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May 23, 2014

How the government bumbled into a budget disaster

A series of errors by the government's strategists have turned the 2014 budget into a political disaster. The narrative has gotten away from Tony Abbott.


Until last week, the worst budget in political terms in the modern era was John Dawkins’ 1993 budget, delivered after “the sweetest victory of all”, which lifted indirect taxes, cut spending and delayed the L-A-W tax cuts. It was called “indefensible” by the then-ACTU president Martin Ferguson and sparked a caucus revolt, led by a newly elected Wayne Swan.

The 2014 budget has yet to spark a party room revolt, but in political terms it makes 1993 look like a masterwork. And it’s the product of a series of errors that will need to be fixed if the government is to get back on course.

The one success of the budget has been in convincing voters there’s a real crisis. Treasurer Joe Hockey and Finance Minister Mathias Cormann were successful in preparing the groundwork for the budget by repeatedly emphasising the fiscal chaos Labor left behind: over half of voters believe there’s a “budget emergency” of some kind, according to this week’s Essential poll — including 39% of Labor voters. One of the repeated failings of the Rudd and Gillard governments was an inability to explain to voters what exact problem they were trying to solve with controversial policy proposals, but Hockey and Cormann convinced more than half of voters that there was a budget problem.

But the budget messaging process descended into chaos well before the budget. A key moment was the leaking of the deficit levy to Sam Maiden at News Corporation. There was no clear policy detail of the levy, and no confirmation of it, so the government couldn’t articulate any position while debate erupted about it. One of the things the Howard government became good at was ensuring that backbenchers were given the tools they needed to sell difficult policies — MPs would be given talking points and some background, including the financial impacts in their own electorates if possible, in order to respond to worried constituents. But in this instance, Coalition MPs were given nothing because there was literally nothing to give them in the absence of a settled policy.

Worst of all, it was a clear broken promise.

It was here that the first major mistake was made by the Coalition: instead of accepting that the budget would require the government to break faith with voters and explain it as being in the national interest, the preferred line was to insist that a deficit levy, or petrol excise indexation, was no broken promise, either because no commitment had been given about no new taxes, or because they weren’t a new tax, or because, as we heard post-budget, the Coalition had before the election made a kind of bedrock promise, beneath any specifics, about fixing the budget.

Call this the reverse dog whistle — Hockey and Abbott claim to have been communicating about promises at a frequency evidently too low for voters to hear.

The core of these arguments is that voters are wrong to think there’d been any broken promises. And no politician is going to get far by insisting voters are wrong — the effective political messages are ones that reinforce, not contradict, voter perceptions. But, having achieved office partly on crucifying Julia Gillard for breaking promises, and having seen Gillard unsuccessfully try to cop the broken promise charge sweet and argue the merits, the Prime Minister and Treasurer spent much of their time during the post-budget “selling” period arguing the toss over whether they’d broken promises, rather than explaining the budget.

The second error was a more culpable one and reflects badly on the Prime Minister’s Office and the Treasurer’s staff. In the course of selling the budget, both Abbott and Hockey made errors on the detail of high-profile measures — Hockey on the Medicare co-payment, Abbott on university fees and the impact on the states of cuts to education and health funding indexation. The impression was created that the government didn’t understand the very policies it was inflicting on voters. If Abbott and Hockey couldn’t get it right, could you blame pensioners for thinking their pensions were under threat, or low-income earners for thinking the Medicare co-payment had started already? This week it seemed the Prime Minister’s Office needed to issue a Nixonian “that statement is no longer operational” clarification as Abbott winked his way from error to error.

“There’s one more thing that Howard and Costello never faced: social media.”

This may reflect the nature of the budget preparation: there’s a persistent rumour in Canberra that some key decisions weren’t made until very late in the process, just days out from the budget — in particular, the decision to dud the states of health and education funding. That would explain why Abbott got it wrong on when the states would be hit by funding indexation cuts, and why there was no consultation with enraged premiers.

