Will feds dare pull fiscal plug as election nears?

If a state welshes on the national plan and initiates a lockdown, the PM will have to say it will get zero fiscal help.

‘When push came to shove, when the locks snapped in a state, would PM or Treasurer stand firm with an election, say, eight weeks away?’ Above, Josh Frydenberg and Scott Morrison. Picture: NCA NewsWire / Gary Ramage

Politics and rational policy make only occasional bedfellows. In the rundown to the federal election, any relationship between the two is going to come under extreme stress.

Incidentally, whatever happened to that early election this year, predicted by assorted members of the political commentariat? Did I miss it? Or does Scott Morrison have it snuggled “up his sleeve”, ready to be sprung in spring?

He would certainly be guaranteed a literally captive audience, with voters in NSW and Victoria locked in their homes and just yearning for yet more political faces pervasively on their TVs, and the voters elsewhere in Australia locked in their states if not, for the moment, actually in their homes.

Hmm. I don’t think so. So, when do I think it will be held? At one of two points.

As late, desperately, as possible in May, as a doleful prime minister ponders the odds of being the beneficiary of two miracles, as he also ponders the all-too secular opinion polls if they stay at the miracle-necessitating 45-55 levels of the current polls.

Or, at a snap, in say February-March, if a combination of events suddenly swings the mood towards the government. Such events would have to include the two lockdown states moving positively and sustainably out of lockdown.

What I touched on three months ago has come to pass. Morrison has passed no less than four Labour PMs in length of tenure: Keven Rudd, Gough Whitlam, Malcolm Turnbull, and this week, finally, Julia Gillard.

His health permitting, he will now also pass a Liberal PM, John Gorton, to become Australia’s 13th-longest-serving PM. How does the saying go: lucky for some?

He would though have to win the next election, early or late, to advance any higher. But if he did, he would leap into the top 10, surging past great Labor icons as varied as John Curtain, Ben Chifley, Paul Keating and Andrew Fisher.

Surely, that’s something for a good God-fearing Liberal to aim for.

The entirely secular omens do not look good and the pathway to the election is littered with both the “events, events dear boy” of former British PM Harold Macmillan’s famous observation, and plain old political obstacles, personified in premiers.

To exit the Great Depression we had the Premiers Plan. I hope that’s not an Omen with a capital-O; the exit didn’t work out that great.

Nearly a century later, we see that the power against all prediction has returned to the premiers and indeed very specifically to the premiers, not governments or even cabinets, as through the pandemic they have increasingly acted on the personal pronoun ‘I’.

For example, on Friday, Premier Palaszczuk said “I” regret letting the NRL WAGS into Queensland. This is reflective of all the premiers: more than a year of standing there next to chief health officers, with parliaments put in the fridge and cabinets in the freezer, the pronoun reflects the reality.

Now, the power of the PM in contrast is supposed to lie in control of the purse. The challenge is going to be his preparedness to use it – in this context that we are now unarguably and inexorably in a countdown to the election.

We are supposed to have this nationally agreed pathway out of, not so much the virus, but the reality and even more the threat of individual state lockdowns and border closures.

There are four phases; the critical one is the third when we hit 80 per cent (full) adult vaccination levels, at which point lockdowns are supposed to be only limited and highly targeted.

Somewhere in there was also supposed to be no state border closures, but if it was it has clearly evaporated, as Queensland and WA – correction, the two ‘Is’, Premier Palaszczuk and Premier McGowan – have made it crystal clear they will decide who comes to their state and the circumstances in which they come.

The lockdowns are the really critical element for the economy – read, for people, their financial and medical and mental health.

Come the post-vaccination reality – whatever it is and on that both Israel and especially the UK will bear very, very careful watching as they enter their winter months – we simply cannot have any lockdowns; even, especially, “go hard, go early” Andrews-style ones (the latest of which is now a multi-month one).

The lockdown reality is damaging enough; the threat is only slightly less so.

At some point – and this is the nub of the politics versus the policy diabolism – the PM or the Treasurer are going to have to say that if a state welshes on the national plan and initiates a lockdown it will get zero fiscal help from Canberra.

If a state opts to throw tens of thousands of people out of work and destroy or batter businesses, it will be on its own fiscal head to provide any support.

There will be no additional payments from Canberra to workers stood down or sacked; Canberra will not pick up the tab for 50 per cent of any support to business. When push came to shove, when the locks snapped in a state, would PM or Treasurer stand firm with an election, say, eight weeks away?

We will we told at the start of December the statistical reality of the recession we are now living through, when the September quarter GDP numbers are released; a recession which in NSW and Victoria is every bit as bad as that of the June quarter of last year.

Right now WA is as smug, basking in the rivers of fiscal gold flowing south from the Pilbara, as NSW was – some time back, now – in its handling of Covid.

But the Reserve Bank’s index of commodity prices this week was a timely reminder that commodity price booms tend to end rapidly and dramatically; and this one – built entirely on iron ore – has just stumbled.

China gave us the virus. Is it about to give us another whack.