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Abbott in abeyance

 

Tony Abbott

The issue

Tony Abbott has survived a backbench revolt to remove him as Australia’s prime minister, but this is only temporary. The vote of Liberal party MPs and senators on Feb 9 was 61-39 against ousting Abbott, hardly a ringing endorsement and an indication that half of those outside the ministry want him gone. Abbott himself described it as a ‘near-death experience’, and admitted he was on probation, but it is more than that. The verdict was a suspended sentence, and will be carried out unless the prime minister can demonstrate he’s up to the job.

Analysis

One law of successful management is always to give top jobs to people who are brighter than you. The toughest job in the Abbott ministry is that of treasurer, and with a crucial budget due in May, the obvious appointee is Malcolm Turnbull, a former investment banker, and current minister of communications.

But herein lies the problem. Turnbull is the man most likely to challenge and succeed Abbott when the next vote of confidence is called, likely in weeks rather than months. Ironically, he was once leader of the Liberal Party, until the party room decided by a margin of one vote to depose him in favour of Abbott because he was seen to be too moderate.Back benchers – and some in the Cabinet – believe Abbott should take the bold step of appointing Turnbull to Treasury. He will not.

The 2014 Budget, drawn up by the present treasurer, Joe Hockey, was a disaster. Not only was it perceived by the public to be unfair,breaking a raft of promises made by the prime minister before the 2013 election. Those parts of it that had merit were poorly presented, and therefore not understood by a populace that is living under the delusion there is no budget crisis. With the Government’s forward estimates now indicating a Budget deficit of around $650 billion, few people believe Hockey capable of addressing the problem. Like Abbott, he is in the last chance saloon, on borrowed time.

According to Peter Costello, Australia’s longest-serving treasurer and one of its most successful, the Coalition government’s retreat from a tough approach to balancing the balance, is endangering Australia’s future. He told The Australian, “unless we get our expenses and revenue back in equilibrium now”, the country would be broken. It was Costello, of course, who handed a healthy surplus to the incoming Gillard Labor government in ???, having generated $100 billion in surpluses over his 12 budgets.

What Australians will get are some tax incentives to encourages investment in small business, and a new child care scheme that will probably  be means tested. But these will not do anything to help the Budget.Our charts below show the detail of the problem as it stood with the Mid Year Financial Statement in December. Things have got worse since then, and will continue to do so.

What happens now

The Government is under pressure from business and its right-wing to cut public spending further to address the revenue shortfalls in the Budget, without harming growth. There may be some tentative moves in this direction, but not enough to make much difference. In the meantime the Australian Labor Party (ALP can be expected to ease up its pressure on Abbott, because it does not want him replaced by Turnbull. Turnbull heads a ‘government-in-waiting, where Julie Bishop will retain her job as deputy prime minister and foreign minister, with Scott Morrison promoted to Treasurer. This will present Opposition leader Bill Shorten with a much greater election challenge than a government led by Abbott.

The route to surplus - since this Treasury forecast in December, the Government admits it can't be reached. Source: Treasury
The route to surplus – since this Treasury forecast in December, the Government admits it can’t be reached.
Source: Treasury

route to surplus MYEFO

Australia's estimated debt as forecast by Treasury in December.
Australia’s estimated debt as forecast by Treasury in December.