The third key error was also a matter of poor judgment from the Coalition brains trust. Releasing the Commission of Audit report less than two weeks before the budget confused the economic fantasies of an old, rich businessman with actual government policy, especially in relation to the pension, which Hockey had been publicly musing about. While Hockey, Cormann and Abbott were repeating ad nauseum that the Commission of Audit was “to the government, not by the government”, the message appeared not to get through to pensioners. When a wily old campaigner like LNP backbencher Warren Entsch warned that the Commission of Audit had “frightened the bejeezus” out of pensioners, governments strategists should have realised there was a potential for the budget to simply snowball into Tony Shepherd’s obsessions, not be distinct from it.

The fourth error wasn’t the politics, it was the policy of the budget. As Howard and Costello showed in 1996 and 1997, you can get away with a harsh budget — even with breaking promises — if you show it’s in the national interest and you show there’s equity in the harshness. But there was no equity in the budget — instead, it looked like a Coalition hit list of groups that had annoyed it or whom they simply enjoyed beating up on — the unemployed, poor foreigners, the ABC, low-income earners — while the wealthy enjoyed ever-burgeoning tax breaks and companies were given tax cuts. Even Liberal voters, according to Essential, disliked measures like deregulating university fees and raising the pension age and thought the well-off came out much better from the budget than the poor.

Moreover, it delivered pain without apparent purpose. The budget did not return to surplus within the forward estimates, because the government refused to target corporations and high-income earners, depriving it of a clear benefit to which it could point as a product of the pain.

There’s one more thing that Howard and Costello never faced: social media. News Corp might be desperately trying to prop up the budget, and in the process demonise what’s left of their readership, but the budget has been copping a hiding on social media, both of snark and factual criticism, from the moment of its release. That creates a feedback loop in which the mainstream media report how social media has covered the budget (why, who on earth knows, but they do it), intensifying the remorseless criticism of it.

Some of this can correctly be blamed on this being the government’s first budget. None of the errors reflect fatal flaws in the government’s decision-making process. But all of them reflect internal problems and misjudgements that need to be examined. An improving economy could make voters forget all the pain in six months. But the government can’t afford another debacle like this.



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29 thoughts on “How the government bumbled into a budget disaster

  1. paddy

    [None of the errors reflect fatal flaws in the government’s decision-making process.]

    I think you let the Govt off a bit lightly there Bernard.
    Fatal is exactly what it looks and smells like.
    They’re simply not equipped to govern.

  2. Dez Paul

    Exactly what paddy said. Can’t see Abbott recovering from this, and Hockey’s ambitions (assuming he had them) are mow completely cruelled. Awesome.

  3. klewso

    Let’s face it, Shonkey and Shagger Cormann had help selling that negative message.
    [Open a paper every day, for 6 years, to negativity – when it’s 4:1 on that the paper you read is one of Murdoch’s. Or listening to rodeo shock-jocks like Singo’s “Cock-or-Two Circus” feeding off their dregs?]

    And I loved Tony Shepherd reported as criticising “sectional interests” – as if he isn’t one? How much did he donate to this Limited News Party?

  4. Repete

    Klassy Klewso “Limited News Party”, Haha!!

  5. Steve777

    Even if there is a budget problem, Abbott told us everything will be fine if we stop the boats and stop the ‘waste’. When asked to give examples of waste, opposition spokesmen muttered about batts and cheques to dead people. They forgot to tell us they regarded spending on Medicare, Hospitals and education as wasteful.

  6. Paddy Forsayeth

    How come there is no examination about the “prosetylsing program” being increased in schools (the so called school chaplains.) As a retired teacher I can say that the school chaplain is simply a front to pushing religion. No comment on the amazing contrast between the reduction in funding for say the CSIRO and the increase in the ‘religion for schools’? Is it coincidence that Abbott and the Cabinet are catholics in the majority? Abbott will blurr the separation of Church and State. Will we also have imams going into our schools? The BOHICA model is well and truly alive and well.

  7. zut alors

    ‘… over half of voters believe there’s a “budget emergency” of some kind, according to this week’s Essential poll — including 39% of Labor voters…’

    My elderly mother believes this tosh. I put the case that Australia is one of only eight countries boasting a AAA credit rating & asked her how that tallies with an economic crisis. Silence…it’s easier to read a Murdoch headline than to apply logic or engage thought.

