What does it mean to ask whether Tony Abbott can turn it around? Here’s my amateur take on it.
There are two ways of looking at ‘turning it around’. Is it Abbott? Or is it the LNP government’s policies?
The Abbott factor itself has two sides. One is whether Tony Abbott can be seen to operate more effectively as the leader of his party. Can he placate his back bench by being more consultative etc? Well, he can consult till the cows come home. And possibly sack his chief of staff. But the real issue for the back bench isn’t whether they like Tony Abbott; it’s whether they can keep their seats come next election if he is still leader. This is the ‘Tony is out of touch’ argument. But is the backbench any less out of touch? Given the policies they support, (see below) it doesn’t seem so.
The other ‘Abbott factor’ is whether he can regain the trust of the electorate, which, with an approval rating of only 24%, he has clearly lost. As John Hewson says, Abbott will never be popular with voters. This means he has to show that he is a competent leader. He’s said he believes that the electorate wants more explanation of his government’s policies, what problems he’s trying to solve, and why his solutions are the right ones. How he will do that we’ll have to wait and see. Better spin? More support from the Murdoch press? This is the ‘we need a better sales job’ argument.
But what if ‘turning it around’ means changes in policy? What if the electorate don’t like what’s being sold, however much Abbott listens to his backbench or however palatably LNP policies are wrapped?
What changes could he make? Clearly he’s not going to undo anything he’s already done, for example on the really important issue of carbon emissions reduction. An LNP government will never put a price on carbon and Direct Action is an underfunded lemon so there won’t be an effective emission reduction policy. This would be the case whoever was leader; Turnbull has repudiated an ETS in favour of Direct Action, and he’d never get to be leader if he did support an ETS. It’s not clear how much the electorate cares about this, but failure on climate change isn’t going to win the LNP any votes.
It seems unlikely that Abbott will back away from deregulating university fees. It may not get through the Senate, or may be watered down there. If implemented in any form, this policy is likely to be unpopular with just the sort of middle class voters he needs to vote for the LNP.
On the other hand, it seems possible that the Medicare co-payment will be shelved. This would be popular, and would get the doctors off his back. But you can bet Hockey will cut health spending somewhere else to make up. And Liberal Treasurers love their price signals (except on carbon emissions), so maybe a co-payment will be promised for a second Liberal term – though backbenchers wouldn’t be happy about the electoral implications of that.
And here’s where it starts to go pear shaped. They’ve cut things that bring in revenue, like the carbon tax. They are having to ease up on spending cuts because they are so unpopular. So where does the money come from?
Abbott said in his Press Club address just last week that the problem was ‘government spending’. But he also said : ‘Because we have done much of the hard work already, we won’t need to protect the Commonwealth budget at the expense of the household budget’. He’s also suggested the next budget could contain tax cuts. There’s so much there that’s contradictory I almost don’t know where to start.
Hardly any ‘hard work ‘ has been done; much of the government’s cost cutting agenda – $28 billion of it – hasn’t yet got through the Senate and may not do so. And even if it does, there will still be deficits for the foreseeable future. This is in a context where the Liberals have identified good economic management with having a budget surplus.
And the ‘hard work’ they have done isn’t popular. Cuts to welfare and pensions are disliked, being widely seen as unfair to the poor and disadvantaged (as well as being broken promises). But in the context of a budget deficit, Abbott certainly won’t reverse them. Nor will he reverse cuts to health and education, or to the ABC and SBS. The budget is one of the main reasons for the LNP’s unpopularity; even in the unlikely event that there are no further cuts to services, what’s already been done will still rankle with the electorate. And if government spending still has to be cut further … Backbenchers may find electors don’t like it – but it’s their policy.
If ‘the household budget’ is not to be targeted, what is? Business? The wealthy? But in a Liberal world, it is rich people who create jobs and needs tax cuts. Even the suggestion that Abbott will keep the company tax hike intended to fund the defunct Paid Parental Leave scheme is outraging business. Does anyone really think he – or any other Liberal – will tax the rich?
Running a ’small government’ pro-surplus agenda is inherently deflationary at a time of weak economic grow – ie what we have now. Abbott might talk about 2015 being a year of ‘jobs’, but where does he think they are going to come from? Even Kate Carnell from the Australian Chamber of Commerce and Industry, speaking on the ABC about the Liberal spill, admits that the economy is sluggish. (She still wants a budget surplus, though.) Private enterprise isn’t generating enough jobs to stop unemployment rising. This is a great time to cut government spending further. What will be the result? More unemployment. How popular will this be in all those Liberal electorates?
Trying to reduce penalty rates and the minimum wage on the grounds that they are to blame for unemployment – apart from being economic nonsense – is likely to spark a popular campaign against the government. I don’t think this is a vote winner.
In other words, it seems to me that the Australian economy needs stimulus, greater than can be delivered through cuts to the cash rate – which can’t go that much lower anyway. Stimulus is the opposite of the Liberal policy of cutting spending. Their only answer is tax cuts to the rich, since they believe that wealth trickles down. It doesn’t. And just at the moment, significant numbers of the electorate can see it doesn’t; what is needed is increased government spending.
So which is it? The Abbott factor or the LNP policy factor? It’s a bit of both, and so far as turning it around is concerned, I don’t think either will work. While LNP policies are unpopular, and the opinion polls are bad, Abbott will be unpopular in the party room, however much he sucks up to them. The Liberals can’t afford to reveal to the electorate their unpopular neo-Liberal agenda of cutting spending and hence services, so their policies will continue to be contradictory. This makes it hard for Abbott to appear to the electorate as an effective leader. It also makes it hard for the party to successfully sell a coherent narrative. And the deflationary policies they’ve tied themselves to – including emphasis on a surplus as the badge of good economic management – weaken the economy and alienate voters. (Turnbull as Prime Minister wouldn’t alter this dilemma; he can smile more nicely than Abbott, but he’s wedded to the same economic world view.)
This doesn’t of course mean that they won’t find ways of lying or bribing their way back to power at the next election; look what they and their cheer leaders in the mainstream media managed last time. Asylum seekers and terror come to mind. And maybe Labor will find ways of stuffing it up. But the LNP won’t hang onto power on the back of sound and equitable economic policy. There are sensible political and economic paths out of this quagmire, but the Liberals will never find them.
PS And if you don’t believe me about the quagmire, read Ian Verrender’s analysis of the situation here.