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Worried about nervous ‘animal spirits’, government plays cool dude on the budget

Finance Minister Mathias Cormann says the government has ample time to get its measures through the Senate. AAP/Tracey Nearmy

The government’s panicky budget message seems to have panicked even the government. Now it is trying to put a new perspective on the battle with the Senate.

For weeks we were regaled with crisis talk, the spectre of a A$40 billion gaping hole posed by Senate obstruction, the impression – generated mostly by the government itself, with the enthusiastic help of crossbenchers, Labor and the media – that the budget was under an unusual degree of siege.

With Clive Palmer recalcitrant on many measures, business leaders issuing warnings about the implications for the economy, senior minister Andrew Robb muttering about sovereign risk, and commentators calling for a budget “reboot”, the doomsday scenario got out of hand.

There was concern in government ranks that too many people might be taking it seriously, thinking the core of the budget really was in serious trouble. To say nothing of the fact that ministers' more recent lines about being willing to compromise on individual items were being drowned out.

The potentially bad consequences for business and consumer confidence were obvious.

So a new official script has been issued. The budget is not in trouble. Indeed most of it is already passed.

As for those measures dominating the headlines – Medicare co-payment, deregulation of universities, tough new arrangements for the unemployed, and others – well, they might just take a while to get though.

It happens, the script goes. No need to panic. The co-payment, for instance, doesn’t start until mid-next year. After all, Senates hold up things. The government might – but doesn’t – recall how the Coalition frustrated for years Labor’s paring back of the rebate for private health insurance, a measure involving substantial savings.

Finance Minister Mathias Cormann, speaking on Tuesday, said there had been an implied suggestion in much of the commentary that unless all the budget legislation was through both houses of parliament by now “we were somehow running late”. Not true, Cormann said – there was “ample time to keep engaging with the Senate crossbenchers”.

“No government in recent political history had passed all of its budget measures through both houses of parliament by the end of August. We are on track,” he said.

The detail underpinning this new cool script has been prepared by Treasury and Finance and is made available by the Treasurer’s office. This is what it says.

“The budget includes around $440 billion in expenses for 2014-15 and $1.9 trillion over the four years to 2017-18. Only around $20 billion in net expense measures over the forward estimates – or around 1% – of this has not yet been implemented by legislation.

“The 2014-15 budget included around 400 policy decisions (expense, revenue, and capital decisions), with a net improvement to the bottom line of nearly $40 billion in fiscal terms over the forward estimates period.

“Nearly two thirds of these policy decisions are implemented with the passage of the annual appropriation acts [in June].

“The impact of these measures that have already been implemented is a net improvement in the budget bottom line of around $15 billion over the forward estimates. This means there is around $25 billion of measures which improve the budget bottom line outstanding.

“Many big savings have already been implemented, without the need for further legislation including [the $7.6 billion cut in aid, the single biggest saving].

“However, many of the savings that remain to be legislated are structural savings that have a greater impact on the budget over the medium to long term, including the GP co-payment, welfare changes and reintroduction of fuel excise indexation.

“These measures are key contributors to reducing expected debt levels over the next decade by nearly $300 billion. These are also some of the key measures that the government is working with the new Senate to implement.”

The emphasis is on what’s through, with the hefty $25 billion “outstanding” figure cast in a fairly relaxed context.

The tone is different from when Treasurer Joe Hockey was threatening new austerity measures if the Senate didn’t play ball.

New script or not, the government still faces major problems in getting a substantial part of its medium term program through.

On Thursday the debate about the Medicare co-payment will ramp up when the Australian Medical Association releases its alternative plan for a co-payment.

This will propose exempting concession card holders, children, and the chronically ill and contain safeguards for indigenous health services. It would not deliver substantial savings. In an interview on Wednesday Abbott sounded as though he might be amenable to cutting back the co-payment for pensioners but not exempting them altogether.

In evidence before a parliamentary committee on Wednesday, Reserve Bank Governor Glenn Stevens (who spoke of the need to generate the “animal spirit”, or confidence, to generate new investment) captured the budget problem in a nutshell.