  8. AR

    Why does Crikey keep repeating the “repeating ad nauseum” error which would ad nauseam?
    And, “News Corp might … demonise what’s left of their readership“… what part of their ‘readership’ would that be, the ones that moves their lips when they think?

  9. JMNO

    The budget is awful. There are no two ways around it. Not only is it mean, it is myopic and mindlessly ideological. It is poorly conceived and poorly thought through. The cuts will adversely affect the economy as well as the social fabric.

    This might be their first budget but Abbott and Hockey have been in parliament for a long time and have been in government before. They should be able to do this by now.

    I am wondering if Abbott has the flexibility to change. He has always been a tribal warrior. He’s good at wars but as with other fighters, is he capable of running the peace? I am not sure he is. And his response to criticism is not to take on board a widely held sentiment that it is mean but to think that his critics are all supporters of the Opposition. If he thinks like this, he isn’t going to have the skills to negotiate.

  10. tonysee

    The answer is becoming quickly apparent, JMNO.

    Labor, for all its faults presided over a very productive parliament despite its minority status. They had to negotiate ad nauseam (thanks AR) and deal with an aggressive, snapping opposition.

    Now the Libs, in a very workable majority early in their term, are bleating on social media about Shorten ‘sabotaging’ democracy. And the evidence? A op-ed from the Daily Smellegraph.

  11. zut alors

    The government is on a new tack – whenever the Opposition or the electorate disagree with them, whenever students protest, it’s now a threat to democracy. Can’t wait for Pyne to accuse angry uni students of being unAustralian. If the government plays that card we’ll know they’re lost.

  12. Buddy

    I can’t see how Abbott is going to recover from this, they have alienated so many groups, and their insist race on say white is black is further entrenching opposition. Talk about cogntive dissonace in action, this lot are champions at it. Tony Windsor had it Sussed. Abbott can’t negotiate, so where to from here. The ‘we are right your all wrong ‘is not going to get a budget passed.


    An apology for bad policy.No analysis of the policy just excuses for “mistakes”. Like lying is a mistake. Hypocrasy is a mistake,racism is a mistake, corruption is a mistake,greed is a mistake….All of these need to be sold in a timely and effective manner and they then become virtues. Thanks for nothing Bernard.

  14. seriously?

    Was blown away by the free advertorial “editorial” in the budgie-cage-liner-masquerading-as-newspaper-herald-sun today. A more blatant piece of partisan “journalism” I have never seen. I can only (happily) conclude that it must be panic stations at Lib HQ with Alan Stockdale opening the hotline to Rupert.

  15. The Pav

    Part of why the dishonest claims of budget crisis are gotten away with is because of a lazy media who won’t even do simple mats. For example I’ve heard Hockey/Abbott etc say that in 10 years the debt will double to $600B but I have yet to hear anybody ask them what will GDP be and what will the debt be as a proportion. Simple obvious question but too hard for any reporter.

    A billion dollars of interest per month sounds scary and Abbott is allowed to peddle the scare again beacsue nobody will ask him what proportion of Fed Gov income is it ( 3% roughly Bernard)…I would bet that if Asked Abbott wouldn’t answer beacuse either he is too dishonest to tell the truth or because he is son incompetent that he doesn’t know it…….I don’t know why people carry on a bout a free press becuase quite frankly the press we have in Austyralia isn’t free Its too lazy

  16. teraluno mercur

    They just don’t seem to understand basic human nature. They are arguing with the electorate ! its crazy . Imagine cracking the shits at the guy your trying to sell your car to – oh dear . Shepard telling everyone to stop complaining . Calling Bill shorten a winger is the same as calling 80 percent of the country a winger . Consumer confidence is down , Hockey suing the media , Abbotts nepotism , jobs disapearing left right and center. I have never seen such a spectacular failure in my entire life. Its pricless to watch them squirm, to watch the con headlines inflame the situation even more . Hockey seems to have gone a paler shade of grey in the last week. and most of the main players have gone to ground . Where is the old bigot Brandis what about the Barrier reef guy? the Shark killer. Im wondering when they are going to wake up and actually realise whats happening here. Im pretty sure that even if they tore this budget up and started from scratch people will never trust them again . Might end up in a gulag or something .

