You could have knocked me down with a feather when I heard Prime Minister Tony Abbott say that a whopping debt of "50 to 60 (per cent of GDP) is a pretty good result."
Admittedly he didn't condone the target but why would he say that unless he was softening up public opinion for a much worse debt level than anyone had contemplated? It seems he has left open the prospect that he's not really going to try very hard to cut spending beyond what little he has done already. For me, Abbott's comments seemed even more surreal when compared to the government official who told a Senate committee the government's figures show Australia will be in deficit for 40 years.
Fifty to 60 is not a good result; it's a shocker and puts us on the way to Greece. If we get into a recession in the next 40 years Australia could experience a serious blow to our economy and real poverty for potentially hundreds of thousands of the most disadvantaged in our society. It could make the recession "we had to have" look like a walk in the park. I doubt Australians will accept that 50 per cent or anything like that could ever be "a pretty good result".
And what about the promises made to the supporters in the 2013 election? Not one Coalition supporter could possibly have ever thought that a Coalition government would contemplate a debt level multiple times worse than what it is today. Most of those who voted for the Coalition expected the Coalition to fix the mess left by Labor not to sit back and see the fiscal situation become significantly worse.
But Abbott said more. Having torn the Labor Party apart in the 2013 election for its irresponsible spending, I find it hard to understand how the PM could then turn around and say that the budget is now "manageable". How can it be said that the government had "very substantially" addressed the budget situation when the government has dumped a number of its own proposals.
The Liberals either believed what they proposed in the budget were vitally necessary cuts or they didn't. Even frontbenchers have recognised that the government's 2014 budget was not that good. So if it was not so well managed then how can it now be said that it was so successful that the federal budget has gone "from out of control to manageable". Sorry, but this does not add up.
I also find the policy approach to be confusing. One minute I was reading the intergenerational report and thinking that the government had at last exposed the extent of the fiscal challenges which confront the government. I thought the government had finally started to hit the right notes. The prospects for the economy were not great but, by being straight with the electorate, the government was on the path to a consistent and honest statement.
And then out of the blue I hear the Prime Minister with a completely different story.
The new story is that we might just glimpse something close to balance in 2020. But it would be like an eclipse of the sun, there one minute, gone the next. Personally I don't believe any of it. Why should anyone accept that claim? Anything could happen in the meantime.
The real fear is that both sides of politics might persuade themselves that they have no choice but to walk away from fiscal repair prior to the next election. Between the lines that is the obvious concern of the RBA Governor Glenn Stevens who stated the bleeding obvious when he said that Australia is "not on the correct path for the long run and we need to get onto a better path". It's the same message from the business community.
Labor is a big part of the problem. Bill Shorten's negativity has made Abbott's time in opposition look as if he were a saint. Confidence in the economy is under attack, not because of the Coalition but instead because of a sense of despair in many quarters that the political system is not able to produce good economic outcomes. In that regard Shorten has been a total failure as a leader. He lacks a broader view and he has no sense of strategy of how he might one day have to confront the same problems as Abbott.
So what now? Some in small business will get a small tax cut and there will be some money for childcare. But as a political ploy, a few baubles paid for by more debt is not the answer. A dull budget is no good to anyone. A dull Abbott budget will leave the electorate underwhelmed and wondering what the government is going to do next to protect jobs and living standards.
Peter Reith was a Howard government minister and is a Fairfax columnist.
