Well, here we are heading for the fiscal falls. The Government has locked in their strategy, not one I would have chosen but they have made the decision so over the falls we will go.
Let us try to be positive. First and foremost, it is better than anything that Labor might have done. For all their maunderings about balancing the budget and getting their house in order, there was never the slightest chance they would. The Swan-Wong team of economic managers had no will at all to stop the fiscal rot. The spending ministers overwhelmed those who thought about prudential outcomes, assuming any thought that way at all.
Second, the budget will be a tough sell but it can be done. Abbott has credibility. No one will be in any doubt that the fiscal horrors left by Labor are an Augean stable that were not the Coalition’s doing. I don’t think they have set this narrative up anyway near well enough but even at this late stage they might be able to convince the country (or at least 50.1%) that these are steps that must with absolute necessity be taken.
Third, the steps to be taken are decided by cabinet so no point in dwelling on what I would have done. That’s a lot of people amongst whom the right compromises must be found. No doubt the PM and Treasurer are leading the way, neither of whom is an economist but there have been other hands on the tiller as well. Everyone in the Ministry is frightened by the size of the deficit they must deal with and are thinking about how this is to be done. They cannot see economic growth as the road to balance, and in fact, don’t really seem to have much idea about how to generate that growth. This must be looked at as a distant second best solution but with Treasury a dead zone for economic thinking, maybe that’s all that can be done. I imagine very few in Cabinet think that a program of cuts to public spending, pulling down regulation, and freeing up industrial relations would do the trick. So this is the way they have chosen to go forward.
Fourth, the major issue is the politics. If there weren’t an election to come in 2016, for which these decisions will be anthrax and strychnine for a large proportion of the voting public, it would not be all that hard to accept that this is how it will have to be. Since this seems to me like a poor approach to the economics and a very dangerous approach to the politics these decisions fill me with dread. If they lose office on the back of these decisions, they will be deposited in the very lowest depths of our political inferno. To have misjudged the politics will be unforgivable. Three and out would repel me and anyone who seeks good governance into the long term. If it brings Labor back to office after three years and not six or nine, there is nothing they can do or will have done that would be anywhere near fair compensation. All they will have done is hand over a more solid foundation for future Labor Party waste. Bill Shorten is far and away the strongest supporter of these policies in the country.
Nevertheless, this is their call and they may pull it out. Economic policy is not the only thing that affects the direction of an economy so there might really be a strong economy leading into the next election. Even more impressively, the country might even appreciate someone taking responsibility for the horrors that the ALP left behind. There may be a constituency for people saying that we must pull together for the national good. The media won’t help them but the Government does have its friends. The die is obviously cast so there’s no point in going on about it. So for me, I will hope things work out for the best and get on with life.