  17. Chris Gulland

    The situation we are in this mess is primarily due to our PM speaks in slogans,rather than having a conversation with the taxpayers.
    He also believes it is better to seek forgiveness rather than ask permission, sorry Tony wink, wink, life outside of Canberra doesn’t work like that in the long term.
    Chris Gulland

  18. Brendan

    I’m staggered by this government’s ineptitude. The unabashed deceit, poor political decisions, disastrous public relations, one personal scandal after another (“secret” scholarships, smoking cigars and dancing for joy right before delivering a devastating budget, winking and smirking at the worst possible time) – what I originally had figured as simple arrogance, and later as cluelessness, I’m honestly beginning to wonder whether they’re not deliberately sabotaging themselves. Could they be this bad at playing politics?

  19. klewso

    “Bumbled”? Isn’t that what happens when you leave the heavy lifting to others?
    In this case left to the conservative, Murdoch dominated viewsmedia (with those they feed “all the facts they need”) to sell?
    As noted, scrapping another allowance – the one for social media?
    One media Murdoch doesn’t dominate or control, yet?

  20. tonyfunnywalker

    This budget debacle is the last straw and the Government and probably Abbott’s leadership is terminal.
    To risk amendment in the Senate will embolden PUP and Labor-
    To negotiate on the cuts to higher education as Pyne is sugggesting will embolden other groups plus the States that Abbott is maliable (which he is) and this will be perceived as weakness by the ideological cronies and chaotic, cruel and unfair and uncaring by the electorate.
    Onto a hiding to nothing which ever direction Abbott decides to take.
    A party room revolt probable, but a one term government — a definite –irrespective of News Ltd ” playing defence” a tactic that is likely to antagonise rather then placate the electorate who are already unforgiving at the malevolence in the lead up to the election and since.

  21. MJPC

    BK, excellent analysis. Radion 2BL interviewed David Coleman (Lib Banks- SW Sydney electorate) during the past week and talk about spin. He said his office had received no comlaints regarding the budget.
    It’s well and good to put on a brave face but what he was purporting as support for the budget in his electorate was plain lies, he needs to read the local paper (which is dropped at his door every Wednesday).
    Local paper; The Torch; came out with front page headling “Vow to block budget: As local community already struggling” quoting Jason Clair, Labour member for Blaxland. If that wasn’t bad enough, page 3 has the story of local family (Mum, Dad, 6 kids including young triplets) and how it will affect them, particularly Medicare co-payment, and it’s not pretty. Turn to the letters page, every leter critical of some aspect of the budget including red by-lines “wealthy hurt little, poor to suffer hugely” and “Can’t afford Doctor now”.
    If this is just one example of what is happening in voter land then the LNP are kidding themselves and David Coleman can look forward to losing his seat recently won from Labour

  22. Barkada

    There is no budget emergency. It is a false narrative. The deficit was necessary and manageable. This actually has allowed a narrative to be built that Labor handled the economy well and that Abbott has developed a false narrative. More and more you read this view on social media and on sites like the Fairfax blogs; and people are realising how heavily censored the Newscorp Murdoch blogs are. Tony will not rebound from this. People are already saying he is safe which we all know is the first sign of his demise

  23. Barkada

    We keep hearing how the Abbott sisters got the scholarship and the plum Geneva job on merit. I am sure they are pleasant and competent young ladies – I won’t say feisty- but really how bad does this look? The repeated assertions that both succeeded through their own merit sound too defensive even if the assertions happen to turn out to be true. At the least it is poor judgment and foresight from dad moment Tony.