“From where I sat, I did not think, really, that the budget was that draconian, frankly, in a macro economic sense. I am not talking about this measure or that measure; I am talking about the pace of intended consolidation over a run of years. That is actually not that tough, frankly.

“I do not think that there is any doubt that over a horizon of five, six, eight, ten years, we have to have a material amount of consolidation. Whichever government is in power today and/or in the future, they are going to face that imperative. How you do it is a judgement call at the political level.”

There you have it. In broad economic terms, the budget is not nearly as harsh as the sum of its political parts. Its weakness has been in the nature and mix of the individual decisions – the “judgement call at the political level” – and it is those that are at issue with the Senate.

If you’re a kid in detention, a date is everything

Scott Morrison is trying to manage the politics of children in detention. AAP/Nikki Short

Scott Morrison’s release of more children from detention is selective, and the timing of his announcement has a distinctly political flavour to it.

The decision applies to about 150 children under ten years old, who will be out by Christmas, but not to the several hundred more who arrived from July 19 last year, when Kevin Rudd made his announcement that all asylum seekers would be sent offshore. To let those out would undermine the government’s deterrence policy, Morrison says.

There are currently 876 children in detention, including on Nauru. This is 516 fewer than at the election. At the end of July there were 148 on Christmas Island.

Morrison says the government has progressively released children, and blames Labor for the slowness, on the grounds fresh arrangements for bridging visas had to be made. “Labor’s arrangements for bridging visas were insufficient to protect and support young children.”

The timing is pointed, coming days before Morrison appears at the Human Rights Commission inquiry into children in immigration detention, which reports to parliament in mid-September. Morrison says he’s been working on the plan for months. When he was asked whether this announcement was about “trying to improve your image before you front the Human Rights Commission” he replied: “That is a pretty cynical question”.

Cynical question or not, the minister no doubt wanted to have some positive news out, though one would imagine, given earlier evidence from doctors about the bad conditions to which children have been subjected and the fact there is no release for many, that he might be in for some stern interrogation when he appears on Friday.

Like most other stages of the asylum debate, the Abbott government is reliving Howard government experience in relation to children in detention.

But Howard’s hand on children was forced especially by the moderates on his backbench. These days, the Liberal moderate voices are silent. At least the Human Rights Commission inquiry has had some public impact.

While Morrison is trying to manage the politics of children in detention, he is also at work to finalise an agreement – of which Australia should be ashamed – that would send people from Nauru to Cambodia.

Alastair Nicholson, chair of Children’s Rights International and a former chief justice of the Family Court, who is very familiar with Cambodia, on Monday made the compelling case against this scheme.

“The concept of Australia sending people who are in need of refuge to a country like that is almost indescribably bad as policy,” he told the ABC’s Lateline.

It would be especially bad for unaccompanied minors, he said (although it is not known whether there would be any of these among the people sent).

“I don’t believe that asylum seekers or anyone else gets very much protection from the law in Cambodia … It’s one of the poorest countries you would find in southeast Asia … It’s just the worst sort of place from the point of view of sending asylum seekers, and particularly asylum seekers who don’t have any cultural or other ties to the country.”

We still know little about the Cambodian arrangement. Morrison’s claim on Tuesday that “we’ve made no secret of the fact that we’re in these discussions with Cambodia” is a stretch. The first information came from the Cambodians, as has most that followed. The Australian government reportedly pressed (not very successfully) on Cambodian officialdom a desire for confidentiality.

As Nicholson said: “We’re never told anything about what the minister’s doing – that’s part of the problem, really. And once it’s done, there’s very little that can be done about it.”

We have got used to the Morrison style of secrecy.

For example when he kept a boatload of asylum seekers on the ocean for weeks, refusing to say where they were. His declining to talk about “on water” matters became a matter for ridicule as well as concern.

The reality of what’s done behind the scenes in border protection policy can be much at odds with the gestures.

Guardian Australia is reporting emails obtained under freedom of information showing the immigration department’s efforts to repatriate (voluntarily) Syrians from Manus and Nauru earlier this year.

This week Morrison said 4400 places would be reserved in the (existing) refugee program for Syrians and Iraqis. The government wanted to be seen to be doing something in line with Tony Abbott’s strong rhetoric about the crisis in Iraq.

