Inside Story

Next up, a budget ambush?

The Coalition won the political battle, but will it fall into the same trap that blighted previous governments?

Rodney Tiffen 24 May 2019 2311 words

It seemed like a good idea at the time: federal treasurer Joe Hockey discussing the infamous 2014 budget soon after its release. Dean Lewins/AAP Image

Newly elected governments often enjoy an extended honeymoon; re-elected governments rarely do. Immediately after an election, especially when the victory was unexpected, the winners are exuberant and the losers plunge into gloom. An iron law of journalistic commentary decrees that everything the winning party did is treated as a stroke of genius, and all the loser’s moves were foolish. The vanquished party must resolve an existential crisis; the victor can look forward to an endless vista of triumphs.

More often, though, re-elected government have only a short time to savour victory. Internal discipline had ruled in the lead-up to the election, but conflicts and rivalries re-emerge once the contest is over. Governments that managed to keep divisions and embarrassments under the radar now find them spilling out.

The signs suggest that the Morrison government is unlikely to break the pattern. One set of troubles surfaced briefly during the election — the “Watergate” allegations and related failures in the Murray–Darling basin — could well come back to haunt it. More broadly, has the public been getting value for money from the government’s contracting decisions, especially when they are let without tender?

Another potential time bomb is the government’s erratic performance on global warming, energy and the environment. Scott Morrison deftly deflected concerns during the campaign, but it’s unlikely he can forestall embarrassment and failure indefinitely. When Malcolm Turnbull was prime minister, he and environment minister Josh Frydenberg failed three times in their quest to introduce environmentally oriented energy policies. Morrison’s victory will give him far more internal authority than Turnbull had, and perhaps he will be able to get the considerable rump of climate change deniers in the government to submit to new policies. Equally, they could turn into a major political headache.

Those problems are particular to the Morrison government, but a third — the difficulty of translating campaign promises into budgetary realities — is common to all returning governments. With the best will in the world, this is a challenging and hazardous process.

The cynical view — that politicians break promises without a second thought — is much too glib. Most of the time, if it is politically and economically feasible, they stick to them. The real sleight of hand tends to happen during the campaign, when voters are misled by omission; once the government is back in office, previously unmentioned nasties suddenly emerge.

But some governments do break election promises blatantly and comprehensively. That’s happened at least three times in contemporary Australian politics, in each case resulting in post-election budgets so out of step with campaign promises that they did lasting damage to the government.

The first of these budget ambushes was engineered in 1978 by Liberal treasurer John Howard, following the Fraser government’s first re-election in 1977. The triumphant campaign had produced a landslide almost on the same scale as Fraser’s first victory in 1975. Its negative side had included ads featuring the pop song “Memories” with unflattering pictures of opposition leader Gough Whitlam and his ministers, and labelling Whitlam “the unemployment expert.” The positive side involved promises about cutting income tax. In ads featuring a fistful of dollars, the government promised to continue the tax indexation it had introduced and to make further cuts. Journalist Paul Kelly called it “one of the most blatant appeals to greed in many years.”

Instead of delivering income tax cuts in the 1978 budget, Howard announced “temporary” tax increases. The government also raised taxes on petrol, cigarettes, beer and cars, introduced an airport departure tax, and gutted Labor’s Medibank scheme. After the temporary tax surcharges were made permanent the following year, the Illawarra Mercury headlined its front page “Lies, Lies, Lies.”

Morgan Poll figures showed the Coalition ahead of Labor in the first half of 1978 but behind after the budget. The government didn’t lead Labor again until March 1980. The polls during that year fluctuated, but as another election neared, Labor pulled ahead.

The election “was particularly heavy going,” Liberal federal director Tony Eggleton wrote in his diary, and the polls were “not encouraging.” The government was rescued by a spectacular scare campaign triggered by a Labor MP’s tentative reference to the prospect of a capital gains tax on the family home. This new tax “was made the dominant issue for the last week of the campaign,” wrote Eggleton. “Television and radio messages and full page press advertisements warned of Labor’s threat to the family home.” The tactics “were controversial even among the Liberals,” he added, “but the political hardheads were of the view that the end justified the means.”