  24. Barkada

    Bernard says “None of the errors reflect fatal flaws in the government’s decision-making process.” Then he expresses a seemingly divergent view in the next line ” But all of them reflect internal problems and misjudgements that need to be examined.’ So Bernard you believe it is not politically fatal for Abbott- that it just needs to be examined. I have to politely disagree though acknowledging you may be correct. I think it is definitely terminal given Abbott’s somewhat unattractive personality. He can’t hide behind the boats on this one and don’t forget he never was popular; he sneaked into power on the back of Labor infighting. Given Shorten is taking pains not to appear contentious or divisive I think Labor is winning on the battle field of public perception. IMHO Tony is finished.

  25. Jeff Poulsen

    >>the well-off came out much better from the budget than the poor.

    Mark 4:25 – NIV
    “Whoever has will be given more; whoever does not have, even what they have will be taken from them.”

    How very *NOT* Christian of the government.

    By the way, I don’t believe there’s a budget crisis! (In the minority again.)

    There has to be some sort of reckoning, in the media, in the party room and on the floor of parliament. I had suspected this government would struggle, but not as badly as this. For me this week, nothing has been more cringe worthy than Christopher Pyne wrestling over the truth of his own education expenses.

  26. Dave Kelly

    Hi Bernard

    Thank you for your fair and balanced views on politics. It always scratches that itch.

    I just recieved this from my local LNP organiser. I think it might be fake:

    OK, listen up you bunch of whining, latte sipping, chardonnay slurping, lefties, entitled youth, ‘failed to save for your retirement’ pensioners, bludging disabled and unemployed types —- In fact anyone who isn’t us.

    Yeah the government didn’t get the message it wanted across, and believe me Textor/Crosby are definitely not getting their pay check from Centrelink this time, so I’m going to explain it.

    We are taking all the undeserved money of the unemployed youth, pensioners and disabled and we are going to direct it to the big end of town, (because you know how hard they have been doing it lately) and we are going to let the trickle-down effect, do its thing, as that just works so well.
    Some of this money will go as tax breaks, another for infrastructure, as industry are the only ones that benefit most from this. Add to this gift, for our friends, the extra savings from killing off public transport (after all that just gets in the way of industry) and a hell of a lot of dosh from fuel rebates, funded from the idiots that actually pay tax.

    Instead of wasting $20 billion of tax payers on writing down the “Debt Crisis”, we are going to give to our Big Pharma backers to do (maybe) some medical research so they can invent cures which they will patent and profit from. Why the hell do you think we closed down competent science groups like CSIRO etc. when our party can have an assured donation income for elections from these guys? Hell we are even giving them super profits from their current pharmaceuticals and procedures, by neutering the efficient Pharmaceutical Benefits Scheme.

    Well the poor and the youth will then become more destitute and instead of using this money by spending back into the economy, (where it never left anyway), we will give to multi-national donors who will spirit it out of the country, tax free. Talk about cheap money. The afore mentioned poor lot will, of course, end up supplementing their income from begging (trickle down), theft, prostitution and selling drugs (so the ‘Mr Bigs’ so they won’t have to spend any time in jail). The ‘Mr Bigs’ even donate to the party to make sure we have tough anti-drug laws so we keep their product prices high. (True capitalists these folks- – we love ‘em.)

    Sure, communicable diseases will spiral out of control from these last two but that will boost the private medical industry revenue through higher demand. In fact disease levels amongst all these lower socio-economic group will, as it has been proven, balloon. We won’t have to help them. We have a mandate. They can pay up or get stuffed.

    This is where our cheer squad, the Murdoch press and their associated loonies, go into feral mode and demand that the laws against these things will incur mandatory jail time in the newly privatised prisons. There will be feedback from this encouragement, by the new owners of the prisons, via donations to our Lunatic Nasty Party so the prison system will be expanded and more entrenched – a bit like the drug enforcement crowd and spy agencies have done. (Don’t worry we plan to privatise these too.)

    Pensioners will be taken care of by natural attrition. You know, dying more quickly from lack medical care and support we have made unaffordable, and if we are lucky a lot will just commit suicide from having their last shred of dignity taken away from them. No one can blame us if they top themselves and save our medical insurance friends a fortune.

    The quarter of a billion dollars spent on chaplains (all male?) who are untrained in social science and without any criteria of responsibility or effectiveness will ensure that,in twenty years after endless denials, we will have another Royal Commission into psychological and physical abuse of or youth and vulnerable.

