Wednesday, May 19, 2010

Wednesday Column: Who would have thought? It's all up to Hockey.

Could the dog have eaten his homework too?

There's a terrific story in biographies of Neville Wran. The centrepiece of the campaign that swept him to power in NSW was transport.

There was only one problem the day before the launch of his transport policy - he didn't have one.

He grabbed David Hill, a young economics tutor he had only just met, put him in a room with his Transport spokesman and they worked through the night to come up with the policy hours before it was launched to acclaim on a Tuesday morning.

Its Wednesday morning and the Coalition had better hope Joe Hockey has been working nights.

Last Thursday in one of the oddest Budget reply speeches in memory Australia's Opposition Leader played for more time.

Given a good TV slot and months if not years to come up with a economic program of his own Tony Abbott delivered what was perhaps the ultimate "dog ate my homework" line.

Here's what he said... "Next Wednesday at the National Press Club, Shadow Treasurer Joe Hockey will announce further measures to reduce spending and to increase productivity including a detailed response to the new spending and new savings proposals in the budget."

I'll be there. I hope it won't sound as if it's been thrown together.

Because the rest of the Coalition program outlined by Tony Abbott last Thursday night sounded scandalously thrown together.

"Smaller government," Abbott told us "in our DNA".

Ignoring for the moment the way the Coalition actually behaved during its final seven years in office, allowing the pubic service excluding Defence, ASIO and the police to swell 25 per cent, lets look at how Abbott proposes to bring about smaller government.

Rather than examine what's needed function by function and axe what's not needed the Coalition will "introduce a two year recruitment freeze to reduce public servant numbers through natural attrition".

If letting the public service explode 25 per cent (44 per cent for senior public servants, 30 per cent for ministerial staff) at was careless, this is worse.

As Abbott explains, "there will be no redundancies, but for two years 6000 bureaucrats who retire or resign each year will not be replaced".

He surely wouldn't manage a company that way. Think about a mining company, on in which the geologists resign or retire early because they can get better jobs elsewhere, leaving behind other less-useful staff in, say, public relations. Abbott appears to be saying he wouldn't hire replacement geologists for two years.

By then he wouldn't have a company.

As a government minister the consequences would be less obvious but potentially worse.

Abbott was minister for health. If he let go of his influenza specialists, because for instance they received better offers from the pharmaceutical industry, the consequences of getting bad or late advice in that area could be catastrophic.

Abbott would know this. He served Australia with distinction during the 2005 bird flu scare.

Shutting the public service to new entrants for two years would create broader problems.

An entire cohort of bright young economists would become unavailable to the Treasury, a constraint that would become accute if the private sector snafled its best macroeconomists.

Graduates who had enrolled in university in good faith would have to put their careers on hold and might find themselves unable to compete with new graduates when the freeze was lifted.

And public service numbers wouldn't be cut by anthing like the 6000 per year Abbott expects. As soon as the freeze took hold resignations would slow to a tricke. It's what always happens during hiring freezes. Workers with low prospects won't risk leaving if they know they can't get back.

The public service would seize up and the expected savings wouldn't come.

None of this is saying the public service shouldn't be cut. It is overdue for a cut, but it is best done intelligently by working out what the government wants to keep rather than in a "lazy way" as Abbott terms it in another part of his speech.

The pledge to cut government advertising by 25 per cent, coming from a man who served in a governement that filled our screens nightly is not credible.

And nor is the most specific promise in a budget reply speech generally free of them - rollback, Abbott's promise that the Coalition "will oppose the mining tax in opposition and we will rescind it in government".

That's right, the Coalition will not only oppose the mining tax ahead of its implementation but will roll it back afterwards.

The ongoing uncertainty this would add to mining investment decisions on top of that that's there now has the potential to do the industry real harm - if the industry took it seriously.

The tax treatment of mining is not only a 40 per cent super tax on profits, its also a 40 per cent government contribution to the cost of achieving those profits.

Rolling that back, unscrambling the egg, would be about as unlikely and damaging as would have been Labor's Kim Beasley coming good on his promise to "roll back" the GST.

Abbott could have outline serious policies last Thursday. He passed up the chance.

Today it's up to Hockey.

Let's hope he has come up with good ones.

Published in today's SMH and Age

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