The Fraser government won another thirty months in government, but on a much smaller two-party-preferred vote of 50.4 per cent. Its lower house majority was halved — from forty-eight to twenty-three seats — and five Australian Democrats and an independent gained the balance of power in the Senate. From May 1981, according to Morgan, the Coalition consistently trailed its opponent, and this period ended with Labor, led by Bob Hawke, winning a large victory in March 1983. The 1978 budget ambush had been the turning point in the Fraser government’s political fortunes.

A decade after Fraser lost power, another post-election budget ambush was performed, this time by a Labor treasurer, John Dawkins, following the re-election of Paul Keating’s government. Labor had trailed consistently in the polls in the lead-up to the election, with extremely unfavourable ratings of Keating himself, and commentators had taken to describing this as an “unlosable” contest for John Hewson’s opposition. The economy had been through a painful recession — the recession we had to have, as Keating called it, in a phrase that would haunt him forever.

Hewson had grabbed the political initiative more than a year earlier with his detailed Fightback! policies. As the election neared, Keating challenged elements of Fightback! — on health, industrial relations and a new goods and services tax — fiercely and forensically. Although conventional wisdom attributes the Coalition’s loss to the proposal for a GST (“Whenever you put your hand in your pocket, Dr Hewson’s hand will be in there too”), Hewson has said that the proposed cuts in Medicare bulk-billing cost him the election. During the campaign Keating also promised tax cuts — famously describing them as “L-A-W law” tax cuts — with the first to be delivered in 1993 and the second in 1995.

Leading into the campaign, and for much of its duration, most polls and commentators forecast a Coalition victory; even as the election night count began, Labor was far from confident. But Keating was soon proclaiming what he called “the sweetest victory of all.”

Now came the problem of living up to the promises made to secure victory. Dawkins was faced with an impossible task: as he wrote later, “We now had to accommodate some very expensive promises that had been made in the lead-up to the election when the deficit was already too large.” By the time he delivered the budget in August, he had threatened to resign three times in private meetings with Keating. (If Dawkins kept up this wilful behaviour, Keating reportedly told his staff, he would knock his block off.)

“The budget was the horror that everyone was expecting,” Keating staffer Don Watson recalled. The first round of tax cuts was introduced but the second round deferred until 1998 (later to be abandoned). Wholesale tax rates were increased 1 per cent across the board, several other indirect taxes were raised, and spending was cut by $2 billion.

The reaction was strong and immediate. Predictably, and with some justification, the Liberals charged that Keating had lied his way back into government. Less predictable was a caucus revolt and ACTU president Martin Ferguson’s description of the budget as an “indefensible… betrayal of working people.”

A Sydney Morning Herald poll found 72 per cent of voters believed the budget would make them worse off. Labor’s primary vote was down to 31 per cent, the Coalition’s up to 54. Hewson led Keating as preferred prime minister 53–33. Keating rarely admits to mistakes, and more than two decades later author Troy Bramston reported that, “given the problems with the 1993 budget, Keating now believes he should have combined the role of treasurer and prime minister.” It was never likely that Labor would win a sixth election in 1996 against any sort of competent Liberal opposition, but the 1993 budget almost certainly made it impossible.

Undeterred by these precedents, treasurer Joe Hockey followed the 2013 election of Tony Abbott’s government with his own post-election ambush. But where governments were juggling difficult economic conditions in the two previous cases, Hockey’s decisions were not based on surprise discoveries or changed conditions.

On election eve, in an interview with Anton Enus on SBS, Abbott had been unequivocal: “no cuts to education, no cuts to health, no change to pensions, no change to the GST, and no cuts to the ABC and SBS.” His would be a government of “no surprises, no excuses.”

