Grattan on Friday: Penalty rates – Shorten's own goal becomes Turnbull's political problem

The latest reflection on just how appalling things are in Canberra politics came this week from former Treasury head Ken Henry, who’s now chairman of NAB.

“Our politicians have dug themselves into deep trenches from which they fire insults designed merely to cause political embarrassment. Populism supplies the munitions,” Henry told a conference in Canberra. “The country that Australians want cannot even be imagined from these trenches,” he said.

A senior player in reforms under Hawke-Keating Labor and the Howard government, Henry contrasted the current dysfunction “to earlier periods of policy success – where politics was adversarial, every bit as partisan – but when the tribal tensions within parties were generally well managed and the political contest appeared to energise policy, not kill it”.

Henry may be slightly romanticising the past, as often happens when people look back to that period of policy-rich achievement. There were more than a few unedifying times in the fights of those years. But his general point is right.

He and his fellow heavyweights in the banking industry have just had a close-up view of the Coalition’s ugly tribalism with Treasurer Scott Morrison’s tantrum over former Labor premier Anna Bligh’s appointment to the Australian Bankers’ Association. It was short-sighted, counter-productive behaviour.

The fact that some in the Coalition saw Bligh’s appointment as the banks writing off the government was revealing. Given the volatility of politics, the bankers would hardly be predicting the next election’s outcome now – the interpretation suggests more about the mindset of alarm in Liberal circles.

When governments are flagging there is always talk of a “reset”. We’ve been hearing it this year, just as we did in the Gillard days.

But looking to a “reset” is more often than not to be staring at a mirage. It’s true that in 2001 the Howard government had a spectacular “reset”. It changed some decisions and crafted a canny budget, but the biggest factors in cementing its turnaround were Tampa’s arrival and September 11.

Some Coalition MPs believe Turnbull’s burst of aggression – over Bill-and-the-billionaires and Labor and renewables – will give the government its “reset”. It’s doubtful. People don’t like abuse, and in the energy debate, this week’s Essential poll suggested the government is struggling.

So looking ahead, there are no quick fixes, or answers based in a superficial change of style. The government faces the toughest slog, as it contemplates a budget that’s difficult to put together and the challenge of delivering an energy policy.

There will be pressure to spend in the budget to gain credibility on health, which cost the Coalition votes last July. Stories are already appearing about ending the freeze on the Medicare rebate. But where will offsetting cuts be found?

And, given the Senate gridlock on savings, can the government produce a budget that doesn’t alienate voters but keeps the ratings agencies at bay and Australia’s AAA rating intact?

As for energy security, the government’s “clean coal” frolic is genuinely hard to understand – beyond fears about regional seats and pressure from the Nationals - given that the word from the sector is that investors won’t go there. Eventually hyper rhetoric will have to give way to concrete measures that can fly.

High electricity prices are a politically sensitive cost-of-living issue and the government is trying to pin the blame for them, and for blackouts, on Labor’s commitment to renewables.

But suddenly there is a new cost-of-living issue, with the Fair Work Commission (FWC) decision on Thursday to cut Sunday and public holiday penalty rates for those working under the hospitality, fast food, retail and pharmacy awards.

This is not the government’s decision – the FWC is independent and the government didn’t even put a submission to its inquiry.

And, in an ironic twist, Bill Shorten when workplace relations minister paved the way for this decision, with amendments requiring the review of industrial awards to cover the area of “additional remuneration” for employees working on weekends, public holidays, shifts and the like.

The Gillard government thought it was writing protection of penalty rates into the award system. Julia Gillard, addressing an ACTU summit, said: “We will make it clear in law that there needs to be additional renumeration for employees who work shift work, unsocial, irregular, unpredictable hours or on weekends and public holidays.”

Labor says it never envisaged the commission would reduce rates. Let alone when the bench members are overwhelmingly ALP appointees.

Although it did not make it, the decision is in line with general government thinking for industrial relations reform. But the government finds itself caught between its base, that will applaud the cut, and many voters whose hip pockets will be hit.

It argues the decision will boost employment, as the commission says. However the job increases – which neither the commission nor employers can quantify – are likely to be longer in coming and less visible than the pay losses.

Shorten has potential to make hay with the decision, helped by the unions. Those facing smaller pay packets are unlikely to be diverted by the government highlighting his role in getting the review of penalties rolling.

Labor says it will intervene when the commission on March 24 considers transition arrangements; it also is looking to some parliamentary initiative. If (as seems likely) these paths come to dead ends, it is promising legislation if it wins the next election to clip the wings of the commission.

The government faces a dilemma as to whether it intervenes to put a view on how long the transition should be.

There is a parallel here with the problem the government is facing with its Omnibus Bill which reforms child care while shaving family tax benefits. In each case, people stand to lose something.

The big difference is that with the penalty rates the government isn’t the body making the decision and can say the judgement of the independent umpire should prevail. But if Labor can make the Coalition wear some of the odium for low-paid workers losing dollars, this will be another burden for Turnbull.