Budget and its effects, May 19
Both main sides continue to debate the second budget of the Turnbull government, with the most interesting development being the view expressed by Albanese that Labor should welcome the Coalition’s budget measures! But there is no indication from most Commentators that initial views have changed and that an improvement in the Coalition’s polling is likely to occur. In fact, doubts about the achievement of estimated budget outcomes have increased following the publication of a much lower growth in wages than assumed in the 2017-18 Budget estimates (1.9% cf 2.5%), a further fall in consumer confidence (the sixth successive occasion when pessimists have outweighed optimists), and a warning from credit agency S&P that while it kept Australia’s credit rating at AAA it also warned that it is at risk of a downside over the next two years. The improvement in the latest employment survey may help if it is sustained. But doubts continue about the survey’s reliability.
Debate also continues over whether the budget has provided adequate grants to the States for (in particular) education and health because no detailed agreement with the States was effected before the budget. Debate has also occurred over the bank levy following the revelation that Treasurer Morrison has indicated that details of the enforcement legislation are not to be revealed before the legislation is presented to Parliament.
Former Treasury Secretary, John Stone, has also had a highly critical article published in this week’s Spectator Australia. His conclusion is
More fundamentally, the consequences of this massive philosophical U-turn for the Liberal Party (and also for the Nationals) are incalculable. Most observers expected a ‘sugar hit’ for the Coalition in the polls. Since that was clearly the aim to which this travesty of everything Menzies’ party was supposed to stand for was directed, they needed at least to be right about that. But as Monday’s Newspoll showed, they weren’t, with the Coalition primary vote unchanged on 36 per cent and its two-party preferred vote actually falling a point. Even if future polls were to improve somewhat (which they won’t), that wouldn’t ward off this budget’s destabilising effects. Anyone for the Australian Conservatives Party?
Importantly, Stone also draws attention to the little recognised “Headline Cash Balance”, which is much larger than the “Underlying Cash Balance” normally treated as the deficit (or surplus). The difference between the two is that the former covers all Commonwealth spending including by off-budget entities, such as the NBN Co, and the purchase/sale of financial assets for policy purposes. As such, when in deficit the Headline Cash Balance has to be financed by borrowings or sale of assets. In 2017-18, for example, the estimated Headline Cash Balance is - $48,4bn (only $2.6bn less than this year) while the estimated Underlying Cash Balance is - $29.4bn ($8.3bn less). In short, the budget presentation suggesting that the Coalition made a substantial reduction in the deficit is grossly misleading: the “real” deficit is much higher than is being debated and the estimated reduction is much less.
My last Commentary (16 May) also questioned the Coalition’s claim that tax increases are needed because the Senate blocked proposed spending cuts. Yet the budget provides for substantial increases in spending in the next two years including policy decisions costing about $5 billion each year. If those decisions had not been made, there would have been no need for the tax increases. In short, the Turnbull government has also “blocked” spending cuts. This seems to have been largely overlooked by commentators.
Turnbull’s Meeting with Trump & the Short Time Span for Replacing Him, May 1
Trump’s agreement to meet with Turnbull this coming week (an appointment which appears to have taken longer than expected) provides an opportunity to confirm the importance of the US alliance in the context of celebrating the vital role played by the US in the defeat of the Japanese in the Coral Sea battle 75 years ago in 1942 (see attached press release on meeting). It also means Turnbull will obtain more photo-ops. He will doubtless also attempt to convey to the Australian electorate that his meeting with Trump reflects another acknowledgment by him of the view of right-wingers.
Following his announcement of citizenship tests, Turnbull is also now presenting his decision to control the export of gas as “an Australia first policy” ie implying a parallel with Trump’s “America first” policy. But the basis of Turnbull’s gas policy is open to serious question. In his press release it is claimed that “gas companies are aware they operate with a social licence from the Australian people. They can’t expect to maintain that licence if Australians are short changed because of excessive exports” (see attachment on Export Controls on Gas. Note that this press release is not on Turnbull’s published list). Apart from the adverse implications such an approach has for foreign investment, it also implies an autocratic government prepared to control in detail the operations of companies. How will it determine what is an excessive list of exports by a company which has concluded agreements with overseas buyers or plans to do so?