A disconnect? One would think so. As there will be between the fates of children, depending on whether they arrived before or after a particular date.

POSTCRIPT: It is reported from PNG that police have charged two men over the murder of Iranian asylum seeker Reza Barati, killed during the Manus Island riots in February. The men are said to have worked for G4S, the company that managed security at the time. One was arrested in July and the other this week.

A climate change convention: Clive Palmer really knows how to mess with Abbott’s mind

Clive Palmer has government ministers right where he wants them at the moment. AAP/Lukas Coch

Clive Palmer may have all sorts of motives but one surely is to drive Tony Abbott to distraction.

As Palmer put it on Monday, after sending Joe Hockey’s chief of staff Grant Lovett on his way to do more work on budget measures, the government had found it quite surprising that it did not have the power to govern – that it had to go to PUP on things.

Perhaps not so much surprising as infuriating and humiliating.

Palmer announced, following his talks with the Hockey officials about the mining tax repeal package (where he wants to keep some spending measures), that there is no agreement at this stage. The government would bring back options.

Joe Hockey kept in touch with Palmer by text. The Treasurer has been out of the national news cycle since Friday’s apology, although he did local media in Sydney and spoke to Chinese TV. His space was filled by Finance Minister Mathias Cormann, who was on the ABC at 5.40 am Perth time on Monday.

Abbott continued the government’s mixed signals. “We’re prepared to talk to the crossbench senators. What we’re not prepared to do though is sell out the fundamentals and the fundamentals are that we have absolutely got to get this budget crisis back under control.” Which could mean anything.

The budget story has a long way to run. But at this point Palmer has ministers where he wants them, traipsing north to see him (with Immigration Minister Scott Morrison next).

On another front, Palmer put Abbott in his place on renewables, after a report the PM wants to scrap the renewable energy target. “They can’t do anything unless we agree with it, basically, and we’ve said we’re not going to get rid of the RET.”

As if this wasn’t enough pain, Palmer announced he was convening a “world climate change convention” on November 17, immediately after the G20, focused on the need to have an international emissions trading scheme.

The one issue Abbott wants to play down at the G20 is climate change.

The review of the future of RET is setting off yet another row for the government to manage. The Australian Financial Review on Monday said Abbott had asked Dick Warburton, the inquiry’s head, to do more work on terminating the RET, after the review leaned towards just scaling it back.

It is hardly wise for the government to be stirring this battle, especially as the PM’s office has been telling ministers not to open new areas of conflict. Just-released modelling commissioned by climate and conservation groups has shown that cutting or ending the RET would hand big extra profits to coal power stations without bringing price relief for consumers.

If Palmer sticks to his position it is an argument that can only have downside for the Coalition – it won’t be able to make the change it might wish but will come under fire anyway (renewable energy is popular with the community).

Cormann said on Monday: “The government remains committed to the renewable energy target, that is our policy”. Whether this holds when the government soon considers the Warburton report remains to be seen.

There is also the question of what the RET is. It was set at 20% but because of declining energy demand, under current arrangements about 28% of national electricity would be coming from renewables by 2020-21. The government could argue for bringing it back to 20% and still claim it was in line with the target. But Palmer on present indications would not wear that.

The government’s frustration about the budget logjam was evident in comments by Trade Minister Andrew Robb to The Australian about sovereign risk.

“We are in the process of desperately trying to restore our gold standard. We are trying to correct a perception that was starting to evolve. The minority government of the past three years played a role in that. If the current Senate continues as it has, it will affect the perception of sovereign risk in Australia,” Robb said.

There are a couple of points to make about this.

It is unwise for a cabinet minister to be talking in these terms, which are exaggerated (just like the government exaggerates the “budget crisis”). The minister’s comments could be viewed overseas more negatively than the Senate situation.

But also, it is a case of pot and kettle. The Coalition in opposition was willing to fight hard against many Labor measures. The only reason it could not be even more effectively negative was that it did not have the numbers in the Senate.

There is an argument to be had about how far the Senate should go in thwarting a government. But complaining about being obstructed by others when in the past you have played as roughly as your circumstances allowed doesn’t wash.