Abbott, Hockey’s mañana moment

Several long-time contacts have asked if the recent report by the National Commission of Audit was of interest to me, and whether I’d be sharing my opinions on its suggestions.

Naturally it’s a ‘yes’ to both questions.

My overriding view on the whole exercise is the way voters were guided towards its revelations.

In the right-hand corner stood Treasurer Joe Hockey, playing the ‘bad cop’

The age of entitlement was over, he’d contended during his April 2012 lecture at the London-based Institute for Economic Affairs.

We must all confront debt and deficits because of the nation’s overspending, he stressed.

I agree, the arithmetic backs it.

Australia’s public finances are far more parlous that politicians have led us to believe, and that’s been so for some time.

And, please, don’t raise Greece or Portugal, Iceland, or anywhere else to try and mitigate the potential threats to our economy.

The commission’s report clearly shows we’re facing troubled times ahead.

Unfortunately the China windfall arrived soon after the turn of the century, which meant the governments of John Howard received a great excuse to only tinker here and there with Australia’s increasingly parlous, but rarely highlighted overspending.

Mr Howard and his treasurer, Peter Costello, boosted spending and delivered unprecedented largesse to the nation’s middle classes.

Then, unfortunately, came the Rudd-Gillard-Swan years (2008-13), which took a bull-in-the-china-shop approach to the nation’s finances.

Mushrooming debt; persistent budget deficits; overpromising and spending on taxpayer-subsidised roof batts, school halls, and the National Broadband Network; an increase in the number of Canberra-based public servants; the failed mining tax; and the carbon tax left a sorry legacy for Labor.

Also, never forget their 20 per cent cut to defence outlays.

In the left-hand corner is Prime Minister Tony Abbott, playing ‘good cop’ and endlessly committing to honour all his promises.

That’s been taken to mean the coalition wouldn’t seek to fully address the nation’s overspending problem until at least 2016, maybe later.

And as the months passed, even Mr Hockey’s messages seemed to mellow.

Then came the commission of audit’s list of long-known unsustainable outlays that need to be either scrapped or radically trimmed.

In the week before the budget, however, Mr Abbott seemed to have been satisfied the political winds had changed, and felt confident the government could impose at least one ‘big new’ tax – a debt levy on the nation’s high income earners.

In other words more, not less, harvesting of tax dollars by Canberra – the opposite of what most voters backed and expected last September.

Of course we’ve seen this kind of behaviour before, as recently as 2010 when Mr Rudd and treasurer Wayne Swan commissioned the Henry tax review, named after then Treasury chief, Ken Henry, who oversaw its compilation.

It carried 138 recommendations.

What happened?

Mr Swan tucked the review into his dilly bag, sat on it for several months, then he and Mr Rudd announced acceptance of one recommendation – the imposition of a new tax on mining, allegedly because all Australians, who, they claimed, owned all minerals, were being dudded by those investing in and expanding this job-creating sector.

We know the outcome; Mr Rudd was ousted by his deputy, Julia Gillard, while Mr Swan unfortunately survived as treasurer.

All the other recommendations went south.

Is the commission of audit facing a similar fate?

Mr Abbott has indicated many of the commission’s recommendations will be shelved until after 2016, when it will probably be forgotten (like the Henry review).

So the $64 billion question – which, coincidentally, sits in the middle of the $60 billion to $70 billion in savings recommended by the commission – what needs doing?

Surely the answer is to embrace the audit commission’s pathway, which recommends confronting federal government’s overspending proclivity.

Furthermore, during that London speech Mr Hockey said: “Either taxpayers pay the bill or the government has to borrow to pay for the entitlement.

“When the electoral pendulum swings, conservative governments have come in promising to fix the problem but in most instances have just trimmed around the edges without addressing the real problem of the growing entitlement burden.

“We must rebuild fiscal discipline.

“Budget surpluses must be restored, ideally until the debt is repaid.

“This can only be achieved by cutting spending or by raising taxes.

“And given the general acceptance that the increased drag from higher taxes would compromise economic growth, the clear mandate is to lower expenditure.”

So why, after years of vacuous ballyhoo about Labor’s overspending, have Messrs Abbott and Hockey failed to take that bull by the horns and put off making the really tough decisions?