While the #beetrooter saga has sucked all the oxygen out of the national political debate for the past fortnight, the Coalition government is confronted by a more existential crisis. Not of morality, but of economics.

It was coming to a head in the first few weeks of the year as the prime minister and treasurer set up 2018 as a test of neo-classical economic orthodoxy.

At the heart of that effort was the faith that his much touted company tax cuts would trickle through the economy via increased demand for labour that would inevitably led to higher wages across the economy.

This is the sort of economic that is presented as a series of immutable truths, based on the premise of individual rationality and consumer sovereignty, the complexity of the world reduced to simple mathematical equations.

Of course, a lot of the economic theory is spent explaining why reality had a tendency to deliver different answers to the ones the equations predict, but as long as you were looking in the rear-view mirror it all made sense.

What passes as economic debate in Australia today may not be called “neo-classical”, but take the treasurer’s lines and you get a fair idea: penalty rates distort the market, immigration drives growth by increasing the demand for goods and services.

These propositions are presented by the government as articles of faith, rejecting those who disagree as flat-earthers (an interesting position given elements of the Coalition’s tendency to reject the disciplines of more mainstream branches of science).

But as figures included in last week’s Essential Report illustrates, the public rejects many of these propositions.

It’s interesting to reflect on what is accepted and what is not. Where the proposition is about trickle-down economics, we are sceptical. Yet when the economic arguments are focussed on intervening at what economists would call the “bottom of the market” – via income tax cuts and wage increases, the public is more receptive.



We are sceptical about the benefits of immigration, yet we are not isolationist, recognising the benefits of trade agreements in improving opportunities for Australian workers.

But on the cornerstone of the Coalition economic strategy – the corporate tax cut – we are just not buying.

Lining up all the economic arguments in favour of the cut, less than one third of voters accept the proposition; while more see it as a simple transfer of wealth from the taxpayer to corporate Australia. What should cause the government particular concern is the high number of “other voters” – the conservative right parties, who are hostile to the idea.



Now the problem with the company tax cut could be the sell. After all Scott Morrison is no Paul Keating; where Keating seduced the population into understanding economics, painting pictures and telling stories, Morrison simply bludgeons them with the theory.

But there might be something more than the sale. I think more and more of the public are subscribing to neo-classical’s maligned poorer cousin political economy, where economics is seen less as an equation and more as a product of history, culture and politics.

A political economist would see lower wages as the direct consequence of the Conservatives’ long-running assault on unions and their ability to bargaining collectively to demand higher wages.

A political economist would look at the rampant tax evasion and minimisation industry that sees one in five of our larger companies pay zero tax and many more book profits in offshore havens.

A political economist would regard cost of living pressures as a product of the government’s failure to land a plan to transition energy, or protect home buyers from speculators, or support job-creating industries.

Where the neo-classical economist would argue for a simple equation, the political economist would advocate a complex web of government actions to deal with these distortion, rather than leave the market to its textbook theory.

Which is why the most emphatic agreement from voters this week is for the idea the government could force companies to pass on a proposition of any tax cuts as pay rises for workers.

Of course, the Turnbull government would never countenance such a market distortion. Plus, they no there’s no way to force corporations to do anything other than maximise their profits.



But when the irrationality of the #bonkban is finally resolved, the government will be back to its so-called rational lines, getting increasingly frustrated that the public refuses to sign up to their equation.

At least Barnaby has had cut-through.