Abbott's controversial new foundation for Australia

If Tony Abbott and the Coalition win office at the next election Australia will be fundamentally changed.

Whether Tony Abbott as prime minister can achieve his vision is another subject. Whether his vision should be Australia's vision will also be the subject of great controversy.

But what is not in any doubt is that we are looking at a totally different society under Abbott, and that Labor's fury of the next election campaign will be aimed at preventing this happening.

So today and tomorrow I will describe what business and public service Australia would look like if Abbott comes to power and actually does what he says he is going to do.

The first and biggest change is that he will immediately re-introduce the building industry rules for Commonwealth government tenders on large building projects in Australia, which can be expected cut the costs by 20 to 25 per cent.

This is exactly what Victorian Premier Ted Baillieu is doing and New South Wales and later Queensland will follow – all three governments are appalled at current practices.

In essence control of building sites and who can be sub-contractors will be taken away from the unions and companies – a practice which is highly advantageous for commercial builders but sends costs through the roof. Unfortunately most of the large Australian building companies currently do not have the skills to manage contracts the Abbott way so groups like Leighton and Lend Lease face enormous challenges.

Lend Lease has already been banned from Victoria because it would not or could not adhere to the Abbott-style Victorian building contract rules (Lend Lease strikes out an unholy union, December 18).

This is a vital lynch pin in the Abbott plan because the lower costs of infrastructure building would allow him to proceed with a dramatic set of big infrastructure projects in New South Wales, Victoria and Queensland and proceed quickly. Longer term the infrastructure list includes dams in northern Australia to make Australia the food bowl of Asia.

He will need private capital and his booklet emphasises this requirement, but does not yet set out how this will be done – a significant gap. However clearly self-managed superannuation funds have the money available and because lower interest rates have lessened the attraction of bank term deposits they will be looking for well constructed infrastructure projects.

Tony Abbott has also said that he would not make fundamental changes to the superannuation system. If he is true to his word, it means that it won't be compulsory for superannuation funds to invest in infrastructure but it will need to be made attractive.

If establishing big infrastructure projects quickly around the nation and reducing their cost is a pillar of the Abbott plan, there is a second pillar that he has not often discussed – a different way of developing business.

"We have a responsibility to keep a diverse five pillar economy: with a capable manufacturing sector, a growing knowledge economy and a sophisticated services sector, as well as strong resources and agricultural industries,” the Abbott booklet says.

"This doesn't mean ‘picking winners' or second guessing the private sector but it does mean low taxes, competitive interest rates, user-friendly government and first-world infrastructure so that creative businesses can flourish.

"With abundant coal and iron ore, Australia should have a natural advantage in making steel. With abundant bauxite and cheap power, Australia should have a natural advantage in making aluminium. With greater export orientation to drive higher production volumes, there is no reason why Australia cannot sustain a viable motor industry.

"The demands of the resources sector should help to sustain a sophisticated heavy engineering capacity in Australia. In this case, the tyranny of distance should actually be working for us, not against us. The threat to the Australian manufacturing industry doesn't come from lack of subsidy but from ideologically driven taxes, union-brokered labour market changes and governments fixated on scoring political points ahead of good long-term policy."

Are these motherhood statements to please the Nationals' Barnaby Joyce, or does Tony Abbott actually intend to carry this out? The unions will see this is a concealed industrial relations attack.

Unfortunately, apart from the removal of carbon tax, Abbott does not explore the dreadful mess the current government has made on energy policy, which has left Australian manufacturing and Australian households short of gas and longer term they will be short of power (Painful extraction from an energy morass, January 9).

If Australia is to have a strong manufacturing industry it will need to follow US policy and base it on the substantial gas reserves Santos believes we have in shale gas near the Cooper basin (Australia must manufacture some Obama zeal, January 9).

But at this stage the Cooper reserves can't be economically developed for the local market because the local prices are too low. And in the manufacturing area the union rules make it extremely difficult to compete offshore. But that is the challenge Abbott has set himself and it would certainly transform the nation if he achieved it.

The third area of fundamental change comes in the administration of schools, hospitals and large areas of the public service. The cost reductions Tony Abbott would achieve in these areas will be monumental and he believes they will fund his lower taxation policies and expenditure commitments. The opposition to what he is proposing will be ferocious because it changes the whole public service game. For example, he aims to rationalise hospital and education expenditure between state and federal governments. His idea is to empower local school and hospital bodies and that will be done via much less bureaucratic involvement. Similarly, in the environment area the Commonwealth will set rules but will exit administration and give a lot more authority to states.

Enormous savings will be involved and many pubic servants will lose their jobs. But this is more than just savings. This is a different way of running government. For decades, governments on both sides have been about increasing the size of the public service and Abbott says he is going in a different direction.

Of course, as we know, the carbon tax will be quickly eliminated and Abbott says if carbon tax revenues and expenditures are netted out it adds to his bottom line. Once again the opposition will be absolutely ferocious. Tony Abbott plans to reduce carbon by direct action and once again although this might be the most sensible idea anyone could have thought of, the opposition will be vigorous.

Abbott believes he can substantially decrease expenditure on the national broadband network and will give some of that money to other infrastructure projects. That will mean a new agreement with Telstra, none of which will be easy – lots of hazards have been put in place in that area.

Tomorrow, I will look at another Abbott change. It will mean that almost all of our larger companies will have to look again at the way they operate.