A possible alternative to export controls would be to threaten reduced grants to the states of NSW & Victoria which are preventing the development of their considerable gas reserves unless they eliminate or substantially reduce their controls on gas development. Arguably, those states are pursuing policies which are inhibiting national economic growth.
The Turnbull government could accompany such action with a major change in its policy requiring increased usage of renewable. That policy is increasing the usage of gas to replace the reduced usage of coal. Such action could draw on the recent attached article by highly regarded Canadian economist Ross McKitrick, who argues that “the same computer models that say global warming is a problem also say that Paris will not fix it. If one were to graph the standard warming projections over the next century with and without Paris, the two lines overlap almost exactly. Whatever greenhouse gas (GHG) concentration we would have reached in the year 2100 without Paris, we will reach it shortly thereafter with. For all its costs, the Paris treaty will have almost no effect on global warming, and by depleting global income it will make it harder for countries to adapt and innovate in response to whatever changes occur. Thus not only does Paris not solve the problem, it arguably makes it worse”.
More generally, the question remains as to whether any apparent move to the right by Turnbull would be sufficient to restore the Coalition’s and Turnbull’s polling. In his latest assessment as a Dis-Con, John Stone repeats his view (with which I agree) that a Coalition with Turnbull as leader will not be electable even two years hence and concludes that by mid-year a new leader must be elected if there is to be a chance of an election win. He suggests that a new leader would produce a stream back into the Liberal voting camp which would “become a flood were the new Leader to be Tony Abbott, but anyone from the Right (Peter Dutton?) will still move many Dis-Cons back to their former fealty” (see full text of assessment published in Spectator in the first attachment). It is certainly close to a tipping point for establishing a newly elected leader of the Coalition.
Defence Against Missile Attacks
In a radio interview Turnbull has responded to the threat by NKorea that it is prepared to attack Australia with a nuclear missile by indicating that, while “their threats can appear to be theatrical and over the top and the subject of satire”, the government “takes the threat … very, very seriously.” He acknowledged, however, that “Australia right at the moment does not deploy a THAAD - this is the anti-missile system that is being deployed in South Korea” –and “does not … see the need to do so”. Our present policy is to support “extensive sanctions, economic sanctions, which are designed to bring North Korea to its senses and urging North Korea’s neighbours to bring its considerable leverage to bear on North Korea to change its ways”. He acknowledged that this “ has not been enough to date because ... the reckless threats and conduct by the North Korean regime has continued.”
The apparent speed in NK’s development of missiles does not appear to have reached or be about to reach a serious threat. Indeed, the most recent trial resulted in an almost immediate disintegration of the missile. But bearing in mind that missile threats could also come from other countries either directly or from their submarines, serious consideration needs to be given to how to handle the potential threat in the future. An ASPI expert has pointed out to me that even the US does not have a missile defence system and we could scarcely afford to install one in the near future. He refers to a paper published by ASPI a few years ago which discusses the issue and most of which, he says, is still relevant.
or the present we presumably have to rely primarily on our alliance with the US, which appears currently to be having some success in persuading China to modify its hitherto “friendly” relations with NK. This is a matter which Turnbull could raise at his meeting with Trump
Newspoll Confirms Turnbull Must Go, 28 February.
