The government doesn't really need Clive Palmer

Whether the four Palmer United Party senators vote as a bloc after July or not, it would make sense for Tony Abbott to antagonise until they refuse to pass the carbon tax repeal.

"The people of Western Australia are smart, savvy people and I don't believe that they are going to allow themselves to be bought."

- Prime Minister Tony Abbott, last week.

Wrong. Clive Palmer won the WA Senate election re-run using money and theatre, a winning combination in the west. He appears to have picked up the swing that the Coalition lost, and will control four seats in the Senate after July.

Labor was the big loser, emerging with a dismal primary vote of just 22 per cent, and the Greens picked up the swing against them. The Palmer United Party will have the balance of power, since the Greens, with 10 seats, usually vote with Labor.

A hung Senate is nothing new, but having the balance of power in the hands of a rich, crazy businessman is a first, and the Prime Minister’s personal attack on him last week should make things even more interesting.

Of course it’s possible Clive Palmer has only been pretending to be crazy, putting on a show for the smart, savvy people of WA as well as the rest of Australia (one anonymous observer quoted in The Australian this morning remarked that the re-run Senate election in WA was a circus and the people voted for the clown).

It’s unclear whether the PUP members in the Senate will vote as a bloc or not, but it’s certainly clear that to get its legislation through, the government will have to negotiate with them, either collectively or separately, as well as the independents.

Will they pass the repeal of the carbon tax, on which Tony Abbott based last year’s campaign? Well, that’s going to be the question.

In fact the sensible thing for the PM to do would be to continue to antagonise Clive Palmer so he would refuse to repeal it. 

What’s more, Abbott would be crazy to call a double dissolution election on the issue -- with Palmer’s willingness to spend and Australians’ willingness to be bought, he’d probably end up with more seats, in both the Senate and Lower House.

The government is being nagged by both the Secretary of the Treasury and the governor of the Reserve Bank to raise indirect taxes, since two of the key economic issues facing the country are a looming tax revenue shortfall and an infrastructure deficit.

Yet the Coalition’s No.1 policy item at the last election, and the top item on its legislative agenda, is the lowering of indirect taxes though the removal of the carbon tax, which is, in effect, an extra GST on electricity. 

And not only does the carbon raise money, it cuts carbon emissions cheaply, which the government says it wants to do as well.

So if the carbon tax is removed, other indirect taxes will have to increase more and the Coalition’s “direct action” plan to reduce carbon emissions will increase government spending. This is clearly the reason Tony Abbott attacked Clive Palmer last week.

As for other legislation that might be held up in Clive Palmer’s Senate, the main jobs of this government involve administration and negotiation, not legislation. 

It must cut spending and raise taxes to remove the structural deficit over the medium term, and negotiate a series of free trade agreements that actually improve our trade position. If it does these two things in its first term, and nothing else, it will deserve re-election with an increased majority.

And neither of them needs Clive Palmer.