Illustration: Rocco Fazzari The man who was uniquely burnt by trusting the Australian people at the 1993 election says that, after a generation of political leaders operating a combination of deceit and the wilful withholding of information, the people are ready to be trusted with the truth. "I think the people are sick and tired of being told stuff they know isn't true," says Hewson. " At the last election they were told, by both sides of politics, that we could afford full funding for healthcare and schools, more money for schools under Gonski, a new national disability insurance scheme, new infrastructure, a national broadband network, plus we could have personal tax cuts, we could have corporate tax cuts, and they'd fix the budget." He's certainly right on this point. Both leaders, Tony Abbott and Kevin Rudd, told the country a fiscal fairytale. Everything good was affordable, more was coming, and it was all to be painless. It was a deliberate, mutual deception. Abbott, who worked as Hewson's press secretary during the Fightback! era, took election policy detail to the opposite extreme as opposition leader: "Policies at the last election were dot points," Hewson says derisively, and recites the Abbott election mantra.

He doesn't think political leaders should go as far as he did: "Don't do a Hewson," chuckles Hewson. "No one will ever lay out thousands of pages of detail again," which, including his supplementary notes and tables, is exactly what he did. But the grim fate of the Abbott prime ministership is evidence of what happens to a leader who attempts reform without a mandate for it. "Everything is short-term politics neutering long-term reform," summarises Hewson. "We have the worst of all possible worlds." If Abbott can't build successfully, he certainly showed how to destroy with his relentless wrecking as opposition leader. His campaign against the carbon tax is a case study. Isn't Hewson overlooking the power of a good scare campaign? "Your opponents will still run a scare campaign," he agrees, "but you have a better than even chance" of carrying an argument if a leader has put a case for change up front and explained it well. I think the people are sick and tired of being told stuff they know isn't true. John Hewson

Julia Gillard, of course, did not put a case for the carbon tax up front. Quite the opposite. "They," he says of both main parties, "are unprepared to take the electorate with them. No one is prepared to start with the basic layer of honesty – set out the problem, then lay out a number of options, pick one of the options, explain it, educate the people about it, and fight for it." But isn't that exactly what the Abbott government started to do this week with its Intergenerational Report? The report produced by Joe Hockey and the Treasury laid out the 40-year future of the federal finances as the population swells, the people age and the economy grows. It showed that, without change, Australia's national finances will settle into a permanent deficit. The federal government deficit this year is expected to be equal to 2.5 per cent of the country's total economic output, as measured by GDP. In 40 years, that will be 6 per cent of GDP every year, the report projects. That's an annual deficit of $266 billion in today's dollars. Each year's deficit, of course, adds to the existing national debt. In 40 years, the cumulative net federal debt will be 60 per cent of GDP, or $2.6 trillion in today's dollars. That'd be a little worse than Germany's net debt burden today, and a little better than Spain's. "The Intergenerational Report," the Treasurer told us, "is an incredibly important document to start a serious conversation about the challenges and opportunities ahead for Australia."

John Hewson, an accomplished economist, concedes that Hockey and Abbott may indeed be trying to establish the basic layer of honesty with this report. His doubts, however, quickly tumble out: "Maybe they are, but they're pretty selective. The report is being dismissed for being politicised, for arguing particular lines rather than an objective analysis. It's all about cutting spending," neglecting the other half of the solution to deficits –increasing revenue. "And at the same time," Hewson adds, "Joe was talking about more spending – spending for small business, a families package, more infrastructure. So there's a mixed message already." In these remarks, Hewson has identified the report's two great flaws. One, it's too politicised. Hockey said repeatedly that the government wants to work with anyone prepared to help address the problem. Realistically, his best prospect of legislating changes is Labor. Yet instead of simply identifying trends, the Intergenerational Report seeks to belittle Labor and promote the government on every page. Two, Abbott recently has sworn to deliver policies that will aggravate the budget problem, not help solve it. Is the Intergenerational Report to be nothing more serious than a New Year's resolution, a moment of well-based resolve abandoned at the first temptation? If Hockey is serious about the report starting a conversation, the first word in the document should be "sorry". And it should be signed by both parties, by leaders past and present. Why? The 2007 Intergenerational Report, delivered when the budget was in surplus, identified a gradual deterioration. Over the years, an ageing society and an increasingly expensive health system would slowly but inexorably push the federal budget into deficit. After 40 years, the annual deficit would be running at 3.5 per cent of GDP.

And this week's report? It foresees precisely the same deterioration. After 40 years, the annual deficit would be running at 3.5 per cent of GDP bigger than it is today. The difference is the starting point. The 2007 report was delivered in a time of surplus; this week's report is starting with a deficit of 2.5 per cent of GDP. So 2.5 now plus the long, slow deterioration of 3.5 over the next four decades adds to 6 per cent. In other words, Australia has blown it. The earlier report alerted us to the great looming challenge of an ageing society, but from a sound starting point. This week we learn that the great looming challenge still looms, undiminished. All we've done is weaken our starting point. The great mining boom has come and gone. The country mismanaged it so badly that, at the end, Australia is now in a feebler condition to face the future. The "sorry" on the front page of the Intergenerational Report should be an Intergenerational Apology, addressed from this generation of political leaders, political advisers, backbenchers, campaign directors, lobbyists, commentators and voters to the generation of Australians that is now emerging from school and TAFE and university to discover that we have handicapped them for the future. John Howard and Peter Costello were too generous in handing out the tax cuts, cash bonuses and family payments in the early years of the boom, but they did manage to deliver surpluses. Kevin Rudd, Julia Gillard and Wayne Swan were quick to spend through the global crisis, but failed utterly to deliver the discipline they had promised once the crisis passed. They bequeathed an inexcusable burden of debt to Abbott and Hockey. And Abbott and Hockey, in turn, bungled their first attempt to set the budget right. This has been a woeful bipartisan failure.

The country that impressed the world with its economic outperformance is now headed into a long twilight of underperformance, unless there is a prudent political response from both major parties. "Australia astonishes" remarked the French daily Le Monde during the global downturn. Australia disappoints, might be the headline on the Intergenerational Report this week. There was no contrition from anyone this week. It was all the usual partisan bluster, blame and blunder. The big question now is, what are the Coalition and Labor going to do about it? Abbott is a weakened leader struggling desperately to stave off a leadership challenge. He is promising spending on families and small business. This does not bode well for a budget of fiscal responsibility. But he has his chance. Labor has adopted the Abbott opposition model of opposing for its own sake. Yet mid-term through this parliament, Labor too has a chance to produce credible and responsible budget ideas. If John Hewson is right, after 22 years of continuous disillusionment with political deception, Australians might be able to be trusted with the truth upfront. Peter Hartcher is the political editor.