Today’s Newspoll shows that, despite Turnbull’s very recent decision to start attacking Shorten more aggressively, the Coalition’s polling has dropped a further percentage point (to 45/55 on a TPP) and Turnbull’s personal polling has dropped sharply to 29/59 satisfied compared with 33/54 last time. This has occurred after Shorten was not only unable to state the estimated cost of Labor’s 50% target for renewable energy but also announced that he would try to reverse the decision by Fair Work Australia to slightly reduce penalty rates even though he had previously supported a review when he was minister under Labor! With Labor on the back foot, the Coalition’s polling ought to have improved
Turnbull’s immediate response to the poll is to blame Abbott’s speech on Thursday launching a new book of essays and suggesting the need for policy changes on inter alia energy and immigration. At a press conference today, Mr Turnbull began with a standard dismissal of the opinion poll that it was a snapshot of voters at least two years before the election proper. But he then attacked Abbott (without mentioning his name) “We saw an outburst on Thursday and it had its desired impact on the Newspoll. It was exactly as predicted and as calculated.” “He knew exactly what he was doing and he did it.”
Such a quick effect on the poll seems highly unlikely. In reality, Turnbull’s continuance as leader under the existing policy regime would ensure a loss at the next election. In the attached article, Andrew Bolt claims “His government will fall. And conservatives will never get what they want from the Liberals while Turnbull leads”. Terry McCrann has already said much the same, concluding that we need a “down-under Trump”. It appears that some so-called conservatives have already been discussing alternative policies outside the party room and have adopted the title of ‘deplorables”, as Hilary Clinton christened some of her opponents in the US Presidential campaign.
The failure of Turnbull to respond to Abbott by indicating possible policy reviews has now deepened the division within the Coalition and ensured that more voters will move to support One Nation, which now shows a primary vote of 10% in Newspoll, the same as for the Greens. This is particularly the case with his (latest) energy policy. While Turnbull rightly attacked Shorten for his 50% renewable target, as Bolt indicates Turnbull “promises more wind power himself as bills keep rising and the electricity starts flickering”. Interestingly, even The Australian seems to have has been reluctant to run critical commentary on the adverse effects from the Coalition’s 23% renewable policy (I have had several letters on this rejected by The Australian and AFR). Turnbull has now vowed to maintain the policy – almost because Abbott suggested the renewable target be dropped!
More criticism of the 23% policy seems bound to emerge in the near future, with a letter signed by 300 scientists being sent to Trump by MIT professor emeritus Richard Lindzen calling on the United States and other nations to “change course on an outdated international agreement that targets minor greenhouse gases,” starting with carbon dioxide.
“Since 2009, the US and other governments have undertaken actions with respect to global climate that are not scientifically justified and that already have, and will continue to cause serious social and economic harm — with no environmental benefits,” said Mr. Lindzen, a prominent atmospheric physicist (see attached 23 February article from Washington Times headed Hundreds of scientists urge Trump to withdraw from U.N. climate-change agency). Our Alan Moran is also about to start publicising his new book on Climate Change Treaties and Policies In The Trump Era in association with Andrew Bolt, Terry McCrann, Nick Cater, Ian Plimer and Senator Malcolm Roberts at locations in Melbourne, Sydney and Brisbane.
Turnbull also missed an opportunity to use the (extended) successful visit to Australia by Israeli PM Netanyahu to drive home the threat from militant Islam. While he rightly criticised the anti-Israeli resolutions in the UN and supported a two-state-solution for Palestine (albeit unjustifiably supporting a return to negotiations now), he should have indicated concern about the threat from Iran and that country’s likely acquisition of nuclear weapons. As Greg Sheridan points out in the attached article (Bibi Warns on Iran), it was left to Netanyahu himself to indicate the seriousness of the potential problem (Sheridan also separately savaged the support given to premature “recognition” of Palestine by three former Labor leaders, but not by Shorten).
Turnbull also missed an opportunity to correct activist Yassman Abdel-Magied for her soft interpretation of the Koran as supporting a feminist religion. Our PM should use every opportunity to provide an interpretation of the Koran which is commonly used by imams but is inacceptable in western culture. Unless we indicate now what is inacceptable, we will be stuck with a very divided society in ten or so years. The publication of an assessment that France is already close to that illustrates the importance of indicating now what is inacceptable. Turnbull does not show any inclination to sounding such a warning.
