A POLITICAL UPDATE – SETTING THE SCENE FOR 2020

Summer in south-eastern Australia was particularly severe with continuing drought being added to by a prolonged bushfire season. The Morrison Government – having won the “unwinnable election” in May 2019 began 2020 under increased pressure with any Budget surplus looking challenged, especially with the outbreak of the coronavirus virus on mainland China, world markets nervous and the Australian economy appears to be further threatened. To discuss how the Australian government might handle the year to come, Editor-at-Large at The Australian Paul Kelly joined National Affairs Columnist for The Australian Financial Review Jennifer Hewett to address The Sydney Institute on Monday 10 February 2020.

A POLITICAL UPDATE – SETTING THE SCENE FOR 2020                           

                                                     JENNIFER HEWETT

The consolation for Scott Morrison is that the political outlook for the year looked even worse in February 2019 than it does in February 2020. He didn’t lose his confidence or conviction then and he won’t now even though he was badly rattled by the public reaction to his Hawaii trip and his handling of the bushfire crisis.

But given early 2020 has not gone at all according to plan, even before the coronavirus struck, it’s far from certain the Prime Minister can regain the necessary political momentum and personal authority he lost over a torrid summer that he didn’t see coming.

We are all more sceptical of polls these days, but for many quiet Australians, he seems to have lost his sheen. Most committed Liberal voters haven’t given up on him yet and are still just willing to excuse his mistakes assuming he learns from them. Those who dislike him now dislike even more passionately. But, as usual, it’s the reaction of those voters who are not committed but who did back the Coalition,  and  Morrison personally – directly or via preferences at the last election – that are making the government far more nervous.

I was in Canberra for the return of parliament last week and the mood of hubris evident at the end of last year is certainly shaken. Not, however, the sense of aggravation that Morrison gets an unfair deal from the media, including now the condemnation by the international media, and much of the public debate. Yet by week’s end, there was almost a relief among backbenchers than the opening of parliament had not been quite as bad as it might have been – despite the Nationals – because Labor seemed unable to capitalise on the Coalition’s weakened state. And that there’s time to do so.

But there’s a belated acceptance that a series of misjudgments means the government needs to rapidly reset.Morrison was rattled by the reaction and has been – unusually – in apology mode, even willing to say an occasional sorry as the Labor Party tries to define him as arrogant. That won’t be straightforward for the Coalition – as the continuing ructions over personalities and policy in the National Party have demonstrated yet again. Last week, today, next week, inevitably.

Despite the claims, Michael McCormack is unlikely to be deputy PM by the time of the next election, probably much sooner – with all the disruptions and arguments and internal party criticisms being part of the story in the meantime. The junior partner is divided but inevitably headed into the direction of being more Barnaby-like aggressive, including giving Scott Morrison much more public trouble on issues like climate change policy and support for coal.  Witness the embarrassment of the vote today for what should be a minor post of deputy speaker this afternoon in favour of Llew O’Brien, a man few had ever heard of prior to his resignation from the Nationals.

The more that sort of division happens, the weaker a Prime Minister looks in his ability to manage his government – let alone the country. Queensland just doesn’t spell trouble for Labor leaders. Control of the numbers in parliament is now much more volatile.

Morrison, however, will definitely go to the election as PM despite the instant exaggerated enthusiasm of his many opponents that he can’t last. How successfully he does so will depend on how much he can assert control over the policy and political agenda from now on.

In that sense, the sports rorts affair and the latest arguments over the unbalanced distribution of another $150 million funded under the so-called Female Facilities and Water Safety Stream (FFWSS) are peripheral. But they now reflect an image that Morrison was previously good at challenging – of corrupted politics and politicians on the make. In other words, the business of politics as usual.

Morrison has famously said that he’s governing for people who don’t like paying attention to politics but playing daggy Dad going to the footy and sounding like an ordinary family man won’t be near enough by the end of 2020.  He needs to be back in the business of being seen to be delivering real results.

What happens to the economy is obviously key to that, with much of it – like China’s economic growth and now the impact of the coronavirus – certainly beyond Canberra’s control as Morrison and Frydenberg keeps pointing out.

We are seeing the alternative to the enormous economic boost if not free ride that China has given this country for well over a decade – and how vulnerable we are, probably more than any other developed country, to any sudden reduction in that massive contribution.

It’s still too soon to be sure just how bad or extended this contraction of Chinese demand will be – just that it will be very bad as the weeks go on.

