There is one version of events that says Joe Hockey was leant on to step aside partway through last year, when it became clear what a disaster his budget had become for the government and how badly it needed to be reset. Hockey, in this account, threatened to “blow up the government” if any move was made against him.
Since then, the government has done a fine job of blowing up itself. In the course of this explosion, however, Hockey’s position has become increasingly tenuous.
On Tuesday, Hockey failed to deliver his first Intergenerational Report. In doing so, he breached his own party’s watchdog legislation, introduced by John Howard and called the Charter of Budget Honesty. A particularly stark oversight for a government so obsessed with the spectre of “intergenerational theft”.
The report is to chart “implications of demographic change for economic growth and assess the financial implications of continuing current policies and trends”. It is required that the government publishes one every five years.
A spokeswoman for Hockey accepted that the treasurer had failed to release, or indeed prepare, this road map. She said the report was a “priority for the government … a vital social forecasting document”. But she also said “it is a complex modelling task” and that the latest economic data was only released via the September quarter National Accounts, which came out in early December, and the Mid-Year Economic and Fiscal Outlook, which was released after that. “Getting the data right is the most important thing…” she said. “We will be releasing it very soon.”
Another assessment came out on Tuesday, with the Reserve Bank’s decision to cut the cash rate to 2.25 per cent. There is every chance the rate will be cut again next month. In short, the central bank has formed a view that the economy is in trouble and requires stimulation.
In a statement released by the bank, governor Glenn Stevens noted the ongoing decline of commodity prices and low growth in demand.
“In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak,” he wrote. “As a result, the unemployment rate has gradually moved higher over the past year. The fall in energy prices can be expected to offer significant support to consumer spending, but at the same time the decline in the terms of trade is reducing income growth. Overall, the bank’s assessment is that output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected. The economy is likely to be operating with a degree of spare capacity for some time yet.”
The picture is a bleak one, set against economic strife elsewhere. Alongside a ruinous budget, it serves mostly to highlight Hockey’s unpreparedness to deal with or even properly articulate the realities of the Australian economy.
The treasurer’s press conference following the Reserve Bank’s announcement was more about point-scoring than economic vision: “The government will continue with its credible plan to get the budget back to surplus, to repair our balance sheet and to deliver the sort of safety and security Australians expect by having a government that is living within its means.”
Australia’s economy is in a position ever more requiring of nuance and expertise. Hockey is not much possessed of either. If Abbott is to be replaced as leader, much of his fate will be tied to a fool budget. There can be every expectation Hockey would go with him, and it would be no great loss.
This article was first published in the print edition of The Saturday Paper on February 7, 2015 as "Exploding cigar".
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