Turnbull to Follow Downer?
A possible alternative position for Turnbull would be to have him move to London as the High Commissioner to succeed Alexander Downer, who is due back about mid-year. Such a “solution” would be better for the Coalition than continuing the division which is now out in the open and which will likely make the polling worse. It would require a push from a considerable number of current MPs.
Follow up the next day, 28 February
My Commentary yesterday suggesting “Turnbull Must Go” has produced some critical responses and has also revealed media bias in favour of Turnbull. This comes from the comments made last night and in today’s media. But before turning to those I should note that George Christensen has resigned as chief whip in the National Party so that, he says, he will be freer to comment on Turnbull government policies. While this follows the resignation of Senator Bernardi as a member of the Liberal party, Christensen indicated that he would stay as a member of the National Party in the lower house. A loss of his vote there in a motion of no confidence would now mean however that there would be equal numbers for each side, a potentially ungovernable situation.
Today’s media includes a surprising article by the chief political correspondent, Phillip Coorey, of the Financial Review headed “Better off losing than changing leaders: Libs". It is difficult to believe that Coorey is being told by “conservative” Liberals that they would be “better off going down fighting at the next election rather than change leaders again”. He does not name any conservatives who told him this and neither he nor other conservative offered any comment on the likely disruption to the consequent formation and implementation of policies in the period ahead. Nor does he say that after the election loss there would almost certainly be a change of leaders.
The reality is that, like all parties, the Liberal party has divisive views and the set of views used since Malcolm Turnbull became leader has failed dismally. Now Turnbull has attempted to make the unbelievable defence that the latest fall in polling is due to changes in policies suggested by Tony Abbot. But does anyone seriously believe that Tony Abbott’s comments about Coalition policies on Thursday night caused the large drop (from 33/54 to 29/59) in Malcolm Turnbull’s personal satisfaction recorded by Newspoll by Sunday night? If so, they should hurry to re-elect Abbott so that his influencing capacity can be put to better use!
The reality is that Turnbull’s failure to present coherent policies consistent with the small government philosophy of the Coalition has lost him the support of a large group of potential voters and he is showing no sign of being able to bring such policies to the fore. Moreover, he has shown an inability to respond with authority to the union-driven policies enunciated by Bill Shorten. He has given no indication that Brexit and the election of Trump in the US suggest there has been a major change in what voters are seeking from their elected governments.
This conclusion is reflected in the attached article by Terry McCrann headed “The Liberal Shambles is not about Tony Abbott, it’s actually about Malcolm Turnbull”. McCrann reminds us of the failed judgements made in the recent past about the prospects of election by various candidates and points out that, even if Abbot were to depart, Turnbull would have the same difficulty as now in implementing current policies.
McCrann argues that “It is Turnbull who is the dud. The utter dud and from the moment he walked into the PM’s office in 2015. It was Turnbull who ran arguably the most inept election campaign we’ve ever seen — or at least since John Hewson lost the “unlosable election” in 1993 — to end up in the totally precarious position he (and the government) did. That was after “cleverly” changing the Senate voting rules to produce the rabble of crossbenchers we’ve now got. That in particular, Turnbull elevated Pauline Hanson from a likely one seat to four — dramatically increasing her political persona and clout, dramatically increasing the threat she poses to both the Liberal and National parties. Turnbull certainly can’t blame Abbott for the shambles of both the campaign and the outcome”.
He also makes the point that the policy changes suggested by Abbott –power bills, immigration, housing prices – are still there and still need to be tackled. “You still need a PM prepared to tackle them”.
The best solution for the Coalition may be to arrange for Turnbull to succeed Downer as High Commissioner in the UK in mid year. At the least, that might help restore their polling. But the main object must surely be to avoid the election of a union-driven Labor party. That will not be achieved by Turnbull.