As Opposition Leader, Tony Abbott frequently railed against the Gillard Government’s minority status. Cobbled together with the support of the Greens and country independents, Julia Gillard’s shaky majority on the floor of the lower house was regularly attacked by the Coalition as evidence for the illegitimacy of her government.

It’s all the more ironic, therefore, that now that he finds himself in office, Tony Abbott is beholden to a motley crew of Senate minor parties.

With the Liberal Party’s Linda Reynolds favoured to win the final Senate seat in the west, the Coalition will most likely control 33 seats in the upper house after 1 July. It needs 39 to pass legislation. This means it has to find another six votes from the cross-benches.

After Saturday’s vote, four of these will be controlled by Clive Palmer: three Palmer United Party senators, plus the unlikely Ricky Muir of the Motoring Enthusiasts’ Party. Also in the mix are veteran South Australian independent Nick Xenophon, Victorian DLP Senator John Madigan, Liberal Democrat David Leyonhjelm and Family First’s Bob Day.

The Greens themselves represent enough votes to pass government legislation. This is an ideologically unlikely combination, but one that might come into play when it comes to Abbott’s paid parental leave scheme.

The Senate arithmetic poses some interesting challenges for the Coalition, particularly Tony Abbott’s point man in the upper house, Eric Abetz. Neither are famed for their skill in negotiation. Abbott tried and failed to round up support from lower house independents in 2010; the bungled discussions cost the Coalition government.

Nor is Eric Abetz well known for his conciliatory style. The hardline Tasmanian is more comfortable delivering stinging attacks than rounding up reluctant cross-bench support. By contrast, veterans like Nick Xenophon are well used to wheeling and dealing to secure concessions for special interests they favour.

Not only will the Coalition need to negotiate on each and every bill to pass the Senate, the numbers also give Labor, the Greens and the Palmer United Party plenty of opportunity to exert scrutiny on controversial government policies, through Senate estimates and committees.

Palmer’s position, controlling the largest bloc of right-wing cross bench votes, is a nightmare scenario for the Abbott government. The wily Queenslander is every bit the political populist that Abbott is. He’s not too bad in front of a camera either. Palmer has shown himself willing and able to use his numbers to extract concessions from a government that will need to his support for most of its legislative agenda. That potentially makes Palmer every bit as influential in the Abbott government as Christine Milne and the country independents were in Julia Gillard’s.

On some bills, the government can be expected to win support fairly easily. Repealing the mining and carbon taxes are entirely to the liking of a mining billionaire, after all. Other legislation could well prove controversial. Surprisingly, the Renewable Energy Target could become an issue, because of the wind and solar industry activity it is supporting in rural communities. Palmer can also be expected to act unpredictably. He will find it much easier to extract concessions from the government if he can’t be counted on as a safe voting bloc.

Indeed, Palmer has already shown he is prepared to rock the boat on renewables policy. During the Western Australian campaign, newly elected PUP Senator Dio (Zhenya) Wang issued a press release defending the Renewable Energy Target and arguing for its retention as a tool to support greenhouse gas reduction. The statement understandably attracted considerable interest from the energy industry.

Palmer is not the Coalition’s only worry, though. Even if PUP support is secured, the government will still need two extra votes to pass laws. This puts Nick Xenophon in a very handy position. As the most experienced independent in the Senate, Xenophon has the best knowledge of Senate processes. A seasoned Senate operator, he’s no mean populist and media performer himself.

Xenophon is also generally thought to be able to bring Madigan’s vote with him. If he can attract Leyonhjelm or Day, Xenophon will control a bloc of three that will be nearly as influential as Palmer’s. Xenophon can be expected to lobby hard on issues that play well to his South Australian electorate, like Murray Darling water reform.

On the other side of the chamber, Labor and the Greens together control 35 seats. This means they will need just three extra votes to block government legislation, as 38 votes is enough to defeat Senate bills. With a diverse assortment of cross-benchers, such a configuration is by no means impossible. A coalition of Labor, the Greens and Palmer United Party could frustrate the Abbott government’s entire legislative agenda. That’s a sobering thought for the Coalition brains trust.

Back in 2003, while Bob Carr was still Premier of NSW, he wrote a short pamphlet entitled What Australia Means To Me. "There is no country happier than this," Carr beamed. "A country where the birds laugh at us. A funny country, in the nicest way. Perhaps I'd add now: an unpretentious country. For what I'd like to see is a patriotism without pomposity, never solemn or grandiose, and never saccharine."

A decade later, it's hard to think of a figure in Australian public life whose pomposity, put-upon solemnity and grandiose self-image exceeds Carr's. "I soar above the mundane and serve my country," the former foreign minister wrote in his latest book, a diary of his short period in the Gillard-Rudd ministry.

The publication of Diary Of A Foreign Minister could not have come at worse time for Labor — although any time seems to be the worst time for the ALP. Coming as it does immediately after the party's poor showing in the WA poll, the book has again dredged up the old hatreds of the Rudd-Gillard government for public display.

That's bad enough. Carr's "diva" performances won't do Labor any favours either. But most importantly, coverage of the book reveals a foreign minister who was surprisingly impotent. In particular, in an interview on 7.30 last night, Carr bemoaned the "extraordinary influence" the Israel Lobby had over Julia Gillard's prime ministership and the way he was cut out of the picture.

"I had to resist [the Israel lobby] and my book tells the story of that resistance coming to a climax when there was a dispute on the floor of caucus about my recommendation that we don't block the Palestinian bid for increased non-state status at the United Nations," he told Sarah Ferguson.

"I think the great mistake of the pro-Israel lobby in Melbourne is to express an extreme right-wing Israeli view rather than a more tolerant liberal Israeli view," Carr said, "and in addition to that, to seek to win on everything, to block the Foreign Minister of Australia through their influence with the Prime Minister's office."

Labor MP Michael Danby called Carr a "bigot" over the comments. Danby also said Carr was being ungrateful to the party that placed him in the ministerial role to begin with. "In retrospect, given all the division he caused ... it was a mistake," Danby said, referring to Carr's switching support from Gillard to Rudd.

Carr, for his part, has called himself a "Labor loyalist", who joined Rudd in 2013 after he began to believe that "The very viability of social democracy in Australia, of a viable Australian Labor Party, is now at stake".