The Treasurer and Prime Minister instantly celebrated the RBA judgment initially expressed by Philip Lowe last week that the economy would continue to grow at 2.75 percent this year and 3 percent next year as evidence that Australia’s economic fundamentals remain very strong. In private they were more surprised by his relative optimism. The combination of the impact of the coronavirus on the back of the drought followed by the bushfires is just the latest huge challenge for an economy that has been struggling to get traction domestically.

That is despite the government boasts of the economy’s resilience, its strong job growth, strong exports and a housing market that is booming again – too much so.

All true. Australia’s exports of minerals, metals and energy commodities reached a record new high of $290 billion in 2019 – up 17 percent from the previous record set in 2018.

Yet, while economic management remains a traditional Coalition strength, another year of low wages and sluggish growth at best will foment cries for the government to do more to spur growth and improve living standards – coming from everyone from the Reserve Bank down to the business community to the outer suburbs housing Morrison’s favourite political species.

But Morrison is a leader who has made a political virtue of delivering on past election promises rather than on calls for major change in future, on maintaining traditional rules rather than attempting new directions, of cautious incrementalism rather than dramatic reforms. Morrison won the election warning of Labor’s risks and taxes not by selling the Coalition’s future agenda.

So, Morrison was never likely to attempt major structural changes such as systemic trade-offs for real reform of the tax system, for example. He plays it safe in tactical terms. It still means this government is likely to go through this year risking looking purely reactive and flat-footed in terms of having any longer term strategy for a stronger future.

This was going to make 2020 – the crucial action year between elections -particularly challenging to sustain a sense of momentum even before the bushfires and coronavirus. A budget surplus may be good but it was never going to be sufficient of itself and now it can no longer be held up as the governments’ holy grail anyway given the uncertainty of the risks facing the economy, global and domestic. The new budget mantra is on the human cost rather than the fiscal cost.

Tough decisions on spending – typical of a first past the election budget – will certainly not be a priority for this government in 2020 as it instead emphasises that its previous discipline now gives it the wherewithal to provide help when needed.

The accelerated depreciation allowance expected in the budget, depending on how generous it is, will get applause from the business despite complaints it should have come earlier. It’s possible but not certain the government might also accelerate the personal tax cuts. The leaked story in the Australian last weekend about possible changes to the petroleum resource rent tax was obviously designed to make sure it doesn’t happen – and it would be tricky for a government which keeps emphasising the negatives of increased taxes. But also true is that there will be even less revenue after all to meet all these raised community expectations.

How much does that matter?

The federal system is, of course, one of the worst systems for attempting such major national reforms – and increasingly unwieldy. Canberra gets much of the blame for practical failures which are actually more the responsibility of the state governments. Blame shifting for school education standards and deteriorating results are a particularly pernicous perennnial that seems unlikely to change. So, the arguments over the adequacy of the land clearing measures and preparedness of fire management for the bushfires are just the latest example of this.

But the public, more than ever in this age of media all the time, everywhere – want the image of national leadership from their national government, particularly in a time of crisis. Morrison misread this and has since been rushing to respond in a frenetic blitz of activity and appearances. Now the inevitable delays and complaints about the recovery from the destruction of the bushfires will be an obvious danger for the Morrison government, particularly one with a tarnished ability to project its national leadership skills.

The government will focus on demonstrating compassion – whether on Veterans Affairs or youth mental health. But I don’t think the government’s interest in social issues such as the Religious Discrimination Bill will do more than rile up all sides with little obvious benefit achieved in the eyes of the general public.

So, in the face of all this, what’s the Prime Minister likely to do and what should he do this year.

I think the most important change required is to excite people’s attention with a narrative that makes them listen again and be persuaded the government does offer some answers to the sort of free floating anxiety that is hanging around as well as to the cost of living and household bills.

Energy policy and the connection with emissions reduction policy might still not be the priority for a lot of households in outer suburbia but there’s no doubt that many people are more concerned about the impact of climate change after this summer. And that they somehow want more action from Canberra even if they don’t know exactly what.

We saw the start of the corresponding policy shift with the Prime Minister’s first set speech of the year promising a future of technological advances and the release of a new technology road map and working closely with business innovation on energy policy rather than imposing taxes. The party is behind him on this.

Yet, the scepticism about how this will work is, if anything, more pronounced in the business community than among his quiet Australians. And the government’s image problem globally is obviously extreme.  The government will be under pressure to do more.

Morrison will make a virtue of his steadiness, the government’s responsiveness and his ability to take practical actions that protect Australians and Australian jobs. He offers a strong defence of the national interest rather than any fashionable global ideologies.

But I don’t think all this will be enough to make 2020 other than a very difficult year politically and one of, at best, treading water economically. All that is without the need to expect the unexpected – of more bad news rather than good. Black swans are no longer rare sightings.