It would be premature to say that the Abbott Government's budget lies in ruins, but many of its key reforms seem unlikely to get through the new Senate, writes Simon Cowan.

It would be premature to say that the Abbott Government's budget lies in ruins; this is the first week of the new Senate after all. Yet many of its key reforms - Medicare co-payments, changes to unemployment benefits for young people, and abolition of the Schoolkids Bonus and the Low Income Super Contribution - seem unlikely to get through the new Senate.

It is estimated that the Senate's obstructionism will cost $43 billion over the forward estimates, $7 billion more than the government's projected $36 billion in net savings. This means the government is leaking support over an extremely unpopular budget that will make our fiscal position worse. This poor start for a first term government is largely a problem of its own making.

The political case for the budget should have started before the election, making it clear that our budget actually needed fixing.

Let's look at some facts. The Commission of Audit report spells out clearly that if we keep going on the current path, on top of our now seven consecutive budget deficits, we will continue to be in deficit until at least 2023-24.

Our current deficit has occurred despite Australia's terms of trade being at the highest sustained level in 150 years. We are now five years removed from the worst of the global financial crisis. Riding on 23 years of uninterrupted economic growth, our budget should be in better shape.

Yet on top of our deep deficit, the previous government left the Coalition to find tens of billions of dollars every year for unfunded promises like Gonski and the Gillard government hospital funding deal, and more than $20 billion a year to pay for the NDIS. Our budget outlook is grim, even assuming our record growth streak continues.

And all of these negatives occur before we feel the impact of the ageing population, rising healthcare costs, and lower economic growth, conservatively estimated in the Intergenerational Report to increase government spending by around 20 per cent by 2050.

Our projected level of spending is unsustainable with our current tax base. Even if we don't have a debt problem now, as some argue, you can guarantee we will have one after two decades of budget deficits. We must act now.

This is what every Coalition politician should have been talking about in the lead-up to the last election and right up until the budget, not diversionary political consequences of this fundamental problem like Labor's "record debt" or a broken promise to deliver a surplus.

The choice is simple: either we significantly reduce government spending (politically painful) or significantly increase taxes (economically painful). There is no easy way out of our addiction to "free" government money. There isn't $50 billion being rorted by the poor or extorted by the rich or hidden in chimeric tax expenditures. There are just too many people getting too much from the government and paying too little.

Even when the government has tried to put out this message, they have contradicted themselves. The Treasurer says the age of entitlement must end, yet the Prime Minister doggedly sticks to his massive new entitlement for Paid Parental Leave - a policy which is both unfair and poorly targeted.

The government's proposed Medicare co-payment is another botched example. The government didn't argue that co-payments are common in our health system. Nor did they note that it is unfair that very sick people get hit with gap fees, waiting lists, and poor services in regional areas so Medicare can pay for everyone's GP visits (especially for those who can afford to pay for it themselves).

Instead of trusting the people to understand that the rapid increase in health spending needs to be arrested (real spending increased 80 per cent between 2000-01 and 2011-12 and is projected to increase faster still), the government chose to try and deflect criticism by quarantining the savings for a huge new Medical Research Future Fund.

The government can't or won't abandon its implication from the last election that the middle class can have all the services it wants (particularly health, welfare, and education) without having to sacrifice anything. Hence the need for the budget repair levy to be limited to the "rich" earning above $180,000, ensuring simultaneously that it passed and that it will raise little or no money.

The difference between economic reality and the empty political rhetoric and meaningless promises of the political class is at the root of the political malfunction identified so ably by The Australian's Paul Kelly. The Greens, Labor, PUP and the Coalition all share blame for this state of affairs; however, the government must fix it in order to start fixing the budget.

The government must convince that action is needed. They must show people a vision for what government should be and educate them on what it can't be. Getting the people on side is the first step to getting the Senate on side too, and it's not a step they can skip.

Simon Cowan is a Research Fellow at The Centre for Independent Studies. View his full profile here.