Morrison will be under pressure if policy is outpaced by politics

Scott Morrison and Josh Frydenberg may soon approach a political and economic tipping point.

Thanks in part to the Reserve Bank, a mild panic is starting to set in about the economy, where Australia is headed and what should be done about it.

So far the Prime Minister has remained firm. The strategy has been for the government to not contribute in any way to fuelling the panic by doing something rash. The focus has been as it always has, on the strength of tax cuts to boost household spending, accelerated infrastructure investment — which also requires the states to get more active — and stabilising the budget position with a return to surplus.

This narrative has been the right one, but is now coming under pressure, again in part due to the mixed messages from RBA boss Philip Lowe and increasing global calls for a new round of quantitative easing.

Even though our economy is still reasonably healthy, the rest of the world has turned bad.

And the view inside government is that the RBA’s three rate cuts have had the reverse effect of pump-priming our economy. People are starting to get worried.

An exclusive Newspoll, the first to measure the mood of the nation in these terms since the election, shows about half of all voters hold some degree of anxiety about the current state of the economy.

The government still has breathing space on the policy front, but politics may eventually overtake it.

The poll shows that 49 per cent of voters believe the government is handling the economy well. This is not a number Morrison or the Treasurer should be happy about because 39 per cent of voters believe otherwise.

Economic management is the reason most voters put the Coalition into government. It was Morrison’s key strength during the election campaign.

But as conditions change, so do the politics.

Labor has been slow to respond and, as contradictory and hypocritical as its message may be, the narrative that the government has no plan may start to bite unless things improve.

As the calls for fiscal stimulus grow, Morrison is unlikely to be spooked. He and Frydenberg, as long as they stay on the same page, can continue to argue the current policy settings are right.

But come the new year, if gloomy conditions continue, politics may demand that the Prime Minister deliver some timely headland statements to remind people of exactly what the government’s plan is.