May 5, 2016

The short and shocking reign of Malcolm Bligh Turnbull - MacroBusiness

The wondrous thing about this
job is that you get to peer behind the curtain of power and money to see what’s
really driving both. Over the six years that I’ve blogged, I have been
progressively more amazed at the bastardry and bloody-mindedness that one
finds behind the veneer. 

It’s been a journey into the darkest reaches of
Machiavellian practice that has seen prime ministers and governments
successively rolled by huge private interests, by bellicose Oppositions and by
rusted-on ideologies that no longer make sense in Australia’s changing world. I
thought I had lost the power to be shocked.

But I was wrong. The deeper
Australia descends into the chasm of its post-mining boom adjustment, the
more extraordinary the political behaviour becomes. Like Vernean subterranean
explorers on a fantastic journey to the centre of the earth,
confronted at each new depth with threats and creatures more bizarre and
horrific than the last, we are probing the uttermost depths of depravity in our
leaders and selves. And latest is most assuredly greatest, a point I will
return to
.
This journey began with what
now seems in retrospect a more than respectable Rudd Government. It did good if
overzealous work in the GFC in which its bailouts were necessary. But they were
never rolled back. Indeed they ushered in Australia’s too-big-to-fail era in
which the illusions of division between private and public interests were cast
aside and policy merged around a singular all-encompassing goal,
protecting the housing bubble at the heart of the economy.
Rudd came and went as he aimed
for sensible reform in mining taxes, assassinated by rent seekers. Julia
Gillard tried her hand at carbon reform with more efforts at Budget repair that
coincided with the second coming of the mining boom. RBA and Treasury for a
moment embraced the problem of both private and public debt and did what they
could to contain both.
But the moment passed when the
China boom ended in 2011. At that point we needed to face up to our sins
and begin reform in earnest. But instead we got a complete volte face from
RBA and Treasury as both exhorted the nation to join a new housing bubble,
as if the GFC had never happened.
Tony Abbott was elected shortly
afterwards and he also genuinely aimed for budget repair. Joe Hockey sought to
end entitlement and swept a broom through Treasury’s perverse forecasting. But
both Abbott and Hockey proved inept ideologues with no idea what they were
really doing, mistaking class warfare for structural reform they ripped the
income out of the very bubble that the RBA and Treasury were busily
nurturing. Needless to say they were doomed from that point forward as
even Blind Freddy could see the chasm looming at our feet. Before they went
they managed to condemn the entire Australian vehicle assembly industry over
the paltry matter of $500 million dollars.
Four prime ministers in four
years and the descent of Australian politics into the dark as leaders could
find no way to spark the lifeless Australian economy.
Then when all seemed lost a
light appeared. Carrying the torch of hope was one Malcolm Bligh Turnbull,
policy titan, charming centrist, orator and Liberal wet, saviour to a
despairing nation. The ideal man drive a new project of national unity that
restored our purpose, economy and political pride. He came to power with a
very clear vision:
Ultimately,
the prime minister has not been capable of providing the economic leadership
our nation needs…
We need a different style of leadership. We need a style of
leadership that… respects the people’s intelligence, that explains these
complex issues and then sets out a course of action that we believe we should
take… We need to respect the intelligence of the Australian people. We need to
restore traditional cabinet government [and] put an end to policy on the run
and captain’s calls.
We were set up to be treated
like adults and have the nation’s challenges explained to us then addressed,
the economic challenge of the end of the mining boom being of primary
importance.

