Abbott-haters forget the peril we're in

At other points in Australian history it might have been quite enjoyable to watch the lambasting Prime Minister Tony Abbott and his team are copping from the larger part of the commentariat over the May 13 budget.

At this point in history, it’s terrifying.

What we are seeing on the front pages of papers and in the op-ed sections is a venting of bile and opprobrium that, on moral grounds, Abbott may deserve, but which threatens to punish the whole nation rather than the PM.

That is not to say the government hasn’t offended -- Abbott set the bar for honesty as high as possible and then presented Australia with a ‘farrago’ of broken promises, as one Labor speech-writer put it.

It was Abbott, too, who made a virtue out of an often illogical and populist assault on Labor policies -- the exemplar being his success in getting Australians to vote to abolish a least-cost carbon trading scheme in favour of one that will cost them more per tonne of abatement.

There are plenty of others -- voting against the Gillard flood levy, opposing the scrapping of the salary-packaging tax rort on leased cars, and opposing Labor’s small attempts to correct the over-generous tax concessions in superannuation.

So in moral terms, yes, let’s get Tony.

What makes this all so terrifying, however, is that the press pack rounding on Abbott will likely harm the nation. Much as the left is enjoying the current bloodsport, there is just too much at stake to focus on trivialities such as ‘Winkgate’, Abbott’s daughter’s schThe glee commentators are deriving from Abbott-baiting threatens to punish the whole nation rather than the PM as the great cash-cow that has sustained the nation for a decade, the resources price boom, is ending.olarship, or who in the Coalition smokes cigars.

What’s needed, if we are to stop the wheels falling off the economy, is more of the ‘look-through’ principle. Just as ‘look-through gearing’ describes a company’s real liabilities rather than less alarming figures from individual business units (it was Babcock & Brown’s look-through gearing that, once understood, brought that company crashing down in 2009), what we need is more ‘look-through political economy’.

That’s because beyond the thrilling hunt for Abbott or Hockey’s latest faux pas or personal quirk, the economy is at its most precarious point for decades.

While it’s true that the Australian was at a precipitous point in early 2009, its weakening pulse was shocked back to life by a combination of domestic stimulus, and the booming demand for commodities caused by China’s stimulus. Little Keynesianism that stood on the shoulders of China’s giant Keynesian push.

The corpse jumped back to life and we emerged from that dreadful period with most Australians thinking the good times would roll forever. Now things are once again precipitous, with the iron ore prices tumbling lower, and Australia slipping from 16th to 17th on the IMD global competitiveness index. As the table below shows, the only silver lining to that cloud is that we’re beating the Kiwis.

As iron ore pulls down the terms of trade, mining-sector capex falls off a cliff, and under-employment grows (a much better measure of our prosperity than the fairly benign ABS unemployment figures), the last thing we needed to add to the list was plummeting consumer confidence -- but that’s what we saw last week. 

It is in the context of all these economic nasties that commentators should think very carefully about the glee they’re deriving from Abbott-baiting. In normal times, it might be a fine thing to excoriate deceitful leaders, but these are not normal times.

The truth is that whether it was Labor or the Coalition who formed government in the 44th parliament, bold economic changes were needed. And no, that does not mean ‘stop the boats’, ‘end the debt and deficit’, ‘cut red tape’, ‘scrap the tax’ or any of the other oversimplifications Abbott used to get elected.

As my colleague Steve Keen has pointed out, “budget deficits of the scale Australia has historically run are no big deal -- and they may be beneficial in the current economic circumstance.” In other words, punters have been scared by the ‘budget emergency,’ but focusing on a ‘return to surplus’ may actually make the nation poorer (see his full explanation here).

The great cash-cow that has sustained the nation in the past decade, the resources price boom, is ending. The policy-minded commentariat must remain focused on what is to replace it.

Two plans were offered at the last election -- Labor’s optimistic plan to keep confidence and employment high and hope global conditions allowed non-resources sectors to begin flourishing again; and the Abbott austerity plan that was laid out in the May 13 budget.

There are obviously many flaws in that budget -- particularly the needless persecution of the genuinely unemployed or disadvantaged -- but emerging from the political wreckage of that process is something like an economic plan.

As described previously, its most important facet is an overhaul of the increasingly dysfunctional federation – a radical change of course for the nation, but one that may actually reap large economic benefits (see: Does Abbott’s army know why it’s marching? May 20 ). However, instead of discussing this, too many serious thinkers are drawn into ‘Winkgate’ or student-inspired class-war rhetoric.

The school bus is rolling over a cliff, kids. Somebody has to steer it in another direction.

The really alarming thing about the current media debate is that we’ve seen it before -- when a political figure loses the support of the Canberra press gallery, they really lose it. Through the late 1980s, for instance, Treasurer Paul Keating had a magnetic attraction for journalists of the day -- some gallery journalists literally had signed photos of the charismatic Treasurer on their walls at home, and this kind of approval helped Keating immensely through the reforms of the early 1980s.

However, as Gerard Henderson recorded in his 1995 book ‘A Howard government?’, the love affair between Keating and the gallery began to fracture towards the end of the 1980s, and many began to dote instead on John Hewson in the lead-up to the 1993 election. That, argued Henderson, is why nearly the entire gallery got their predictions for a Hewson victory so wrong.

A similar process characterised the Rudd ascendancy. Dozens of journalists enjoyed a close relationship with the former PM, but that love affair ended around May 2010 -- with only a hard core of senior journalists sticking by their man through the Gillard years, and playing a central role in his return as leader last June.

Julia Gillard never got as close to journalists -- while Rudd and Keating were masters of cultivating such relationships, Gillard was just not cut from the same cloth. Moreover, the manner of Rudd’s removal left dozens of gallery journalists angry with Gillard, as figurehead of the ‘faceless men’ who arranged Rudd’s demise.

What we are talking about here is not widespread abrogation of the duties of journalists, but pure human nature. When a PM phones to ask your opinion it is deeply flattering. When you are warmly greeted at state functions, and introduced to international dignitaries, it can be intoxicating. 

During the Gillard years, many journalists saw Tony Abbott as the grown up to replace a PM whose policy agenda some thought of as ‘university politics’ (a common slight on the left) -- and the Abbott slogan-heavy platform never received as much scrutiny as it deserved. Journos were just too busy beating up the Gillard front bench. Now Abbott is falling foul of the same cycle, though in this case his relationship with the gallery is breaking records for disintegrating so rapidly.

The point I am trying to make is that, whatever the circumstances of Abbott’s rise and the broken promises and inequitable policies thrust on Australia in the May 13 budget, the nation will suffer if journalists don’t ‘look through’ all the bile and bluster to see what’s happening to the economy. As a Bill Clinton advisor famously put it, “It’s the economy stupid”.

Entering an extended downturn, or watching the government flounder while the nation slips into structural decline, isn’t good enough. The love affair, such as it was, may be over. But we need to ‘look through’ the budget to see if Abbott’s economic plan can work.