Elected, the government moved with alacrity in the opposite direction. During the campaign Abbott had sought to neutralise education as an issue by declaring that “as far as school funding is concerned, Kevin Rudd and I are on a unity ticket.” In late November, just ten weeks after the election, education minister Christopher Pyne attempted to renegotiate Labor’s funding deals with the states. The resistance was immediate.

The Abbott government has the distinction of being the quickest first-term government to lose its lead in the history of Australian polling. Just three months after the election, it dropped behind Labor; the Coalition never led again in the polls while Abbott was prime minister.

The horror budget came the following May. Ten days beforehand, the government released the report of its National Commission of Audit, chaired by business leader Tony Shepherd. The commission recommended major cuts and privatisations. According to the Financial Review’s Aaron Patrick, “the new government wanted to reset the nation’s expectations far lower.” Naturally enough, no such resetting had been attempted during the campaign.

The cuts came as a shock not just to the public but also to many MPs. Abbott and his office had been so concerned to prevent leaks that they had severely restricted the flow of information, making the government’s own MPs ill prepared for the news they had to sell to the public.

Apart from the substance of the measures, the budget was a PR nightmare. Hockey was in high spirits in the lead-up, reportedly dancing to the pop song “Best Day of My Life.” In a devastating interview, Channel Nine’s Laurie Oakes suggested that it might not be the best days in the lives of the unemployed, the sick and other welfare recipients. Later, questioned about the impact of petrol tax on poor people, Hockey replied, “The poorest people either don’t have cars or actually don’t drive very far in many cases.” Having been the government’s strongest performer, he never recovered from his first budget.

Labor sprang into action. It spent $1.5 million on an advertising campaign centred on Abbott’s election-eve promise of no cuts. Newspoll found that 48 per cent of respondents disapproved of the budget and just 39 per cent approved. In contrast, the first poll of the Rudd government had a 60–12 approve–disapprove margin. Just 5 per cent of those polled thought they would be better off, while 69 per cent thought the opposite.

Like Keating and Dawkins, Abbott and Hockey lacked control of the Senate, and many of their most contentious measures had to be abandoned. Although they had campaigned on their greater ability to rein in government debt and deficits, they never seriously attempted to address these issues again. Over the next five years, government debt doubled.

What this fiasco revealed was that Abbott and Hockey, who had spent most of their adult life politicking, had no idea about governing. But this may be a problem within the political class more generally.

Weeks before this year’s election, political analyst Sean Kelly wrote that if Shorten were to lose, his name would forever be linked to that of John Hewson and the 1993 election. In both cases, an opposition lost what it should have won by campaigning on an ambitious and detailed reform agenda that provided too many targets for scare tactics.

Some commentators were already focusing on what they thought was the folly of the franking credits policy; since the election, such sentiments have become the conventional wisdom. Finance writer Alan Kohler has concluded that “best to just shut up about tax increases or any other difficult reforms” during election campaigns, and if you must say something, lie.

Bowen and his economic team, Jim Chalmers and Andrew Leigh, had presented what is probably the most precise budget blueprint any opposition has produced. It specified which tax concessions would be abolished to fund extra spending on health, education and environmental initiatives, all the while promising to keep the budget in surplus and address the mounting debt. Its reward for this honesty was to be attacked for its “retiree tax,” its “housing tax” and its “death tax,” and to have its economic credentials lambasted. John Howard’s small-target conventional wisdom of 1996 has been restored.

But there is a cost to such electoral pragmatism. As politics has become more professional, it has become more cynical. The concentration on short-term tactics, on winning by whatever means it takes, has become stronger, but at the expense of governing skills and with the likelihood that the tactical spin of both sides is making people more disillusioned with the democratic system itself.

The 2019 election was a triumph for Scott Morrison and the Coalition. Will they be as successful at governing as at politicking? They won on a reassuring platform of continuing economic good times and sound management, of budgets that will deliver both tax cuts and surpluses. Will Josh Frydenberg’s next budget fulfill these expectations, or will he deliver a budget ambush? •