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Grattan on Friday: Managing the economic numbers harder than taking shots at them

Joe Hockey faces a daunting task as Treasurer. AAP/David Crosling

Incoming Treasurer Joe Hockey is easing into the job, getting a feel for the economic numbers and for how he and his departmental head, Martin Parkinson might shake down.

The numbers are not so good. It is believed the revenue, which plunged in the Rudd government’s pre-election economic statement, confirmed by the Treasury-Finance outlook in the campaign, continues to head south.

As for the relationship with Parkinson, that is likely to be on a trial basis for a while.

It’s been bumpy in the past, with the Coalition alleging Labor had politicised Treasury. Hockey has always been willing to confront Treasury when he thought it was being used as an attack weapon.

He did so in the campaign, contacting Parkinson after Kevin Rudd and his ministers released what they said were Treasury costings showing a huge hole in opposition savings. Later, Parkinson and Finance chief David Tune distanced themselves from the Labor claims. The costings had been done, pre-campaign, on what Labor expected would be opposition policies.

Hockey has sweated for months, indeed years, over costings, learning from the botched (though he would contest the term) experience of the 2010 election that you can’t be too careful.

But there is nothing like having to do the real thing – the first budget of a new treasurer in a new government.

Work begins on the May budget towards the end of the year. There will be parallels this time with 1996, except that was before the Charter of Budget Honesty so incoming treasurer Peter Costello could find a fiscal crater as soon as he took up the job. Hockey can only find any weakening that occurred in recent weeks. The next major revision will be the mid-year budget update, released any time from October to early 2014.

As in 1996, there will be a commission of audit, whose membership will be announced soon, that will report at the end of the year or early next. Its findings, or at least its interim ones, will feed into Hockey’s first budget.

Getting this budget right will be crucial to how the Abbott government travels. It’s the budget for the tough decisions. But not too tough, if that would damage the economy and confidence. And not if toughness breaks promises, which would undermine trust.

The Coalition has been banking on a rise of confidence coming from the fact of its election, and indeed business and consumer confidence surveys this week suggested the anticipation of a change of government had had some effect. But sobering was yesterday’s unemployment number of 5.8%, up from 5.7%. This is the highest in four years.

Abbott’s first days have reflected his priorities – speaking quickly to regional leaders (of Indonesia, Papua New Guinea, Sri Lanka) who are crucial to his “stop the boats” policy – and the style he wants to bring to the job.

The boats policy seems to be running into continued difficulty, with the ABC reporting last night that Indonesian Foreign Minister Marty Natelegawa had told his parliament’s foreign affairs commission that the Abbott people smuggling policy was a “problem” to be managed – although the ABC also said the minister’s office had later hosed down the comments.

As of the end of yesterday, Abbott had not given a general news conference as prime minister-elect. There have been a handful of interviews, “pic facs” (one when he was briefed by defence chiefs) to feed the beast, and ministers-elect have been put out to fill the media space. But it does seem that Abbott wants to step back from the 24-hour cycle to the extent that’s possible.

He’s aiming for a measured marching pace. Parliament won’t commence until the last week of October or the first week of November, but when it does, legislation to repeal the carbon tax will be introduced in the initial week. The timing is for symbolism as much as anything. This is the issue Abbott used as a chariot to power.

The likely course would be that the Labor-Greens dominated Senate would send the legislation off to an inquiry, and there would be no pre-Christmas Senate vote on it. When the Senate did get round to voting, it would probably reject it.

For Labor, the crucial decision would be when the bill came back a second time. The ALP would then have to decide how far it pushed its opposition.

There are different views emerging in the party, and it could depend on who becomes leader, in the contest between Bill Shorten and Anthony Albanese that starts today (on the assumption Albanese runs). It was notable yesterday that Shorten, formally announcing his candidature, said Labor had its own mandate to pursue its carbon price policy but did not lock himself into saying he’d want Labor to force the issue on the repeal legislation.

The new Senate, which arrives on July 1, could probably be persuaded to pass the repeal (because it will be right-leaning, and why would the minor players, having been unexpectedly elected, vote for likely oblivion in a double dissolution?).

This would give Labor more scope. By the time the legislation came up for a Senate vote second time, it would be nearly mid-year. The ALP, if it insisted on keeping itself pure, could (with the Greens) block the legislation, knowing there almost certainly would not be a double dissolution, because the new Senate would give it the tick.

On the other hand, a party is not necessarily disowning a policy just because it lets through its repeal. As Labor MP Nick Champion advocated this week, one tactic could be to vote against in the House of Representatives and abstain in the Senate. That would make a statement, while also accepting the government’s superior mandate.

One can understand why Labor would agonise over what stand it should take on the repeal legislation, not least because it doesn’t want to send confusing signals to its supporters. But it also must look to the next election rather than the last.

One way or another, the Coalition is likely to get its carbon repeal legislation through without having to take the extreme step of another election, although probably not as quickly as it wants.

The real challenge of its first year is likely to be managing the economy and the budget, as the Coalition started to understand in the run up to the election, when it tried to preserve maximum flexibility with minimum undertakings surrounding its return to surplus.

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