The book, and the ongoing tit-for-tat that will be the result of its publication, will drown out current noises being made on party reform. In particular, the efforts of Neal Lawson, a British Labour guru who recently visited Australia, have gone all but unreported. Lawson, has written a must-read essay for the Evatt Foundation, in which he asks whether the ALP wants to regain power, or merely regain office.

"There is a difference," Lawson wrote. "Being in office means you have the trappings of power and can make a narrow band of decisions to impact on the symptoms of the things we care about but not the causes ... Power, on the other hand, is the ability to change the world — to transform it — to stop the poor from getting poorer and the planet from burning."

Lawson analyses the causes of Labor's crisis in a much more sophisticated way than is usually seen, going beyond the standard union-factions framework of Labor criticism (although he writes on those topics too). It is a shame his visit to Australia was not more widely promoted. It's a trend: the 2013 visit of UK Labour peer Maurice Glasman, whose influential "Blue Labour" philosophy is one proposed solution to the decline of social democracy, also received little attention.

From within the ALP, Senator John Faulkner has announced that he will push for far-reaching reforms to party rules at the National Conference in July, including "the preselection by ballot of the full party membership in NSW for Senate and NSW Legislative Council candidates", and integrity rules for those in office. Anything else, the Senator said, would be mere "window dressing" and would be an insufficient reply to the corruption scandals ripping through the party.

Not even a week after a devastatingly low primary vote in WA, and with a Royal Commission to add to Labor's ICAC woes, perhaps Carr might have learned some of Faulkner's humility and kept his diaries private for the time being. Who knows. Perhaps Carr was too busy working on his "concave abdomen defined by deep-cut obliques” to realise that his party is in crisis.

Treasurer Joe Hockey has been busy preparing his first budget. It looks like the razor blades are out.

After flagging his intentions in opposition with his infamous speech about the “end of the age of entitlement”, Hockey appears to be hinting at changes to the aged pension.

It’s no secret the government wants to slash public spending. Motivated by a conservative fetish for smaller government, Hockey and Mathais Cormann would prefer to solve Australia’s fiscal deficit by cutting spending, rather than raising taxes. That means attacking government spending in all its forms.

Scientific research appears to be a prominent target, with rumours of big cuts to the CSIRO. But research only accounts for a small proportion of federal expenditure. The really big bikkies are in benefits.

Perhaps that’s why Hockey has this week flagged reforms to the pension. In an interview with the ABC, he suggested the government will move to raise the eligibility age for the aged pension to 70 years. “We’ve got to have a sustainable welfare system,” Hockey told the ABC’s Barrie Cassidy. “It may be the case that my generation has to work for an extra three years.”

Hockey points out that the United Kingdom has moved to raise the pension age to 70. “We need to have a health and welfare system that appropriately deals with the changing demographics of the nation.”

There’s no doubt that Australians are living longer. In the early 1900s, when the pension in Australia was first introduced, life expectancies were in the high 50s. Better public health and nutrition has meant that Australians now enjoy a life expectancy at birth of nearly 82 years (79 for men, 84 for women).

In this context, a gradual rise in the age at which you can access the pension is not unreasonable. And indeed, during Wayne Swan’s tenure as Treasurer, Labor already raised it to 67, although the change will not kick in until the 2020s.

But, as both Labor and the Council on the Ageing have noted, better health and longer lives do not necessarily mean Australians will want to retire later, or indeed will be able to. The increasingly demanding modern workplace is not a very nurturing environment. Most workplaces have few dispensations for workers who fatigue more easily, have eyesight or hearing difficulties, or suffer from mobility issues.

Ian Yates from the Council on the Ageing told the ABC yesterday that “Age discrimination is alive and well, regrettably, in Australia.” Sadly, many older Australians know this only too well from personal experience.

Yates points out that there are 150,000 older Australians on Newstart alone, with hundreds of thousands more on the disability pension, which the Coalition has also made noises about reforming. “Newstart is not liveable,” he told the ABC’s Louise Yaxley, “and we're going to extend that for another three, four, or five years?”

Better health overall doesn’t mean that all are healthier. Many Australians are still working in physically demanding occupations, from contract cleaning, to labouring, to nursing. How realistic is it to expect a male blue collar worker, who has been working in factories and on building sites since he was 15, to work until he is 70?

In any case, does Australia’s aged pension really need reform?

As so often occurs with the Coalition’s scare campaigns on public finances, Hockey’s warnings about the sustainability of the aged pension aren’t backed up by the facts. Australia’s aged pension is far from an unaffordable indulgence. In fact, we have one of the most sustainable public pensions in the western world.

The graph below shows public spending on cash benefits for seniors for a range of rich, western economies.

As you can see, Australia is at the bottom of the table. Australia’s aged pension costs us just 3.5 per cent of Gross Domestic Product, the second lowest in the entire OCED. Only Korea is stingier. Australia’s spending on the aged pension is less than half the OECD average of 7.8 per cent.

Perhaps this is why Australia’s over-65s are, on the whole, a lot poorer than in many other rich countries. The next graph shows poverty levels for seniors in 34 OECD countries.

In this figure, "poverty" is defined as less than 50 per cent of the national median equivalised income. In Australia, this figure is about $22,000 for a single person – an income most of us would agree is pretty basic. (If you need a refresher on what the median equivalised income is in Australia, ACTU economist Matt Cowgill has an excellent explainer.)

Australia has the second highest rate of over-65s poverty in the OECD – more than a third of our older citizens. Again, only Korea fares worse. For every highly-paid CEO retiring with millions of dollars of super, there are dozens of ordinary pensioners struggling to get by on little more than their Centrelink payments. The poverty rate for Australian seniors is nearly three times the OECD average.

If this is the situation now, what will it look like after Joe Hockey and Tony Abbott get out the chainsaw?

The hard truth is that Australia already has a highly-targeted social safety net. On international comparisons, you could even call it miserly. Compared to most advanced economies, we don’t spend vast sums of taxpayers’ money on cash benefits for the needy.

But the Coalition has rarely let facts get in the way of an ideological commitment to smaller government. Unless of course we’re talking about welfare to the less needy – like corporations and high income earners.

Some parts of Australia’s retirement system really are unsustainable and wasteful, such as the roughly $32 billion of superannuation tax concessions handed out by the government last year.

