While nothing is certain, it would take a massive change in fortune, polling and betting market pricing for there to be any thing other than a Coalition victory at the September 14 election.
This of course means that on September 15, Mr Abbott will probably be Prime Minister, Mr Hockey, Treasurer and Mr Robb, Finance Minister. It will be the first time in six years that there will have been a Coalition government and Mr Abbott will become only the third Liberal Party leader to be Prime Minister in the last 40 years. On taking office, Mr Abbott and senior Ministers will be given the so-called Blue Book from Treasury. The Blue Book is a document prepared in the lead up to each election by Treasury for the Opposition of the day in the event of a change in government.
The Blue Book gives the newly elected government an up-to-date assessment of economic conditions and the outlook for the economy; it includes analysis of the various policy announcements made by the Opposition in the lead up to the election and touches on a checklist of big picture themes that Treasury judges to be important short- and medium-term issues that the new government will need to consider as it starts the job of running the country.
It is probably one of the documents most subject to Freedom of Information requests given its sensitive analysis of Opposition economic policies. It has never been released under FOI laws, because, according to Treasury, it sees the information contained therein as “an incomplete draft” of its advice and analysis of Opposition policies. Treasury continues, “consistent with the Treasury’s long standing policy to protect the confidentiality of advice prepared for a government that is not formed, and consistent with the Treasury’s normal administrative practice, the Blue Book was not finalised,” and after the 2010 election, it noted the strong views of the Leader of the Opposition, Mr Abbott, “that the release of oncoming government briefs would contravene the Westminster conventions”. Such is the political dynamite in these documents.
That aside, the importance of the Blue Book has been diluted a little in recent elections because of the requirement for the Secretaries of Treasury and Finance to publish a Pre-Election Economic and Fiscal Outlook (PEFO) within 10 days of the writs for the election being issued. This means that in the upcoming election, the latest economic forecasts, budget projections and estimates of tax and revenue will be available for all to see on or before August 22. They will, of course, be based on the existing policy settings and will take no account of hypothetical scenarios such as a change of government. The PEFO is a good initiative, introduced by Mr Costello when he was Treasurer as part of the Charter of Budget Honesty.
The PEFO effectively prevents the government of the day fudging budget or economic figures just before the election and it stops a newly elected government from having any excuse to break promises because the prior government was hiding a budget or economic problem from scrutiny. Which brings us back to the early days and weeks of the likely Abbott Government. Mr Abbott’s policy announcements to date involve commitment to reduce government revenue and add to government expenditure. This means a larger deficit unless savings are identified in the seven months until polling day. Abolishing the carbon price and the mining tax are two high profile and revenue-sapping promises offset in part by cutting the school kids bonus, hiking income tax (reducing the tax-free threshold) and cutting other payments.
Mr Abbott is also committed to increase spending on infrastructure, increase defence spending to three percent of GDP, buy new boats to protect Australia’s borders, index the superannuation of defence personnel, give government funded concessional loans for small business indirectly impacted by natural disasters, increase the education tax rebate, establish a “green army” and spend more on roads, to name a few. In addition, the Direct Action Plan to cut carbon emissions will have significant budgetary implications, all of which points to the need for some policy changes elsewhere in spending or higher taxes to pay for all the commitments.
The fiscal outlook for Mr. Abbott is even more challenging given the Coalition is also committed to having a budget surplus of one percent of GDP. It is likely that Treasury and Finance are already working hard on the background for the Blue Book given the range of policy changes that have already been outlined by Mr Abbott and his economic team. There is no doubt that for there to be policy credibility and consistency and no broken promises, Mr Abbott will need to have the Coalition’s policy proposals articulated and costed so that when he walks into the Treasury building with Mr Hockey and Mr Robb a few days after the election, he is not confronted with a Blue Book that shows that his policy agenda cannot be delivered.
Stephen Koukoulas is Managing Director of Market Economics marketeconomics.com.au