The budget impasse reflects an indulgent electorate and an undemocratically elected senate

Australian politics has become an "embarrassment on the world stage" according to Dow Chemical Company chairman and chief executive Andrew Liveris. This view, said to be not uncommon in business circles, is a reaction to the minor parties in our Senate blocking the Government's Budget and legislative agenda. The Budget deadlock is also believed to be affecting consumer confidence, with the Melbourne Institute and Westpac Bank Index of Consumer Sentiment falling a seasonally adjusted 4.6 per cent in September

The deadlock in the Senate over the Budget (in my opinion) reflects two underlying causes.

The first is an Australian electorate that is addicted to its handouts, having lost sight of the need to raise taxes or increase public debts to pay for them.

The second cause relates to the composition of the Australian Senate, which is now (with a large number of Senators from minor parties) more a reflection of the decisions of party machines than the knowing choice of the electorate.

The present Senate has indulged almost every call from interest groups to retain their individual "pork-barrel", despite the end-result meaning either a massive budget blow-out or a future mini-budget to raise needed revenue. The recent repeal of the Mining Tax by the Senate might appear to be progress. This repeal, however, is estimated to likely cost the Budget $6.5 billion over the forward estimates because the Senate cross-bench has insisted on retaining a number of spending programmes as a condition of their support.

The 2014 Australian Budget has been widely criticised and has cost the Government support in the polls. I might be alone in my opinion but I regard the 2014 Budget as as one of the better budgets of recent years. It certainly was a far more honest and responsible budget than the one that preceded it.

The underlying reason for the unpopularity of the 2014 Budget is that it was the first budget for some time that sought to genuinely rein in the deficit, particularly through cutbacks in spending. Interest groups have squealed loudly at the prospect of losing some of their handouts, and there have also been accusations that the poor have been targeted more than the rich.

The problem is that you can't cut tens of billions off government spending without a good deal of widely-spread pain. Despite the extent of cuts, Hockey's Budget is still unable to produce anything near the Budget surpluses promised (and presumably thought appropriate) by the outgoing Labor Government.

Wayne Swan had promised in his 2013 Budget Speechthat "This Budget delivers a surplus this coming year, on time, as promised, and surpluses each year after that, strengthening over time". We now know from the 2014 Budget Papersthat the 2013-14 budget outcome was not a surplus but rather a whopping deficit of $49.9bn. The 2014 Hockey Budget plans for the deficit to fall to $29.8bn in 2014-15 and $2.8bn by 2017-18, Senate permitting.

Comparing the pair (as they say) one has to conclude that the 2013 Budget was either dishonest, or incompetent or both. Sure, the revenue outlook did deteriorate throughout 2013-14. It did not, however, deteriorate to the tune of $50 billion. The commentators were correct in saying that a surplus in 2013-14 was never a realistic prospect under Swan's Budget, which was always going to leave any incoming administration with revenue shortfalls.

An even worse aspect of the 2013-14 Budget was its lavish commitment to new programmes such as Gonski education spending and the National Disability Insurance Scheme (NDIS) without adequately funding either programme into the future through tax measures. (This was an attempt to buy popularity with further handouts, while leaving much of the necessary but unpopular tax raising to a later administration.)

There is now every prospect that the NDIS will be a repeat of Medibank/Medicare insofar as the half percentage point NDIS levy is likely to prove woefully inadequate for funding the scheme, when it gets fully operational. The Coalition in the lead-up to the last election should have opposed these under-funded schemes (desirable if we had the money and if the Budget outlook was not deteriorating) but the Coalition did not have the courage to take such a position into the election.

In my opinion the 2014 Budget did not deserve the treatment it received in the press, though there are some aspects of it that I do not support. (I had, for example, felt that the HECS/fee burden on students had already approached its limit, that the cuts to the Public Service were being rushed and were resulting in excessive expenditures on redundancies, and that conditions and rates of payment for allowances such as NEWSTART had already become too frugal relative to the benefits available to pensioners.)

That said, the reality is that the quantum of cuts made in the 2014 Budget was absolutely necessary in order to slow the growth of spending. The alternative of raising the equivalent in increased taxes would probably have been even more unpopular.

I also don't agree that the Budget unfairly targets poorer Australians. The poor benefit disproportionately from public spending so that it was inevitable that they were going to be hit by any cuts. Certainly some measures cutting welfare outlays were targeted on the poor but Centrelink payment rates themselves are indexed.

Other Budget measures, however, mainly hit middle and high income earners. For example, few commentators have drawn attention to higher income taxation in the 2014 Budget. This occurs because all income tax thresholds have remained the same in 2014-15 instead of being indexed, so that taxpayers have an increased proportion of their incomes subject to higher tax brackets. A new 2 per cent Budget Repair Levy also came in for the highest tax bracket, as well as an increase in the Medicare levy from 1.5 per cent to 2 per cent.