As we’ve noted before at New Matilda, Australia’s super system is amazingly regressive, with the highest income earners paying less tax than the lowest income earners. One estimate – by the Treasury itself– suggests a third of the value of all super tax concessions flow to the wealthiest 10 per cent of the population. The poorest 10 per cent get nothing.

If Joe Hockey wants to look at the sustainability of Australia’s retirement spending, super is the place he should start.

Everyone expected Clive Palmer to pose problems for Tony Abbott and his legislative agenda. But the intensity of the headache is only now becoming clear. Palmer’s decision over the weekend to withdraw his support for the Coalition’s risible Direct Action climate policy makes clear what the mining mogul has been hinting at for some months now.

“We'll be voting against Direct Action, whatever form it's in,” he said yesterday. “If that's what the Government wants, they can call a double dissolution.”

“We can't see any reason to vote for direct action. We think it's hopeless,” Palmer continued. “It's goodbye Direct Action. It's gone.”

Palmer wants the government to spend the money it has budgeted to pay big polluters to reduce their emissions on pensioners instead.

“Supporting aged pensions is more important than supporting token campaigns like Direct Action,” Palmer tweeted.

Palmer’s opposition could be the opening gambit in a bargaining process to allow the Palmer United Party to set terms for the passage of Direct Action in the Senate. Or it could be a genuine indication of the party’s opposition to the measures. Either way, Tony Abbott and Greg Hunt have a problem.

Without Direct Action, if the government goes ahead and abolishes the carbon tax, the Coalition will have no climate policy in place whatsoever.

While this may not unduly trouble the climate sceptics on the Coalition backbench, it also removes the chief utility of Direct Action, which is political, rather than environmental. Direct Action has always been used by the Coalition as a handy tool to deflect unwelcome scrutiny of its profoundly anti-environment attitudes. Without it, the Government will find it increasingly difficult to defend itself against charges of destroying the planet.

The Coalition’s anti-green ideology plays well to a certain subset of the electorate, chiefly older men in the suburbs. But in the inner cities and amongst younger voters and women, the environment remains an important political issue. The Coalition’s slash and burn approach to environmental regulation and green policy initiatives risks serious problems down the track.

Green politics are one problem. Palmer himself is another. The outspoken Queenslander is a skilled political opponent. His rhetoric on Direct Action is a clever wedge tactic to use the Coalition’s own ambivalence on climate policy to attack it from the right. By assailing the policy’s credibility, he is simply echoing the Coalition’s own rhetoric on climate, which has repeatedly called the science of human-caused global warming into question, and which has long argued that Australia’s small contribution to reducing emissions will have no impact on global temperatures.

Unfortunately for Greg Hunt, Palmer is right when he describes Direct Action as a token policy. No credible economist or climate policy expert believes the policy can work. Every independent analysis has concluded that Direct Action will not achieve a 5 per cent emissions reduction without a massive increase in government spending, well beyond the $1.55 billion the government has so far budgeted over the forward estimates.

Even Greg Hunt’s own hand-picked economist, Danny Price, chosen by Hunt to advise the government on setting up Direct Action, has told journalists that the 5-year contracts for emissions reduction envisaged by Hunt’s recent Green Paper on climate policy are simply too short to be workable.

The Green Paper was slammed by most experts after its release in December. Curtin University’s Jemma Green pointed out that it opens a huge loophole, that means “money will be given to carbon-reduction projects that would have gone ahead anyway.”

Environmental lawyers at Norton Rose Fulbright argued that the “safeguard” mechanisms to prevent companies from exceeding their emissions baselines are “substantially undeveloped”. Climate finance analysts Bloomberg New Energy Finance were even blunter. They called the policy“practically unfinanceable.”

“It is very hard to see how projects will be viable under this mechanism, particularly ones that will be big enough to provide the amount of abatement the government requires,” Bloomberg New Energy Finance wrote. “All of the bankers we have surveyed have said projects under the scheme will be practically unfinanceable.”

It takes a special type of chutzpah to plough ahead with a manifestly flawed policy in the face of informed criticism. But Environment Minister Greg Hunt is a specialist in arguing dubious cases. He was on the ABC this morning warning of a constitutional crisis if the Palmer United Party went ahead and blocked Direct Action. Because it will be part of Joe Hockey’s budget in May, Hunt claimed that blocking it is tantamount to blocking supply, which hasn't happened since the Whitlam government.

“The funds will be part of the budget papers, and I doubt that the budget will be blocked unless we're going to be forced into a constitutional issue,” Hunt told ABC Radio today.

Hunt is most likely correct. It does seem unlikely that Clive Palmer would use his numbers to block supply. But Palmer United senators can still frustrate Direct Action by other means. For instance, they can block some of the legislation linked to the policy: the government needs to amend the Carbon Farming Initiative, for instance, in order to legislate for a key mechanism of the policy involving soil carbon.

The minor party senators can also refuse to vote for other Coalition policies, potentially taking hostages of high profile government policies such as Tony Abbott’s paid parental leave scheme. Finally, Palmer could refuse to repeal the carbon tax itself, which would leave Hunt’s entire strategy in ruins.

Complex, risky policies that many experts doubt can work don’t necessarily hurt a government at the ballot box. But they do have a nasty habit of coming back to haunt their political creators, especially in election years. As the Rudd and Gillard governments discovered with their own carbon policies, even the appearance of a solid mandate can rapidly dissolve when faced with the hostility of vested interests, and when highlighted by an effective opposition.

The Abbott government has staked plenty of political credibility on Direct Action. That’s quite puzzling, because nothing about this government suggests it is at all serious about dealing with dangerous climate change.

Last night, Prime Minster Tony Abbott gave a speech to the Sydney Institute. "Right now, Canberra is fixated on the coming budget — as we should be — because budgets matter,"he said.

As happens most years, much of the budget speculation is coming from the government itself. With Joe Hockey’s inaugural fiscal statement only a fortnight away, the public is being softened up for the inevitable bad news that will flow on 13 May.

In recent weeks we've had a number of spending cuts and tax rises mooted. Hockey has signalled that he wants the pension age raised to 70. Various other cuts and tweaks to entitlements have been signalled, as have spending cuts across a range of government services, and a new $6 levy for visits to the doctor.