    Did you like the way we look good by sharing the pain to the high income earners ($180,000+) via temporary “debt reduction” tax? God, you people are such a bunch of suckers. Not only is this temporary, but these folks can afford great tax minimisation agents that they pay even less, or no, tax than the unemployed. If they do then they deserve all they get. We have no time for the unwary or slackers.

    Don’t worry we are safe from the “Debt Crisis”. We made that up so to scare you into voting us in with enough votes to ram this stuff through. We even ignored all the world independent experts who said we had the world’s third healthiest economy, and paid our own ‘experts’ to concoct the whole charade. One of them was so good that he managed a top company and, through incompetence, was able to trash it value to its shareholders from $10 down to $1 and got away with it. Pretty good going, huh. If you can pull the wool over the eyes of investors, and get away with it, the writing up a cover story for part of the faux “Debt Crisis” story was a doddle.
    Good grief we aren’t even paying down the “debt”. You people really are as dumb as we think you are.

    And those twerps who didn’t get a free law degree, like us, get used to asking “Do you want fries with that?”

    And don’t get me started on the religious stuff. Paranoia is our game, governing is our aim.

    Trust us, we do love you. Would we lie?

    Signed LNP spoke thingy.

  27. AR

    Did I just hear Sloppy calling Blip Shorterm “Mr NO”?

  28. AR

    DaveK – you might possibly be correct to question the veracity & provenance of that missive.
    As someone said of Capote’s opus, “that’s not writing, it’s typing.”.

  29. Paige Hicks

    Not only did the Commission of Audit manage to “frighten the bejeezus” out of pensioners, so did the cuts outlined in the 2014 Federal Budget, in relation to pensioners and older Australians. Australia’s population is continuing to age, and the Australian Bureau of Statistics predicts around the year 2025 the number of older Australians will exceed the number of children. As Australia continues to age, community health support services should be provided in order to promote, maintain and restore health. However, “the Government will eliminate or cut a range of entitlements for older Australians… an attempt to make pensions ‘affordable and sustainable for decades to come’.”, which include:

    • Pensioners will be affected by a $7 co-payment to see a GP. This will be waived after 10 visits per year for concession card holders.
    • Commonwealth Seniors Health Card holders will lose the Seniors supplement, which currently sits at $876.20 per year for singles and $1,320.80 for couples.
    • The Seniors Health Card will be harder to qualify for, with the untaxed superannuation of new applicants now counting toward the income test.
    • And the Commonwealth will dramatically cut its support for various state- and territory-based seniors’ concessions, eliminating $1.3 billion in spending.
    • The pension age will rise to 70, but not until 2035.

    These budget cuts are likely to have significant and detrimental effects of the health and wellbeing of older Australians.

    A significant determinant of health and wellbeing in older Australians is social isolation, which can have an adverse impact on health and wellbeing. Social isolation has been conceptualised as a lack of social integration, being socially disconnected, lacking relationships and social interaction. Therefore individuals, or couples, who live alone and have limited friends and family, and limited contact with others, are seen to be socially isolated. Social isolation can be caused by a variety of factors, including having a small network of contacts, limited contact with family and friends, and lacking social integration. The budget cuts to take effect by 2017 have the potential to increase the risk of social isolation in the elderly, as it may further their loss of independence, due to lack of financial stability and freedom.

    The early intervention and prevention of social isolation will reduce the use of health and social services that already exist, and will allow more positive outcomes for aged persons in Australia. Additionally, the use of preventative measures ensure the health and wellbeing of older Australians has the potential to benefit not only the individuals themselves, but also to lessen the cost to government for treatments of preventable conditions that result from social isolation.

    Instead of removing funding from a vulnerable population, such as older Australians, and causing further marginalisation and inequality, the Commonwealth Government should maintain and improve on existing payments and services. Additionally, provision of funding for programs that best address and promote social participation, to improve the quality of life for older Australians, as well as provide funding to existing services and organisations to allow continuation of existing and future programs, would be beneficial.


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