Prime Minister
Turnbull started slowly but OK with the innovation agenda which fitted
with this reality but it was small and in no way lived up to its absurd
hype of being an “ideas boom”, the ads for which are still rolling out all over
at tax-payer’s expense.
GST reform could also have
fitted with the structural adjustment theme and it was rolled out next. It was
a way to help repair the Federal budget through boosting revenues and
productivity via tax efficiency. But, soon afterwards it collapsed after it
took heat from lobby groups and internal Treasury modelling showed it would hit
growth. Why it was rolled out at all before this modelling was done is
a pointed question given one should know one’s research before announcing
policy plans.
Associated and afterwards came
a narrative about bracket creep and the need for income tax cuts. This was
toyed with in public for a few weeks then got suddenly junked as it became
obvious (as if it wasn’t already) that there was no money for said cuts,
replaced with a modest adjustment to the $80,000 threshold, which only benefits
the top 25% of income earners.
Then came negative gearing
reform. It was also supposed to help address the budget deficit, as well as
adding equity to a clearly and grotesquely unfair tax system favouring assets
over income, old over young and rich over poor. Treasurer Morrison was wheeled
out again to sell it but hardly were the words out of his mouth when Labor
countered with a much more comprehensive and considered policy proposal. The
Government panicked, flopped around for a week or so, then ‘pulled an Abbott’
and abandoned all reform to negative gearing, leaving Treasurer Morrison
high and dry once again, citing spectacularly dubious and widely debunked BIS
Shrapnel research as his reason.
Next onto the comical tax
conveyor belt was a company tax cut. It was bandied about in public for a few
weeks before it too was off to the knackers as it again became clear that there
is no money for it and, moreover, that yet more modelling showed that although
it would boost growth it would detract from national income – the best
indicator of livings standards. Then it was reincarnated again in Tuesday’s
Budget despite benefiting primarily foreign shareholders/investors.
Throughout this tax schmozzle
the Turnbull narrative oscillated wildly between post mining boom fear
mongering, placing emphasis on the need to find growth, and half-baked
solutions that rose and fell with the regulatory of a metronome. It is
absolutely no wonder that polls have sunk throughout.
As they have done so the Prime
Minister’s methodological madness has accelerated. Rather than pause and
take stock on where he was going and what he was doing, the PM’s
gathering maelstrom has in the last few weeks spun off a series
hair-brained schemes like some crazy policy Catherine wheel:
  • perhaps spooked by his own failure, the PM
    engineered a remarkably self-serving and flimsy double dissolution trigger
    in its Australian Building and Construction Commission legislation (which
    is good idea) despite having declared consistently that he would run his
    term thereby immediately trashing his own polls given the severe lack of
    national interest in the policy;
  • he unilaterally shifted the Budget timetable
    to accommodate this desperate ploy but failed to tell his Treasurer
    and thus filled the media with a week of speculation about a
    failing relationship which, let’s face it, would be no surprise given
    the number of occasions ScoMo has been hung out to dry;
  • the day before COAG, the PM unilaterally
    declared that the states ought to be raising their own taxes and that they
    would get no money unless they did. Despite the idea having merits, the
    complete lack of a process to implement such an huge Federation
    reform agenda meant it was treated with the contempt it deserved by
    state premiers;
  • next the PM threw a high speed ponzi-rail Hail
    Mary proposal to link eastern cities funded largely via dealing the
    developers into the resulting land value increases. Just a day later, his
    own head of the task force, John Alexander, openly confessed that the plan
    was all about spreading the Sydney and Melbourne property price
    bubbles into regional areas, the very opposite of improved competitiveness
    and productivity that is need to address the post-mining boom challenge;
  • Labor then blind-sided the flailing prime
    minister again when it announced a Royal Commission into banking
    malfeasance, something that is years overdue, to look into both financial
    planning and interest rate setting scandals, so the desperate PM (or
    Treasurer or both) immediately responded by seeking to boost funding to
    the (ir)responsible regulatory body, ASIC, which pointed out that it was
    Coalition budget cuts that had gutted its functions in the first place.
And now, in the past week we
have witnessed two more policy disasters. The first is the $100 billion plus
submarine project that could have been done for $25 billion. Handed to Adelaide
to save the political life of Christopher Pyne for the princely cost of
4.7% of GDP over the next decade. Truly a shocking waste of money and act of
such transparent political self-interest that by itself it warrants the
guillotine.
At this stage I really thought
that the centre of the earth’s gravity was upon us. It seemed to me impossible
to descend any further into the political pit. $75 billion to save one
ham-fisted minister because the very same government had failed to pay $500
million to preserve an entire industry is in any man’s political calculus
a scale of public betrayal so vast that it is surely unbeatable.
But I was wrong. It was beaten
in under a week because next came the Budget, a work of such deep fiction that
Jules Verne would envy it.
Here are the Budget’s greatest
lies:
  • dwelling investment to grow 2% when we already
    know it has peaked in ABS data;
  • business investment is expected to fall
    -5% when hard ABS data is already measuring it at -18%;
  • wages and demand growth based on 1.6%
    productivity gains when the current trend is sharp falls;
  • terms of trade forecasts that are 30% higher
    than futures markets are projecting;
  • nominal growth that is supposed to accelerate
    when it is largely made up of the above.
The Budget is a complete
work of fiction, one that will fall apart within six months, probably less, and
will trash the Government’s credibility in the process, as well as wider
confidence with it. The Budget lies are designed for one purpose only, to
get the Government elected in eight weeks, and damn the lifeboats.
In a six month period, the
short and shocking reign of Malcolm Bligh Turnbull has opened a fissure at the
bottom of the pit in which the faith of the nation was already crashed and
pushed it flailing into a bottomless free fall towards all manner of
horrors that could have been avoided just so he can crown himself king.
He is king alright, king of the
damned.



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