Well, This Is What I Think

Repeat after me: You … will … like … this.

Far from backing down over the howl of protest of the last few days at the floated “tax increase” ahead of the Budget, and in what is, in our opinion, an astonishing display of mule-headed tone-deaf bravado, Prime Minister Tony Abbott says voters will eventually thank him for trying to repair the budget bottom line, even if it includes breaking his very clear promise not to introduce new taxes.

But Mr Abbott says he knows people will be “disappointed” with some of his methods and is again refusing to rule out reports he will raise income taxes for those on higher wages.

Some Liberal MPs – closer, perhaps, than the PM to the Coalition’s overwhelmingly well-off blue-collar and middle-class backers, many of whom earn more than the mooted $80,000 threshold were the new income tax levy will kick in – are leading a backlash against the deficit levy with some even threatening to cross the floor in opposition to the move, if it is included in next Tuesday’s budget, as expected.

This, of course, would be something of a meaningless gesture, as it certainly will not be in large enough numbers to actually defeat the move. They would be better advised to try and “roll” the PM before it gets into the Budget bill. But given the locked-in support of the PM, the Finance Minister, and the Treasurer, this looks unlikely, too, meaning that the net sum effect will be “Libs split on new tax” headlines everywhere.

Abbott has obviously decided he can burn some of his political bank account and ride that out. We are not so sure. If the polls continue to turn relentlessly southward over the next few months we believe many of his backers, both in Parliament and in the wider party, will demonstrate long and accurate memories.

Potentially rebellious Liberal MPs say the new “levy” would breach the Coalition’s pre-election pledge not to introduce new taxes. They are, of course, absolutely right.

“Was that a core promise? Was it? Hmmm?”

We cannot help but idly speculate who has been advising the Government on its post-election economic and political strategy, given that John Howard, Tony Abbott and Joe Hockey are all Sydney chums, and Howard and Abbott have historically been very close. In an eerie throwback to Howard tactics, the Prime Minister now says the Government’s “most fundamental commitment of all” was to “get Labor’s debt and deficit disaster under control” and that justifies changing tack from his pre-election commitments. This has strong echoes of John Howard’s much-derided “core and non-core promises”. We are surprised no-one in the mainstream media seems to have picked that up. Maybe today’s political pundits are just not old enough to remember.

For those who haven’t made a lifetime’s habit of watching Government, the Liberals have form. In 1996, the new Howard Government soon found that the previous Keating Labor Government had allegedly left them with an unexpected $7.6 billion “black hole” budget deficit. The new treasurer, Peter Costello, and Finance Minister, John Fahey worked at reducing Commonwealth expenditure. This involved reneging on a number of election commitments, which Howard defended as “non-core promises”. At the first Coalition government budget, the public service was “down-sized”, the Commonwealth Employment Service (CES) was privatised, and cuts were made to all departments including with the exception of defence. (Readers will note that this budget, too, will be brought down against the backdrop of a massive $12.5 billion increase in defence spending on the new fighters from America.) Back in 1996, $8 billion in spending cuts were made over the government’s first two budgets.

But in the ultimate example of hubris this time round, Abbott says voters will eventually “thank” the Government if it meets its top promises. Is he right?

“I’m not going to deny for a second that there will be people who are disappointed,” Mr Abbott told Channel 9 this morning. “No-one likes difficult decisions, Governments don’t like taking difficult decisions, voters don’t like the consequences of difficult decisions.But you’ve just got to make hard decisions at times like this, and I think in the long run the voters will thank us for doing what is absolutely necessary if Labor’s debt and deficit disaster is to be tackled. I’m not going to comment on the detail of the budget, but I want to assure the people of Australia that this is a Government which is going to bring down a budget which is fair.”

In a week, and in following weeks, we’ll know if the country agrees with him. Our advice? Don’t hold your breath, Tony.

Those who ignore history are fated to repeat it. One option for tax reform (by which everyone of course always means “collecting more taxes, as painlessly as possible”) which is most definitely on the table in Australia is an increase in the rate of GST, or broadening the items it applies to, such as food.

Whilst we doubt we’ll see it in this Parliament, it is being constantly promoted by the business lobby, and could form a centrepiece of a “Give us the tools* to do the job” campaign by the Coalition at the next election. *Read: more money please.

Along with swingeing cuts, perhaps the most controversial of all of Howard’s economic reforms was pushing through a GST n the first place. In an early election dubbed a “referendum” on the move, on 3 October 1998, the Howard Government won a second term but with its March 1996 majority of 45 seats slashed to 12. Current Liberal MPs on smaller margins will be looking at that statistic with some alarm. The current Coalition majority is 30.

Back in 1998, exit polls had even predicted a government loss. Some smart marginal seat campaigning by the Liberals, and a phenomenon of Labor piling up votes in seats it was never going to lose, prevented that.

In the final wash up, a 4.6 percent swing away from the Government translated into a two-party preferred vote of 49.02 per cent for the Government to Kim Beazely’s Labor’s 50.98 per cent. (Leading to him being promptly installed as the most unlucky Labor leader ever.)

It’s worth remembering that one feature of an unpopular conservative government is that it tends to see a drift of inchoate disenfranchised protest voters to fringe parties on its own right. For more than a year in 1988, for example, the Libs had been leaking support to the far right, much as the Conservative Party in the UK are now to the UKIP, the result of which will be very decent levels of success for the appalling far right party at the upcoming council and European elections.

But despite One Nation winning almost 1 million votes and its 8.4 percent first preference vote being larger than the National Party’s, Pauline Hanson did not win her run for the House of Representatives seat of Blair. Howard was widely seen as having “seen off” One Nation.

Perhaps more accurately, given the inevitable drift back to him of their preferences, he had gambled and won that he could see them off “just enough” to retain power without being embarrassingly outflanked on the right.

But the runes don’t look as promising for today’s Coalition. In 2015 or 2015, Abbott will almost certainly face a much more cashed up and powerful populist force to his right in the Palmer United Party, and a force that appears definitely to eschew high-taxing Government. They will provide a much more natural (and less offensive) home for disaffected protest-minded “a plague on both your houses, but ‘specially yours, Tony” voters than One Nation ever did, or would have.

Here’s the thing: it is a long-term feature of Australian politics that Governments govern from the centre, and stray to their right or left at their peril. A combination of huge cuts and tax increases – especially as weapons against a “budget crisis” that few people either sense or understand – will mark Abbott’s cabinet as having shifted hard to the right.

That has its own dangers, but the murky future is made darker still when one factors in that when the next election comes, the Liberal National Coalition will not face a Labor Party weakened by continual bickering and top-level incompetence at the next election. Instead, they will face a photogenic and mild-mannered centrist leader with a good ear for popular soundbites who is very wisely keeping his powder dry at the moment – albeit a bit too dry, in our opinion. His “front and centre” deputies, Plibersek and Albanese, are generally very popular as well.

The current Government would well advised to remember that in the 21st century there are more “independents” than ever, and many fewer people consider themselves “ironed on” supporters of one party or another. As a result, we loan power to parties, not give it, and nowadays we have short memories and even shorter loyalties.

Howard successfully entrenched his position through endless handouts of welfare and tax cuts to the middle class, who quickly worked out that “they’d never had it so good”.

At its simplest, Abbot risks losing power and being condemned by history as a one-hit wonder if he attempts to skewer exactly the people he needs to keep him in the Lodge.

Those who care about such things should perhaps whisper in his ear: “Maybe we could do with a few less F-35s, Tony?”