The slow but intriguing transformation of Joe Hockey into the Coalition frontbench’s economic conscience continues. Earlier this week, we flagged in The Power Index how Hockey’s recent policy battles had been within the party, over issues such as industry assistance. His comments about “the age of entitlement” overnight, however, take him right off the reservation.
Have no doubt that Hockey’s condemnation of Australians’ entitlement mentality is well-supported within the Liberal Party, and at senior levels. But under Tony Abbott, such criticism has hitherto been muted, partly because Abbott himself is a fervent believer in middle-class welfare and partly because attacking the government’s mild attempts to rein it in proved a potent political weapon, especially when closely co-ordinated with News Ltd newspapers. In Battlelines, Abbott’s inconveniently hard-copy collection of policy ideas, he went so far as to say middle-class welfare was necessary to retain widespread electoral support for income assistance for low-income earners.
Indeed, Hockey himself has previously been on the record as saying that middle-class welfare was necessary to “grease the wheels of structural change” in the face of a mining boom. This was a key part of the “nostalgianomics” approach of Abbott and Hockey, in which they insisted they could transport the Australian economy back in time to a pre-GFC point where the mining boom would drive big revenue increases that could be delivered to voters via endless rounds of tax cuts.
It’s hard to overestimate how central the “entitlement mentality” was to the Howard model of electoral success (Howard himself passionately hared the term “middle-class welfare”). Providing endless handouts and tax cuts to key constituencies — particularly middle income voters getting Family Tax Benefit A — was a core Howard strategy, and by the final term of his government the mining boom was delivering the revenue to fund it, fuelling inflation and the interest rate rises that so anguished Howard in his last desperate days. Howard’s strategy then was simply to shovel the money ever more furiously, until Public Service departments literally didn’t have enough public servants to staff the cash fire hoses.
I asked Hockey in 2009 whether he was comfortable about the Howard government’s approach to fiscal policy. “No one was demanding that we have bigger surpluses,” was his response.
Now Hockey appears to have significantly reversed himself on entitlements, and not before time. At long last, someone in the Liberals is publicly prepared to address the disconnect between the Liberals’ embrace of middle-class welfare during the Howard years and its ceaseless small-government rhetoric. Although, Hockey’s attempt to compare us to the approach of Asian economies to welfare is spurious and a little bizarre.
Noteworthy, too, is his apparently deliberate identification of compulsory superannuation as a key mechanism for avoiding European-style problems in entitlements. The Coalition are profoundly ambivalent about compulsory super and would, in their heart of hearts, like to do away with it, or at least with the direction of income into industry super funds, which they regard as union-run pigs’ troughs.
Hockey’s comments flag that, at the very least, he’ll be pushing within the Coalition’s policy process to wind back transfer payments. He must do so now, having deliberately created expectations of action rather than words.
Which payments gets targeted, of course, is the issue: the Republican approach in the US has been to wind back transfer payment and support programs for those most in need of them, low-income earners and the working poor, while delivering tax breaks and handouts to the super-rich.
Labor will attempt to paint the Coalition’s support for a mining tax while putting transfer payments under the microscope as evidence of the same Dooh Nibor approach. The tweets write themselves. Indeed, they’ve already done so.
But Hockey, like every politician in Canberra, knows the budget is padded with billions of dollars in handouts to taxpayers and companies, and there’s real potential to move the budget into structural balance or even surplus with some political will.
The question for Hockey is, how long his courage will remain once he returns to Australia and has to deal with cranky colleagues. And perhaps even a cranky leader.