Changing PM could benefit The Liberal Party: Tony Abbott and Treasurer Joe Hockey. Credit:Andrew Meares The idea, which was not taken up, was to see if there were matters on which agreement could be reached in the national interest and in the shared political interest of both major parties – given that either could, and probably would, be in office at various times in the foreseeable future. It was an opportunity lost. Clearly the atmosphere since has hardened decisively, with an arrogant all-or-nothing government, an eclectic populist Senate, and a Labor obstructionist opposition seething with desire for revenge, and with its foot firmly on the government throat. And here's why: one of many unfortunate sequels to last year's own-goal-heavy budget is that the word "budget" has become negative in its own right. According to ALP-commissioned focus-group testing, voters now read it as a byword for unfairness. "They (the government) can't even talk about the budget at the moment without people immediately hearing unfairness and broken promises," said a Labor insider.

This is the signature political failure of the Abbott project and a testament to Labor's success in portraying Joe Hockey's first blueprint as an ideological document – a wilful attempt to make life easier for the well off at the expense of the poor. Politically, the budget was doomed the moment it contained broken promises, but the absence of tough medicine for the rich, beyond a small and temporary budget repair levy, denied the government the cover of demanding sacrifice from all. The proof of that is that Labor and its populist collaborators in the Senate have suffered no real opprobrium from blocking its implementation, whereas the government's stocks have sunk sharply. Yet the real losers out of the short-term gridlock since May are voters themselves – or more pointedly, their children, who will foot the bill for problems left unaddressed. As the Intergenerational Report – or IGR as it is shorthanded – will show when it is released early next month, Australia does have a long-term budgetary problem worthy of the term "crisis". Spending is going up, and revenue is falling further behind. The difference is being met through borrowings. As the population ages, the shortfall between what the government ordinarily raises and what it must spend necessarily widens. As the population ages, the shortfall between what the government ordinarily raises and what it must spend necessarily widens.

A key problem is the way the bellicose argument over the budget-crisis-slash-budget-emergency, started. From opposition, Abbott had insisted the situation was so dire as to warrant an immediate election for an equally immediate change of government. Yet Abbott's claimed budget emergency was a contemporary concept rather than one that related to a long-term structural problem. As such it was always nonsense – as his months of inaction after being elected showed. Where was the emergency economic statement in 2013? Where was the drastic corrective action in the Mid-Year Economic and Fiscal Outlook? We had to wait until May of the following year for a budget which, in the end, was more politically charged than it was fiscally contractionary. And now, thanks to revenue write-downs from collapsing iron ore and gas prices, the deficit is growing, not shrinking. In truth, Australia's debt-to-GDP ratio under Labor had been low compared to comparable economies', which is why our capacity to manage it was rated Triple A by all three ratings agencies. The cost of Abbott's overreach is that the real emergency, the long-term sleeper built into a budget heavy with big-ticket items such as Medicare, the NDIS, pensions and overly generous superannuation concessions, remains bereft of serious attention.

Having learned the hard way the lessons of budget No.1, Joe Hockey is determined to get the politics and economics into harmony this time. And, he wants the voters to understand the problem before asking them to embrace solutions. He will use the IGR to lay out the immense fiscal challenge and point to what are expected to be some pretty alarming numbers as part of what he has called a deep community engagement in the solutions. Labor's Chris Bowen, who this week had his own problems recalling the level at which one begins paying income tax, claimed the engagement will take the form of an advertising campaign paid for by taxpayers. That's probably right. But for Hockey, the primary question now must be whether he lasts long enough to deliver a second budget. He is as welded to Abbott as Abbott is to him. Liberals say they'll go down together. Chatter in the government shows no signs of abating and could yet manifest itself in a sudden move to replace Abbott with Malcolm Turnbull as early as the first full sitting week beginning March 2.

If that happens, the IGR will still be an important document because the long-term problems aren't going away. But don't expect to hear much about university deregulation or the toxic GP payment, no matter what Orwellian name it has acquired by then. Mark Kenny is Fairfax Media's chief political correspondent.