Today, the news is full of reports about a so-called “debt tax”. If the stories are true, a 1 per cent levy will be introduced on everyone earning more than $80,000 to help pay off government debt. Those on $180,000 or more will pay an extra 2 per cent.

In his speech last night, an oration full of the shopping list of slogans we have come to expect from Abbott, there were plenty of signposts about the horror budget ahead.

“We’re striving to achieve a stronger budget because that’s the way to a stronger economy, to a stronger society and to make your life better and your job more secure,” he told the assembled guests at the conservative think-tank.

It sounded good. Unfortunately, you can’t get a clearer illustration of what’s wrong with Australia’s economic debate than this sentence. Abbott is almost 100 per cent wrong.

The state of the federal budget does have an important impact on the economy, but it’s the reverse of the relationship that Abbott describes. A strong budget, which we can take to mean a government budget in surplus, is bad for the economy. Budget surpluses are contractionary: they collect more taxes than they return to the economy in spending.

That’s why governments typically commit to deficit spending when the economy is weak. By borrowing money, governments can spend more than they raise in taxation. This injects extra stimulus into the economy. Stimulus can also flow from lower taxes. Again, the result is a weaker budget. It’s macroeconomics 101, and Abbott is flunking.

In his speech, Abbott also banged on about government debt. “Labor debt and deficit stretches out as far as the eye can see,” he warned. “$123 billion in cumulative deficits over the next four years, debt projected to reach at least $667 billion — which is $25,000 for every Australian man, woman and child — with $10 billion a year in interest repayments alone.”

There’s no doubt that too much government debt is a bad thing. Debt requires interest payments, and if a government gets too far underwater, those interest payments — in the form of bond yields — can spike to crippling levels. This was the situation Greece, Portugal and Italy recently found themselves in.

But how much debt is too much? That question has become hugely controversial in recent years, as economists argued over the exact figure at which government debt started to cripple economic growth.

Economists Kenneth Rogoff and Carmen Reinhart, in a now-notorious paper, argued that the danger figure was around 90 per cent of gross domestic product. Unfortunately, they got their sums wrong.

Many economists believe that the real “trip-wire” for government debt is the point when international bond markets stop lending to sovereign governments. Given Australia is one of only 14 nations with a AAA rated debt, that’s not happening any time soon.

Whatever the dangerous level of government debt, Australia is well below it. Recent IMF figures put our government gross debt at around 28 per cent. International investors can’t get enough of Australian government bonds.

The truth is that slashing government spending to pay down debt is actually bad for the economy. At various times, Joe Hockey has even admitted this. But the economic reality — that Australia is a prosperous nation, with sound government finances — has been swamped by the political opportunity that the government sees.

Maybe this is why the government’s budget lead up has been so confused. The reality of a reasonably strong economy simply can’t be squared with the doom-laden predictions of the austerity chorus.

There’s also the pesky problem of the various spending commitments that the government has inevitably made since coming to office: big ticket items like $12 billion to buy new Joint Strike Fighter jets, $9 billion for the Reserve Bank to top up its cash reserves, $4 billion a year in a gold-plated paid parental leave scheme, and $2.55 billion in handouts to big polluters as part of Greg Hunt’s Direct Action climate policy.

Squaring these spending announcements with the general atmosphere of belt-tightening has not been easy. As a result, the government has a lot of work to do between now and budget night to convince voters that all this pain will eventually be worth it.

And pain there will be. The new “debt levy”, should it eventuate, represents about $800 a year in extra taxes for a middle income earner on $80,000. That’s well above the roughly $500 a year impact that Labor’s carbon price was estimated at by the federal Treasury.

Should ordinary householders be slugged to pay off government debt? Only if you think that’s the best use of government tax revenues. No doubt there are some ordinary Australians who would like to see the federal government pay down debt. But most voters would, I think, expect the government to pay down debt from its ordinary revenues.

After all, if Abbott and Hockey really want to find extra revenue, there are plenty of easy sources of extra cash. As many economists and public finance experts have pointed out, the federal government gives away roughly $120 billion in tax breaks every year for things like superannuation discounts for high income earners, negative gearing for landlords, and cheap diesel for big mining firms.

Just tweaking superannuation tax rates for the top 5 per cent of earners could generate more than ten billion, according to Treasury figures. But superannuation, like mining, is a powerful industry.

As inconsistent as the Abbott government has been in its budget rhetoric, it has been absolutely consistent when it comes to protecting the tax perks of big business and special interests. When the Abbott government breaks promises, it makes sure that these interest groups are protected.

The Commission of Audit delivers its massive 900-page report this afternoon. Set up by Prime Minister Tony Abbott in the early days of his government, the commission is touted as “as an independent body to review and report on the performance, functions and roles of the Commonwealth government.”

That’s rubbish, of course. Headed by a well-known conservative in business executive Tony Shepherd, and also featuring Howard minister Amanda Vanstone, the Commission is a highly political exercise.

Its function is less about recommending fiscal policy reforms, and more about shifting public opinion in favour of radical austerity. There will be few surprises if the report recommends massive cuts to the size of government, huge reductions in spending, and the delegation of many federal services to the states.

That’s exactly what the various leaks detailing the report in today’s newspapers suggest. According to Lenore Taylor in the Guardian, the report “concentrates on longer term measures to bridge the widening gap between forecast spending and revenue over coming years, so the budget can reach a surplus of 1 per cent of GDP by 2024”.

The Australian’s David Crowe tells a similar story. He says the report is “a searing assessment of federal finances that also calls for the family home to be included in the asset test for the age pension”.

New Matilda will examine the policy particulars of the Commission of Audit next week. But for now, the most interesting thing about it remains the Abbott government’s surprisingly poor performance in the run up to the audit's release.

The commission’s report lands just as the government is trying to hose down the fires of dissent in its own base, over mooted increases to income taxes. The Abbott Government’s proposal to introduce a special levy to help pay down federal debt — labelled variously as a “deficit levy” or a “deceit tax” — has enraged Coalition supporters and dismayed Liberal backbenchers.

A Jonathan Swan report from earlier this week talks about “incredulous” backbenchers and a “febrile” mood in the marginal seats. Even Andrew Bolt has turned against the government, attacking the tax rise in his column today.

There’s no getting around it: a new tax is a broken promise. If Tony Abbott stood for anything in opposition, it was lower taxes. His relentless attack on the carbon tax destroyed Julia Gillard’s administration. Voters have heard his sound bites railing against “big, new taxes on everything” many times.

Any tax rise will come at a very real cost to Abbott’s credibility. It hasn’t taken long for media organisations and various Labor spin doctors to dig out quotes from Tony Abbott from before the election, in which he promises no new taxes, and no tax increases. Matters haven’t been helped by the mealy-mouthed attempt to spin the tax rise as a temporary levy. After all, Abbott opposed the one-off natural disaster levy imposed by the Gillard government in 2011, to help with flood and cyclone reconstruction in Queensland.

Despite the backlash, the government appears to be pushing ahead with the tax hikes. Finance Minister Mathias Cormann was out giving interviews this morning in which he openly discussed“sensible, well targeted, time-limited adjustments we might be able to make through the tax system.” In other words, a tax rise.

Not to put too fine a point on it, the government has been all over the shop in the run up to the budget. Key messages have been absent or confused. Carefully timed budget leaks have been overwhelmed by apparently genuine leaks, such as the deficit levy proposal. Big-ticket spending decisions have been announced even as belt-tightening has been threatened.

The evolving mess of paid parental leave is a case in point. Abbott this week decided to wind back the most generous bits of the government’s paid parental leave scheme. Instead of paying parents earning up to $150,000 as much as $75,000 after the birth of a child, the new figures will be $100,000 and $50,000.

The move may assuage the doubts held by the Greens about the largesse of the scheme, but Labor continues to attack it as absurdly generous, particularly at a time when the government is supposedly ending the age of entitlement.

The decision may have headed off dissent inside the Coalition party room, at least for now, but it’s another confused and hasty adjustment that has all the hallmarks of policy on the run. Predictably, some in the Coalition are now complaining about the decision to wind back the largesse, such as NSW MP Sharman Stone, while others, such as Nationals Senator John “Wacka” Williams, continue to oppose the parental leave scheme altogether.

Into this mess drops the Commission of Audit, with its hardline recommendations to chop off whole limbs of the body politic. The government has had the report for some time now, but has held it back, in order to secure maximal political effect in the run up to the budget.

Unfortunately, the bungled preparation of the last fortnight has meant the report is likely to add to the confusion, rather than reinforce the government’s austerity message. Abbott and Hockey may now be wishing they had released it earlier, giving some of the more controversial proposals time to play out.

For instance, recommending that the family home be included in the assets test for the aged pension will almost certainly alarm many older voters, who are already concerned about Hockey’s talk of raising the pension age. At a time when the government is not in control of the media cycle, big and scary government reports can start to generate a momentum of their own.

Perhaps that’s the idea. If the Treasurer can deliver a relatively mild budget on May 13, the pre-budget controversy will help it seem less severe, smoothing its reception in middle Australia.

If so, Hockey and Abbott are playing a dangerous game. As both Rudd and Gillard discovered, political capital can dissipate quickly once ordinary voters lose faith in a government to keep its word. In Rudd’s case, the turning point was his backflip on the Carbon Pollution Reduction Scheme, which he’d championed as the “great moral challenge” of his government. In Gillard’s case, it was her decision to change tack on a carbon price, after saying in the 2010 election that “there will be no carbon tax under a government I lead”.

A lot has been staked on this budget. Behind in the polls and with any electoral honeymoon apparently permanently postponed, the Coalition has plenty to fear should voters turn against it on the issue of economic management. Raising taxes, in particular, represents a huge political gamble. If the conservative base turns against Tony Abbott on a signature issue like taxes, he may find that a certain amount of his credibility has vanished — forever.

On the same day that the Commission of Audit was released in Canberra, Tony Abbott’s Royal Commission into the Home Insulation Program (HIP) resumed its hearings in Brisbane. Reading like a neoliberal how-to guide, Tony Shepherd’s report calls for a new wave of outsourcing and privatisations. Yet the evidence emerging from the HIP Royal Commission provides a salutary warning for Abbott and Hockey: outsourcing government programs to the market comes at a cost.

Abbott’s instigation of a Royal Commission into Rudd’s “pink batts” scheme is clearly an exercise in keeping Labor’s failures fresh in our minds. But the Royal Commission paints a picture of a government program that failed primarily because of its reliance on “market delivery” — precisely what Hockey’s Commission of Audit demands more of.

Over a month in to the Royal Commission it is increasing clear that it was the design of the HIP that made the program “an accident waiting to happen”. By outsourcing the program to the free market the HIP allowed unsafe and unsupervised work to be carried out by young, untrained workers. The deaths of the four young men working on the scheme were not just tragic accidents, they were the result of a program design that came from Rudd’s own office for Prime Minister and Cabinet and his hand-picked stimulus chief.

The insulation industry was deemed a great “shovel-ready” stimulus target by Rudd and his staff precisely because the lack of existing regulation meant there were no barriers to entry — great for flushing money into the economy and boosting small business, not great for creating meaningful energy efficiency or ensuring workers’ safety.

Behind the headlines about missed warnings and a rushed rollout, much of the Royal Commission’s proceedings have revolved around the program’s business model. As the Brisbane hearings have revealed, the market delivered rebate model was not initially favoured by the Environment Department staff charged with getting the scheme off the ground, but was foisted on them by senior officials close to Rudd.

Former assistant director of the Environment Department Kevin Keefe described how, 20 days into the program, he was abruptly presented with a new “free market” business model. In March 2009 Keefe attended a meeting that included Senator Mark Arbib, Rudd’s hand-picked stimulus coordinator Mike Mrdak and other senior staff from the Department of Prime Minister and Cabinet. Keefe believed the meeting would discuss the progress his department had made in getting the HIP up and running. But the heavy-hitters from Rudd’s department “blindsided” Keefe and presented a wholly new model as a fait accompli.

As Keefe testified, the message of the new model was clear: “don’t do things in a government slow way. Let’s let the market do its work … let the market rip”. This laissez-faire logic was at the heart of the HIP’s design around a rebate. As witness after witness has told the commission, a “principle” of the program was that the key legal relationship in the HIP lay between the householder and the installer. The Commonwealth was the funder, not the provider. Or, as then secretary of the Environment Department Robyn Kruk put it in her statement to the Commission “… there was a strong emphasis on encouraging a high level of participation by homeowners and low-skilled workers by removing red-tape and making the program business friendly”.

The fateful decision to remove the requirement that each installer under the HIP be trained, to only requiring a trained supervisor (itself ill-defined in the program guidelines), was also justified by the notion that the government should not create “barriers” to participation.

Just as it was designed to do, the HIP created a surge of market activity virtually overnight. Prior to the scheme there were roughly 70,000 houses retrofitted with insulation every year — at the height of the HIP the number reached 180,000 in one month. As one installer reported to the Queensland Coroner last year, the attitude for the tens of thousands of start-up companies that flooded into the sector was “make hay while the sun shines”.

Those responsible knew that the HIP rebate would distort the insulation industry and draw in thousands of new start-up businesses. From a stimulus perspective, that was the point. And yet still they designed the program around the premise that existing OH&S laws would be enough to regulate industry and ensure the safety of the new recruits entering the nation’s ceilings.

It was when the department tried to beef-up safety rules, after the electrocution of 25-year-old Matthew Fuller in October 2009, that the anarchy created by the HIP was fully revealed. Even after then minister Peter Garrett banned stapling metal fasteners into foil insulation, an audit found that 33 per cent of installers were still using the banned metal staples. The “light touch” design of the HIP made it impossible to impose effective safety rules down the track.

For 30 years governments on both sides of politics have increasingly outsourced public services to the private sector under the rubric of efficiency and savings. The Commission of Audit’s call to sell off state assets and build new infrastructure through public private partnerships is more of the same. The effect is a hollowed-out public service, unable to regulate, with no in-house knowledge of how to safely deliver services. If the government listens carefully to the messages coming from their Royal Commission they will think twice before continuing down this path.

The current hearings of the Independent Commission Against Corruption in New South Wales are not calculated to inspire hope in Australian democracy. Throughout this year, ICAC has uncovered one shocking revelation after another.

The corruption taint began with Labor’s Eddie Obeid and Ian Macdonald, whose backroom manipulations regarding coal mining leases stood to benefit the Obeid family an estimated $60 million. But the malfeasance quickly crossed party lines, drawing in a federal Liberal minister, Arthur Sinodinos, as well several New South Wales state ministers. Then the New South Wales premier, Barry O’Farrell, was forced to stand down after appearing to mislead ICAC over a bottle of expensive wine.

ICAC’s current investigation involves slush funds set up by the New South Wales Liberal Party to obscure donations to the party from property developers, a practice banned under New South Wales law. At the centre of the investigation is former Energy Minister Chris Hartcher, who appears to have been intimately involved with a special fund, mysteriously named ‘Eight by Five’.

Money that could not be directly donated to the Liberal Party flowed into Eight by Five, including from the now-notorious Australian Water Holdings. Eight by Five in turn donated generous sums to the New South Wales branch of the Liberal Party. Hartcher has already resigned, followed in short order by Police Minister Mike Gallacher.

Long riven by internal tensions and factional warfare, it now appears as though affairs inside the New South Wales Liberal party are every bit as disreputable as the right faction of the New South Wales Australian Labor Party.  That must be a concern for the federal Liberal Party. After all, the New South Wales branch of the Liberal Party is the home branch of Prime Minister Tony Abbott and Treasurer Joe Hockey.

Both Abbott and Hockey have appeared agitated, to say the least, when questioned by journalists about the federal implications of the New South Wales stink. In a press conference after the resignation of Barry O’Farrell, Abbott was asked by journalist Nicola Berkovic from The Australian whether he trusted the New South Wales government, “which is proving to be corrupt”.

The Prime Minister bristled. “That is an entirely unjustified smear,” he snapped. Since that press conference, of course, even more New South Wales government ministers and backbenchers have stood down. Just today, ICAC said it had discovered“a strong prima facie case of serious electoral funding irregularities" against Gallacher.

This is the context in which we learned yesterday, courtesy of an investigation by Fairfax Media, that Treasurer Joe Hockey has been charging sky-high prices for membership of a political fundraising club, the North Sydney Forum. In an article provocatively titled “Treasurer for sale”, the Sydney Morning Herald detailed a secret donations club, with undisclosed membership, in which intimate access to the Treasurer of Australia was offered in return for Liberal Party donations. According to the Sydney Morning Herald’s Sean Nicholls, “in return for annual fees of up to $22,000, members are rewarded with ‘VIP’ meetings with Mr Hockey, often in private boardrooms.”

Nicholls apparently sent a detailed list of questions to Hockey’s office, asking how and why the fundraising club worked. Top of the list: who was in the secret club? But instead of answers, Nicholls was met with fierce denials and the threat of a lawsuit.

In a statement released yesterday – under an official Commonwealth letterhead – Hockey’s office informed interested observers that he was calling his lawyers.

“Accusations made in Fairfax Media today are both offensive and repugnant,” he wrote. “The Treasurer will not let this distract him from the important task of putting the Budget together. As the matter is now in the hands of lawyers no further comment can be made.”

Let us recall that Hockey has been mentioned at ICAC before. Donations from Australian Water Holdings flowed to Hockey’s campaign fund, and were later repaid. Hockey has refused to give details about why and when the repayment was made.

New Matilda is not implying or suggesting any wrongdoing by Treasurer Hockey. Indeed, current federal regulations around political donations make fundraising clubs like the North Shore Forum perfectly legal.

But it is worth reflecting on the implications of one of the most senior ministers in the government of Australia suing a media outlet over a matter that is manifestly in the public interest. After all, this is a government which claims free speech is so important that it has to amend the Racial Discrimination Act to make it easier for newspaper columnists to have their say.

In the normal cut and thrust of politics, politicians do not sue media outlets over stories with which they disagree. That’s not to say it doesn’t happen, or that threats aren’t made. Clive Palmer is suing the Courier-Mail over an investigation into his business interests. Craig Thomson sued Fairfax over the brothel allegations that eventually led to his conviction. Julia Gillard threatened to sue a number of times over the Australian Workers Union scandal, although no proceedings commenced. 

When politicians sue, they usually do it to clamp down on debate. A defamation action signals that a politician is prepared to gamble on the risk that the facts of a particular allegation will be raked over in a court of law. That poses risks all of its own, for instance when uncomfortable details emerge in public for the first time.

Threatening to sue generally does damp down on media coverage of a particular issue. Other media outlets can be loathe to cover the allegation, for fear of being added to the action and therefore subject to expensive damages should an adverse finding be made. For a small, independent media outlet, a lost defamation decision can spell the end. Notoriously, Crikey founder Stephen Mayne was forced to sell his family home after a court found in favour of broadcaster Steve Price in a defamation suit.

Whatever the particulars, Hockey’s decision to bring in lawyers should alarm those citizens who are concerned about the health of Australia’s democracy. As ICAC has discovered in New South Wales, there appears to be no shortage of funny money looking for a way to influence public administration. And we know that under Sinodinos, the Assistant Treasurer working with Joe Hockey, the government decided to strip away Future of Financial Advice reforms to the financial planning sector, reforms that would have prevented corruption. Some think the benefit to the big banks and financial institutions by removing the reforms could run into the billions.

Of course, you might argue that big business types who want to influence Joe Hockey have no shortage of opportunities to press their case. This is one of the most pro-business governments in decades. Its Commission of Audit, convened by Hockey, was run by a former top lobbyist for big business, Tony Shepherd. Nor is Hockey exactly shy about boasting of his regular conversations with business leaders. As the saying goes, the real scandal about politics is what’s legal.

And that’s the real concern about the Hockey allegations. If his fundraising operations were entirely legal and above-board, why is he refusing to answer legitimate questions about who attended, who donated, and what was discussed? If Hockey genuinely believes he is innocent, why not simply put forward the available evidence that clears this up? Why stonewall? Why sue?

In short, what has Joe Hockey got to hide?

The Commission of Audit has laid bare the neoliberal agenda driving the Abbott government’s assault on Australia’s welfare safety net. Be afraid. Be very afraid.

One of the most refreshing aspects of the entirely dismal Commission of Audit report released last week is the debate it has sparked about the future of Australia’s social contract. As many New Matilda readers would already know, the report itself wants to rip up most of Australia’s welfare state. The scale and severity of its recommendations are breathtaking.

In order to fix an imaginary problem in the form of a budget “emergency” that doesn’t exist, Tony Shepherd and his partners in crime want to tear yawning holes in the Australian social safety net. Ending Medicare as we know it, lowering payments for the age pension and other benefits, punitive new conditions for Newstart and lowering the minimum wage are just the beginning. Also recommended: abandoning the Gonski schools reforms, slashing foreign aid, and removing Commonwealth support for homelessness altogether. The National Disability Insurance Scheme will be delayed before it even starts.

Perhaps the nastiest phrase in a very mean and nasty report was the Audit’s claim that it would continue to protect the “truly disadvantaged”. While everyone can agree that the government should “target public assistance to those most in need,” as the report argues, the rest of the Audit makes it clear that those currently in need will have to make do with less. In some cases, much less.

The report’s recommendations around the minimum wage are perhaps the best, and most frightening, example. Despite having no mandate to examine wages — they were not part of its ambit as set down by the Abbott government — the report recommends sweeping changes to Australia’s century-old system of setting an adequate minimum wage.

In recommendation 28, the report states bluntly that "Australia’s minimum wage is high by international standards". The Audit recommends that the wage be set at a new benchmark, much lower than current levels. It would also be allowed to vary nationally on a state-by-state basis, meaning that low-paid workers in Tasmania, for instance, would earn far less than their counterparts in Western Australia. With precisely zero discussion of the complex economics literature on the employment effects of minimum wage rates, the report simply says that this would “improve job opportunities.”

Monash University’s Veronica Sheen suggests that this would mean a huge drop in the minimum wage. “If the Commission of Audit’s recommendation is implemented, the current minimum wage of $622.20 per week would be reduced to $488.90 per week,” she calculates.

There’s a cruel logic to such recommendations. If someone working on the minimum wage is “truly” disadvantaged now, what will they be after losing a quarter of their income?

Perhaps the most alarming aspect of the Commission of Audit report is how little consultation it appears to have undertaken with the people its sweeping recommendations would affect.

The Commission’s embarrassing error regarding how many times Australians actually visit the doctor has already been exposed: rather than the average Australian visiting the GP eleven times a year, as Shepherd and the Commission claim, the true figure is below six. This and other mistakes led the Australian medical Association’s Steve Hambleton to say simply that “the Commissioner's recommendations are really uninformed by medical opinion".

Similarly, when it comes to the Commission’s savage cuts to welfare provisions, there is no evidence it consulted the available evidence on the impacts of such austerity. The Australian Council of Social Services, for instance, put in a comprehensive and academically rigorous submission to the Commission of Audit. It was completely ignored.

If the Commission failed to talk to social policy experts, doctors, or the welfare sector, there seems little chance that it talked to ordinary Australians making do at the margins of our economy.

Perhaps that’s because if Tony Shepherd and his mates really confronted the hardships encountered by ordinary Australians trying to support themselves and their families on low incomes, they might have been forced to rethink their devastating austerity measures.

What is life like for Australia’s poorest? An important new report by Anglicare, released this week, gives us a glimpse.

Anglicare’s sixth annual State of Sydney report chronicles the struggles of our fellow Australians living on low incomes in our biggest city. Unlike the Commission of Audit, it is based on hard evidence: more than 40,000 people who came into contact with Anglicare across 108,051 visits.

The statistics are sobering. Anglicare says two-thirds of the households it dealt with are getting by on a combined income of less than $500 a week. 30 per cent are earning less than $300 a week. A quarter had someone with a disability. Anglicare says its encountered almost 5000 households experiencing homelessness. One in 10 families with children were living in “squats, refuges, cars, on the street, in boarding houses, in emergency hotel/motel accommodation or staying with friends.”

The plight of those trying to survive in Sydney’s tough private rental market was especially concerning. According to Anglicare’s Sue King, “rental affordability was a big issue”. King cites figures from the research indicating that 32 per cent of all households surveyed were in “severe rental stress, spending more than 45 per cent of their income on rent”. Could households like this afford $15 to visit the doctor?

