Joe Hockey has a point about spending. It’s a shame he’s a bad salesman

When the history books tell the story of the Coalition’s nine years in power between 2013 and 2022, Joe Hockey’s disastrous May 2014 budget will be recorded as a defining moment of self-inflicted political harm.

The Abbott government’s first budget blew up in its face, inflicting enormous reputational damage which the Coalition struggled to recover from. An unprecedented $80 billion cut to health and education spending led a list of savings measures affecting age pensioners, seniors concession cardholders, family payments and people on the disability support pension.

Former treasurer Joe Hockey.Credit: Peter Rae

Hockey argued that without change, the budget would never get to surplus and debt would never be repaid. “So the time to fix the budget is now,” he told parliament at the time. “The time to strengthen the economy is now. The time for everyone to contribute is now.”

The key problem with Hockey’s budget was not that it sought to rein in government spending. The flaws were that the strategy asked certain people to contribute more than others, particularly those who could least afford it, and that the economic statement was built on a litany of broken election promises.

As the Herald’s economics editor Ross Gittins wrote at the time, Hockey’s first budgetary exam delivered a distinction on management of the macro-economy, a credit on micro-economic reform and a fail on fairness.

Before handing down the 2014 budget, Hockey was hard at work paving the way for some tough love, including via a landmark speech in which he argued the age of entitlement was over and need to be replaced by the age of personal responsibility.

Nearly a decade on, the former treasurer who went on to serve as Australia’s ambassador to the United States has renewed his call for fiscal restraint and attacked politicians who shun cutting government spending to stay popular with voters. Politicians were afraid of making hard decisions when cheap borrowing was available, Hockey said, and populism was rampant and uncontrollable.

“That sense of entitlement, that you can give people everything they want, is a cancer in our community,” he told London’s Institute for Economic Affairs. “We will all pay a price.”

Hockey also stood by one of the 2014 budget’s most polarising measures - a $7 GP co-payment - by pointing to the 7 million people waiting for treatment from Britain’s National Health Service.

“Once again, an entirely publicly funded system, with no means testing, does not meet the community’s needs and expectations,” he said. “And yet it is politically toxic to suggest that there should be an affordable means-tested co-payment to sustain and improve the service.

“Apparently feeling good about a ‘free’ entitlement is more important than the health outcomes.”

As the Herald’s Latika Bourke notes, Hockey argued that Western democracies had fallen into the deep abyss of populism that made hard decisions between regular elections almost impossible.

It is a persuasive argument. Hockey’s tenure as treasurer is widely viewed as a disaster. But that doesn’t mean his warnings on government spending are wrong. Those seeking evidence to support Hockey’s observation need only consider the dispiriting lack of reform from governments at a state and federal level.

In August, Treasurer Jim Chalmers warned that half the budget will be swallowed by spending on health, aged care, the NDIS, defence and interest payments on debt within the next 40 years.

Combined, these five spending categories are projected to increase by 5.6 percentage points of GDP to 2062-63. In today’s dollars, the 5.6 percentage point increase is about $140 billion, meaning the cost increases will be in the order of hundreds of billions of dollars by 2063.

But where are the big, brave and bold policy measures to tackle the spending surge, and the implications for other government services which will feel the squeeze? Crickets. The same criticism can easily be levelled at state governments.

Hockey has raised an important topic all political leaders - and voters - should contemplate. It’s a just shame he’s such a bad salesman.

Bevan Shields sends an exclusive newsletter to subscribers each week. Sign up to receive his Note from the Editor.