Overall, I would have thought that the pain of the 2014 Budget was necessary and pretty widely shared.

Turning to the political process, Australia has a Senate that in recent decades has been (more often than not) controlled by its non-government Senators. While the Senate was intended to act both as a States' House and as a House of Review, the Senate has in fact been mainly used by the non-government parties (both sides) to simply block or amend government legislation. Because the Senate is not fulfilling its intended purpose, I personally favour its abolition (and getting rid of the remaining State Upper Houses for that matter) but it is unlikely that a proposal to abolish the Senate would be passed in a referendum.

The voting system for the Senate has changed twice since federation, with the Hare-Clark system having been introduced in 1948 by the Chifley Government (at that time expected to lose to Menzies in the next election). The earlier block-voting regimes for Senate elections tended to result in landslide Senate majorities for an incoming government (which largely prevented a blocking role), so that a change to Hare-Clark advantaged a party expecting to go into opposition, as well as facilitating the Opposition and cross-benches in blocking Government legislation.

In theory, the Hare-Clark voting system (known overseas as Proportional Representation by the Single Transferable Vote)gives voters the final say on which candidates get elected. The Hare-Clark systemis used in lower house elections in Tasmania and the ACT, as well as in Ireland and Malta. It is also used in upper house and regional elections in many Australian states and in a number of Commonwealth countries, as well as in many local government elections.

Hare-Clark is supposed to give each candidate on the ballot paper an equal opportunity to get elected ("donkey vote" influences excepted, - unless Robson rotationis used), and preferences are distributed according to individual voters' rankings on the ballot paper. In theory, there are no safe seats under Hare-Clark because all candidates need to compete for votes against others on their party ticket, as well as with candidates from other parties.

The reality is that the Hare-Clark system in Australia has been corrupted by a number of influences. Historically Australia's use of and common adherence to how-to-vote cards was the biggest distortion. This was eclipsed in the lead-up to the 1984 Senate poll by the introduction by the Hawke Government of above-the-line voting for the Senate (in an attempt to cut the high informal vote at that time, felt to disadvantage Labor more than the Coalition).

How-to-vote cards are mainly a phenomenon of Australian mainland elections. They are unknown in Ireland (for example), and they also are said to be little used in Tasmania. How-to-vote cards (if followed) result in voters surrendering their right to themselves choose preferences. Instead voters follow the instructions of the party of their choice. While not in the spirit of democracy, in a literal sense this practice is not undemocratic because following such instructions is a purely voluntary decision.

Above-the-line voting is far more insidious because it makes voting for the permutations of preferences registered by political parties much simpler and time efficient (because voters only have to mark one box) relative to choices below the line. Filling-in preferences is compulsory in Commonwealth (and many state) elections and it is discouraging for voters to have to fill in up to 70 or more boxes below-the-line. Consequently, in recent upper house elections about 96 per cent of voters voted above-the line.

With so many voters opting to vote above-the-line, the top spots on the Labor and Coalition Senate tickets are now effectively "safe seats", with the Senators effectively chosen by their party machines. At Senate elections it is now the political parties who determine candidate order on the ballot paper, ensuring that Senators are always elected according to the party's preferred order. The parties' efforts are further re-enforced in all mainland states because state legislation allows each party's candidates for state upper house elections to be listed on the ballot-paper in the order desired by the party.

Because of the extent of above-the line voting, the flow on of preferences between parties is now also overwhelmingly determined by party-machine decisions (which themselves can be the subject of preference deals made between parties). Most people voting above the line have only a broad notion of where their preferences are likely to be directed to. Both the ALP and Greens tend to put Coalition candidates at or near the bottom of their preference list and the Coalition reciprocates. This all means that a minor or micro-party candidate has an improved chance of getting the last Senate spot in each state (compared with the ALP or Coalition).

One can only speculate on what the outcome would be if above-the line voting was abolished. My guess is that there would be reduced preferencing to micro parties and fewer numbers on the Senate cross bench. This might not greatly reduce the incidence of hostile Senates but it might result in Opposition-controlled Senates being somewhat less obstructive.

I believe that the Australian political system has a fundamental problem stemming from the fact that its two Houses of Parliament are elected using quite different structures and constituencies. As a country Australia is not unique in this respect (just look at the US), and, most likely, we will probably just have to live with this situation.

There seems to be general recognition that the present system of above-the-line voting for the Senate and state Upper Houses is problematic, and a momentum for change seems to be developing with the support of political scientists, political commentators and others. Optional preferential voting below-the-line is one proposal that seems to have a lot of support.

Any proposal that reduces the preferencing powers of the party machines and returns it to voters is welcome in itself. Such moves are likely to reduce the role of minor and micro parties in the Senate, and may lead to some cultural changes whereby the major parties may in the future become less obstructive to each others legislation.