The Anglicare report should be compulsory reading for any politician or business leader advocating for deep cuts to government services. It also puts paid to hoary clichés like the argument that the poor in Australia are not “absolutely” poor, and are just earning low incomes relative to the majority. The Anglicare data reveals a picture of a significant underclass of Australians who cannot afford to put food on the table, let alone pay their utility bills. Anglicare says 48 per cent of all visits to their emergency centres resulted in a food card hand-out, and 45 per cent in a food hamper. Millions of dollars were also handed out in vouchers for gas and electricity accounts.

What were the risk factors for what Anglicare calls “deep disadvantage”? Top of the list was low income. Second was unemployment. Third was being a single parent. Fourth was housing insecurity.

The Commission of Audit is doing us all a favour with its unabashed honesty. The veil of rhetoric has dropped, and we can see the assault on our community’s poorest and most vulnerable people for what it is. No wonder many in the community are scared. We should be.

Jacqui Lambie is going out on her own.

In one of the worst-kept secrets in Australian politics, the first-term Senator from Tasmania has resigned from the Palmer United Party. She will sit as an independent for the remainder of her term.

The implications for the balance of power, and therefore for the Abbott government’s legislative agenda, are significant.

The numbers in the current Senate are not kind to the Coalition. With only 33 Senators, the Coalition needs at least six extra votes in the upper house to pass any legislation. Each and every bill is therefore a difficult negotiation between the government and a very motley crew of crossbenchers.

This scenario would pose a stiff challenge for the wiliest of governments. For the Abbott government, which struggles to come to terms with anything short of meek acquiescence, the requirement for six crossbench votes for each and every bill has proved something of an insoluble puzzle.

As a result, key legislation languishes. Last week, the crossbenchers combined with Labor and the Greens to vote down the government’s controversial financial advice reforms, known as FOFA. Although overshadowed by the explosion of public anger over funding cuts to the ABC and SBS, it was in itself a significant defeat.

The FOFA story is long and complicated. FOFA was originally a Labor reform package that imposed modest new regulations on financial planners – in particular, requiring them to keep asking their clients if they wanted to retain their financial advisors’ services. The big banks opposed this, because it threatened their lucrative trailing commissions and advice fees. The incoming Abbott government sided with the banks, rolling back Labor’s reforms. Now the Senate has struck down that roll-back, in a humiliating defeat for Finance Minister Mathias Cormann.

FOFA is hardly alone. Plenty of other bills are in trouble. The government’s higher education reforms are due to be voted on this week. They look headed for defeat. The $7 GP co-payment, which has already cost the government so much negative publicity, hasn’t even been introduced to the Parliament.

Now that Lambie has defected, the government’s task has become yet more complicated.

On the face of it, Lambie’s independence should give Coalition Senate leader Eric Abetz an opportunity to build a new faction. But it also takes away one vote from the Palmer bloc – which has been instrumental in helping the government pass bills like the abolition of the carbon tax. There are more jigsaw pieces, but the puzzle remains.  

Lambie’s first test as an independent is whether she can force concessions from the government over her own burning issue: a pay rise for the servicemen and women of the Australian Defence Force.

The background to the dispute is the surprisingly modest pay rise of 1.5 per cent offered by the government to the serving personnel of the ADF. That’s well below inflation, meaning their wages will decline in real terms. Labor and the minor parties have been attacking the offer for weeks. Lambie, a former military policewoman, has threatened to vote against all future government legislation unless the Abbott government revisits the pay offer.

Now that Lambie has left the Palmer bloc, the Coalition may well have a chance to cut a deal. Indeed, it’s a mark of the government’s mismanagement that it has let the pay deal fester this long.

The Abbott government has committed to a big increase in defence spending, and defence experts say the money is there for a better deal. While the government is on a mission to rein in the salaries of public servants across the board, the optics of squeezing soldiers, sailors and air personnel at the same time they are being asked to fight in Iraq are hardly in the government’s favour.

The Lambie defection comes at an interesting point for the Abbott government. Behind in the polls, the government has been badly wrong-footed by the intensity of the public backlash against the cuts to the ABC and SBS. Abbott and his cabinet badly need some wins.

As a result, given the government’s many and various problems, Lambie might be in a better negotiating position than many realise. Perhaps this is why Lambie is seeking a meeting with Prime Minister Tony Abbott over the pay deal. So far, we're told, her request has been rebuffed. Should it happen, it will be an intriguing encounter.

How will Lambie fare as an independent? The Tasmanian has taken a decision that offers both opportunities and perils.

Now that she’s an independent, Lambie has the opportunity to carve out her own niche. She is now free of the direction of Clive Palmer; she can chart her own course.

Given her media profile is already considerable, this should help Lambie to pose as a plucky populist standing up for the interests of Tasmanians – particularly regional Tasmanians, whose unemployment levels and human development metrics are well below those of their mainland cousins.

Much like Queensland, Tasmania has a long history of right wing populism, with maverick figures like Brian Harradine and Michael Hodgman looming large in the political history of the island state. Lambie’s humble origins and plain-spoken style are cut from the same cloth. If she sticks to a platform of putting Tasmania at the top of her agenda, she could have a long and successful Senate career.

However, Lambie’s move also brings with it significant risks.

Lambie is clearly a woman of conviction, but conviction is not always sufficient. Her political career is neither long, nor particularly distinguished. She flirted with both Labor and Liberal before joining forces with Palmer. It’s not a record that suggests she plays well with others. Her penchant for controversial public statements could also prove a double-edged sword.

Independent senators must cope with a huge workload if they are to meaningfully engage with the volume of legislation that governments propose. They also endure considerable scrutiny, particularly if their vote becomes crucial to a particular bill. Experienced operators like Nick Xenophon thrive in the spotlight. Others have wilted, however. By the end of his single term in the Senate, Family First’s Steve Fielding was a widespread figure of ridicule. John Madigan is headed for the same fate. 

Perhaps the biggest threat to independents is obscurity. Crossbenchers can’t achieve anything without building a caucus in the chamber to cut deals and pass legislation. To secure funding and support for their favourite hobby horses, independents need to build alliances and ultimately negotiate with the government of the day. If they can’t, they can end up languishing in the back rows of the chamber, unable to influence the political agenda.

Will this be Lambie’s fate? We’re about to find out.