to stay there. The bigger threat and greater folly is Abbott & Co.'s delusional refusal to recognise the scope of its mistakes

blind monkeyThe boats have stopped, the carbon tax is gone. The government should be riding high but isn’t. ‘Oh, it’s all because people don’t understand what we’re trying to do,’ the government whines. Nonsense!  Can they get it through their thick heads? The budget is incredibly, inconceivably bad.

There, I’ve said it! Is anybody listening? Unfortunately, logic has trouble penetrating the fog of political partisanship. Those on the Labor side suffer badly from Abbott-loathing syndrome. Those on the conservative side seem to believe that repairing the budget and accepting the government’s ham-fisted effort are one and the same. They are not.

The evidence points to those who developed the budget being incompetent. This is not being unkind. A large proportion of people are incompetent. They need to be accorded respect. I’m not a eugenicist. We mostly manage to filter them out before they become surgeons or airline pilots or fill other demanding occupations. Unfortunately, this leaves more of them available to become public servants and politicians and, failing that, bankers.

The budget is a bygone problem. The problem now for the government is not the budget itself, which could be withdrawn and replaced, but an inability to recognise its mistake. At its core is a communication problem. It is not the kind of communication problem that governments are fond of citing. You know, the response which says our policies are good but we are misunderstood. It is an internal communication problem.

From the days when I worked for a bank I recall a senior executive love-in led by a guru. Its aim was to improve internal communications by tearing down barriers between the most senior of executives and those further down the pecking order. Shortly afterwards increased security was installed to make it harder to reach the floor which housed the CEO, whose large desk remained as far from the entrance to his office as it ever had been, despite this being specifically addressed as a problem.

The banking industry has been doing roughly the same thing for hundreds of years. It incurs liabilities (mainly deposits) on one side of their balance sheet and build assets (mainly loans) on the other. Most tasks are mundane. Any Johnny could do them. As a result, jockeying for position is paramount and open communication discouraged in case it reveals some career-threatening mistakes.

Problems build until they boil over.  Banking crises eventually erupt or, on more minor levels, banks have to refund unfair fees collected over many years or provide compensation to customers who have been serially misled. It is a cultural communication phenomenon which largely will never be fixed — and you can have as many inquiries as you like.

Having recently moved house, Tony Abbott sent me a welcome-to-my-electorate letter. Instead of filling in his useless pro-forma feedback form I wrote him a one-page hard-copy letter via snail mail; the old fashioned way. I made it clear that I was a supporter while at the same time pointing out that his budget changes to the aged pension and Medicare package were unsellable and, further, that the introduction of the Paid Parental Leave scheme was ill-timed. However, I particularly concentrated on the change to the indexation arrangements for the aged pension and encouraged the PM to back off this measure before it queered his chances of re-election.

A little over one month later came a letter from his office thanking me for my letter. The letter was signed off by his electorate manager. It was clearly a form letter telling me that my “correspondence [‘re Medicare’, it said] is receiving attention”. Hmmm, I thought. Nobody, least of all Mr Abbott, has or will ever read my carefully crafted letter. It was a waste of time. I thought it would be. So I can’t claim to be surprised.

But the larger question is not whether little old me gets a hearing but whether government ministers have circled the wagons and are behaving like bank executives hearing and seeing no evil. Are they simply talking among themselves about how political and ill-conceived are the attacks on the budget? If that is the case it will blow up on them.

I listened to Barnaby Joyce on Sky News following the repeal of the carbon tax. He explained the need to protect the incomes of pensioners and said something to the effect that everybody knows they do it tough. My God, I thought! It has gone so far that Mr Joyce and his colleagues have split minds with non-existent or scrambled communication between the two halves. They can believe in protecting pensioners’ incomes with one side of the brain while reducing those incomes with the other.

The government should make some effort to listen with open and intact minds to the right people. In this case it happens to be the Labor Party, not their doting conservative friends. The Labor Party says the budget is unfair. In part it is, and that is patently the case even if the Labor Party is saying so.

Here’s a simple message for Joe Hockey which surely cannot be misunderstand: There are ten of us drifting in an open boat at sea. Among us there are two octogenarians, two pregnant women and a small child.  No, we can’t all contribute equally to the rowing and some can’t contribute at all. That is just the size of it. The moral of the story is not to make blanket decisions that we all have to do some lifting to repair the budget. We don’t.

Peter Smith

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics