Will Humpty Hockey have a big fall?

The Treasurer is busy reshaping the national debate on debt with an entirely different meaning to when he was in opposition.

'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean – neither more nor less.'

Like Humpty in Lewis Carroll's Through the Looking-Glass, Joe Hockey has used his first few weeks as Treasurer to assert some unconventional semantic rights – the terms 'debt', 'shock' and 'public' are all being subjected to some vigorous Humpty Dumptyism

'Debt' isn't debt at all if it's spent wisely on much-needed infrastructure. 

The government needs to borrow more in case there's another economic 'shock' – such as our baby boomers getting a year older twelve months hence, and needing more expensive healthcare. It could happen you know!

And the 'public' sector, which the Abbott government wants to shrink, can stay small as long as all it does is underwrite the risk of private investors in infrastructure, or soak up the private funds used to buy Australia Post, Medibank Private, the HECS debt or even Centrelink assets at attractive prices. All are being considered. 

Armed with new definitions for these old terms, Hockey is attempting to shape national debate such that he can protect both the economy and the Coalition's stellar position in opinion polls – there is no sign yet of a big fall. Quite the opposite, in fact. 

Hockey's paid back $8.8 billion to the Reserve Bank that economist Warwick McKibbin thinks ought not to have been borrowed by Wayne Swan in the first place. 

He's boosted the federal gross debt ceiling to $500 billion, well ahead of the $400 billion Treasury would have preferred. (Even vocal Coalition supporter Judith Sloan has said she'd have preferred a more gradual lifting of the debt ceiling.)

And he's talking up infrastructure investment as a way to take up slack caused by the end of the investment phase of the mining boom. 

This is all good stuff. The 'debt and deficit' panic that helped get Hockey and Abbott into wonderland is now seen for what it really was – a highly effective political strategy with next-to-no substance. 

Note, for instance, how the debate has switched from net debt under Labor to gross debt under the Coalition. That is one way to make Labor's legacy look disastrous. However, later in the Abbott government you can bet net debt will once again be the focus – particularly if Hockey has used the company credit card to build vital infrastructure. 

Hockey is still hoping the private sector will become a bit more risk-friendly and build a lot of the infrastructure we need in the next few years. 

News that the US funds management group Blackstone is considering shifting more capital to Australia is one hopeful sign, but Hockey's best hope of mobilising private money is to use the public balance sheet to guarantee investments by our own local super funds. 

The political problem with all this is that Labor, carrying large bruises from the 'debt and deficit' pummelling it took from Hockey and Abbott during the 43rd parliament, will try to damage the government using exactly the same argument.

In truth, both sides know that we are still in perilous times. Booming stock prices and housing sales tend to gloss over the fact that the current 5.6 per cent unemployment rate is set to rise to 6 per cent in early 2014 and may go further .

The wise thing for Hockey, just as it was the wise thing for Labor, is to leverage the still-healthy 'public' balance sheet, accrue a bit more 'debt', build the infrastructure to get the economy moving again before a real 'shock' arrives. 

When the bile of political discourse is wiped away, Hockey's Humpty Dumptyism can be seen for what it really is – good sense in troubled times.