So Joe has seen the light on the budget. Amazing how the prospect of actually having to make real decisions rather than sound off from opposition can focus the mind. All sorts of Damascene conversions can happen.

For years the Coalition has been insisting the only reason the budget wasn’t in surplus was Labor’s profligate spending. Only the Coalition could deliver surpluses, and it’d deliver one immediately upon returning to government. Coalition MPs rejected Labor’s argument that revenue was being continually written down through lower corporate tax receipts, reflecting the high dollar and mining companies reinvesting their profits in new capacity. They mocked Treasurer Wayne Swan’s claim that the financial crisis had dramatically undermined revenue. The financial crisis, they insisted, was over years ago.

Now, five months out from an election they look odds on to win, well … not so much. Shadow treasurer Joe Hockey now says “we’re not going to go down the path of austerity simply to bring the budget back to surplus because it would end up being a temporary surplus”. It follows on from comments made by Hockey a few weeks back when he told ABC Brisbane’s Steve Austin he rejected austerity as a policy prescription.

Opposition Leader Tony Abbott, for once on the same songsheet as his shadow treasurer, reinforced this by saying “all bets are off” on a surplus yesterday. He also indicated the Coalition was preparing to dump its 1.5% cut in corporate tax.

This suddenly takes a big chunk out of what we know of the Coalition’s economic plans, which is not very much. Abbott spent much of his National Press Club address in January boasting of the Coalition’s hairy-chestedness on budgets and how important lower taxes were. But the Coalition will now go the election with a rolled-gold commitment to lift business taxes on large companies, in order to fund its rolled-gold paid parental leave scheme for high-income earners, but without a commitment to return to surplus.

Age of entitlement indeed.

“Hockey has shown that, despite the verbiage, on fiscal policy he’s not as dumb as his rhetoric makes him look.”

When Swan, in the face of constant revenue writedowns, abandoned his commitment to surplus in December, Hockey rightly and mercilessly bagged him for the literally hundreds of times Swan and the Prime Minister had insisted, often in the most colourful language, that they’d return to surplus.

But just four months later, Hockey has ended up at the same point as his opponent, although the Coalition surplus rhetoric has been more pedestrian than Labor’s — more about DNA than hell or high water. So much for the boasts about the surpluses delivered by the Howard governments and how that was going to be repeated by an Abbott government. Debt, of course, is now in vogue as well for Joe and Tony. What will opposition finance spokesman Andrew Robb now do for his basic song-and-dance routine? Will Nationals Senate leader Barnaby Joyce rail from the deputy prime ministership against his own government?

Nonetheless, just as it was for Swan, it’s a sensible and realistic submission to fiscal realities. Not just the fiscal reality that revenue is being hammered by a dollar that more and more appears to be a sort of unkillable beast from a horror movie, but the fiscal reality that the last thing Australia needs right now is a surplus fetish. We need sensible moves to make the tax base more sustainable, and less pro-cyclical, in the long-term, rather than short-term slashing that will smash demand, undermine consumer confidence and, if the global environment continues to deteriorate, push us toward recession.

It’s also an acceptance that the budget is a means to an end, not an end in itself: the ALP has, despite the black holes in the budget, given the country solid growth, low unemployment and maintained its AAA credit rating (which is an enormous cross to bear for some parts of the economy because of its impact on the value of the dollar). The Coalition could do exactly the same in its first term.

By explicitly rejecting austerity as a policy, Hockey is demonstrating his awareness that it hasn’t worked in Europe and there’s no need to contemplate it for Australia, especially in the current, precarious global environment. And by rowing back from his surplus commitment, he’s acknowledging the reality of the numbers he’s going to have to work with after September 14.

Hockey and Abbott will continue to bluster about how it’s all Labor’s fault, and the only reason they won’t return to surplus is because of the sheer size of the mess Labor has left them. But Hockey has shown that, despite the verbiage, on fiscal policy he’s not as dumb as his rhetoric makes him look.