Don't count on opposition's fiscal arithmetic

SMOKE and mirrors. That is the strategy under-resourced oppositions adopt when trying to hold to account governments armed with the full apparatus of state.

The federal Coalition is getting away with punching holes in the budget by blocking cuts as well as protecting expensive programs. But it isn't finding the replacement funds elsewhere, and with the budget bottom line looking tighter than it once did, the Coalition's actions deserve attention.

It has got away with such fiscal recklessness by trading off the reputation of retired Liberals who established their financial management credentials during the Howard years.

But let's look at the present Coalition's track record. Mistakes were made by the opposition during last year's federal election campaign with respect to its costings. The Coalition refused to have its promises costed by the Treasury process Peter Costello established after the 1996 election.

After the election we found out the opposition had a $10 billion hole only because, in the scramble to win over the independents, the Coalition handed over its arithmetic. Some of the shortfall was a difference of opinion on economic modelling, but some was highly embarrassing for the shadow finance team.

For example, it was Coalition policy to sell Medibank Private, but the opposition continued to include dividends from the health insurance provider in forward estimates. That's like budgeting for the rent from an investment property you have sold.

Despite the hole in Coalition costings, its team continues to spruik the $50bn savings figure used during the campaign. However, that is only the beginning of the credibility gap between what the Coalition claims and what it does in the fiscal space.

The opposition continues to block or declare it will block revenue raising measures by the government, but without an alternative plan to balance the books.

For example, Liberals don't like means testing and Labor wants to means test the private health insurance rebate. But, according to Treasury, not means testing it will cost $2.1bn across four years. So the Liberals' ideological stand needs to be backed up by savings, which it isn't. Or there is the chronic disease dental scheme that Tony Abbott designed when he was health minister. Labor wants to scrap it and the Coalition won't let them. Not doing so will cost the budget $3.1bn, also across four years. Again, the opposition doesn't have a plan to make up the revenue shortfall.

For a party known for its sound fiscal management, the Liberal Party should demand more of its financial quartet.

Seven months ago the Labor government was reduced to a minority government backed by the Greens and independents. The new paradigm elevates the opposition to a permanent alternative government, a status that usually registers in people's minds only close to elections.

With the elevated status comes elevated responsibility. But opposition is hard and when the floods hit Queensland and the government came up with a package to help fund the reconstruction, Abbott's team was expected to do the same without a public service to lean on. In doing so it made a $700 million error by outlining cuts to various environmental programs that in fact had been cut already by the government, or had been earmarked by the opposition for cuts during the campaign.

You can't cut programs twice and simply double the savings. That mistake hasn't been corrected in the opposition's alternative budget planning, either.

The Coalition has been good at using its numbers in the Senate to frustrate the government's financial planning or simply to embarrass it as it struggles with its minority status in the other chamber.

At a cost of $417m across four years, the Coalition supported changes to the youth allowance, a nice fillip to younger voters. And because the scheme focused on rural students, the independents liked it, too. But the opposition went for this change without outlining where the revenue would come from.

Older Australians disproportionately vote Liberal, so it makes sense that the Liberals would try to block changes to military superannuation, albeit at a cost of hundreds of millions of dollars. Again, they did so without identifying the savings to pay for it.

Now we have a situation where the Coalition is suggesting that it may back the company tax cut of 1 per cent at the same time as blocking the mining tax package.

Abbott opened the door to this possibility in an interview with the ABC on March 29 and other Liberals backgrounded to that effect for a story in The West Australian the following day.

The Rudd government's first term saw too many journalists focusing too long on the opposition, me included. The leadership tensions and lack of policy development by the Liberals meant the government got away with limited scrutiny. Opposition MPs understandably felt that despite losing office in 2007 they were being treated like a government in exile, expected to account for more than they should have been when the polls showed they had no chance of forming government.

But with the Labor government in trouble and the polls showing the Coalition well placed to win the next election - and all this in a new minority paradigm - it is high time to apply the blowtorch to the opposition for failing to account for itself financially.

A common line in private (and occasionally in public) from the Coalition is: "Trust us, we have managed the national economy well in the past and we will manage it well in the future if given the chance to do so," But who are "we"? While Joe Hockey served the Howard government as financial services minister early on and Peter Dutton was assistant treasurer later on, they were very much a part of the second XI.

All the big names are going or gone: Peter Costello, John Fahey, Nick Minchin. These were the key financial managers during the Howard years, not Abbott or the team he has around him now. Faith in the new Coalition financial line-up must be evidence-based and the evidence doesn't look all that good at the moment.

The Labor government has hardly covered itself in glory as far as financial management goes. Tax increases passed off as savings measures, a $42bn National Broadband Network agreed to without a business case and inefficient programs all give voters reason to shift their support. But not if the opposition doesn't get its financial house in order first.

Peter van Onselen is a Winthrop professor at the University of Western Australia.