There he was on morning television telling the nation that a key plank in his government’s first budget was a dud after all. That would be the $7 Medicare co-payment, the one he defended in May as “right and fair and proper, and that is why it will happen under this government”. Unravelling right there on Channel Nine was a year’s worth of insistence that this was an adult government, more competent and trustworthy than its Labor predecessor.

Now, seven months later, this stunning reassessment from the prime minister: “The bulk billing arrangements are absolutely protected for children, for pensioners, for veterans, for people in nursing homes and other aged-care accommodation. This is a way of making Medicare sustainable and fair. It’s a better policy package than the one we announced on budget night.”

Just as stories of the Rudd office’s dysfunction began seeping into the media for months before he was brought down as prime minister in 2010, persistent reports are beginning to appear about the Abbott office.

The Today host followed up somewhat incredulously, “Doesn’t that suggest your policies were flawed at the outset?” Bold as brass, Tony Abbott shot back that it suggests the system is working as it should. “The government puts a proposal forward, it goes into parliament; it’s debated, it’s modified, it’s improved.” He even praised the nation’s founders for giving us a senate as a house of review – a far cry from the negative, unpatriotic, obstructionist chamber that has been frustrating his government’s attempts to repair the budget. It was a frank admission the non-government majority was in fact saving the Coalition from itself.

Labor’s Bill Shorten thinks that task is not yet finished. He accuses the government of introducing a GP tax “through the back door” and will move to disallow in the senate a $5 cut to the rebate the government pays doctors. He says, “Tony Abbott doesn’t think his policies are wrong, he is just changing his tactics because he personally and his government is in political disarray.”

The Fairfax Ipsos poll earlier in the week bolsters that view. It found that the electorate rates Abbott as incompetent and untrustworthy as his much-maligned Labor predecessor Julia Gillard at her lowest point. A postmortem of the co-payment saga shows the causes of the dramatic demise of the prime minister and the government’s standing is all their own work.

Back in February, on the eve of the Griffith byelection, the prime minister slammed talk of a Medicare co-payment as a Labor scare campaign that he had knocked on the head. He insisted, “Nothing is being considered, nothing has been proposed and nothing is planned.” Three months later, it was up in lights, in the budget, as jarring as the Kings Cross Coca-Cola sign. What mystifies and angers some on the backbench is the political cack-handedness of it all. “Did no one war-game the package for its saleability?” one MP asks in frustration. Apparently not, although Health Minister Peter Dutton told the ABC, “We had offered up the co-payment in the May budget as a measure which we knew would need to be compromised on.” That prompts the question: were children, pensioners and the aged all pawns in a political game? Or worse: was he prepared to open the government up to the charge of unfairness as part of his negotiating strategy? He, like the prime minister, can hardly complain if voters are disinclined to believe anything he says in future.

But there is also an element of “mean and tricky” in the government’s scrapping of the $7 co-payment. The new package still raises $3.5 billion – almost as much as the policy it is supposedly replacing. The Public Health Association of Australia (PHAA) says it is the same policy by stealth. CEO Michael Moore says, “This $5 cut in the Medicare rebate is in effect a pay cut for doctors. Have government ministers taken a pay cut themselves? This is comparable to the minimal pay increase offered to the military.” The PHAA says GPs are being forced to do the government’s dirty work: “Either they lose $3 billion from their own pockets or drag it from the wallets of the bulk of their patients.” There are, it must be remembered, 15 million Australians not covered by the exemptions.

The underlying assumptions for any co-payment are both economically and medically flawed. The government argues a “price signal” is needed to make Medicare sustainable. Senate independent Nick Xenophon says, “If people are discouraged from seeing their GP – that will mean more people will end up in hospital.” Medicare on the government’s own admission is costing $20 billion annually, the states’ hospitals cost $140 billion. And, of course, we know early detection of disease is the best and cheapest medicine. So much for the efficacy of a “price signal”.

The prime minister can’t lay all the blame for the disarray at the feet of his ministers. He, unlike John Howard, chaired most meetings of the Expenditure Review Committee as it prepared the budget. The tentacles of his office reach deep into senior colleagues’ bailiwicks. Veteran press gallery journalist Laurie Oakes wrote last weekend that the decision to sack Treasury head Martin Parkinson was taken in the Abbott office without consulting the treasurer. A chief of staff such as Peta Credlin can only act in such a way if she has the full authority of the prime minister. Joe Hockey did his best to stave it off without success. Oakes all but blamed the prime minister’s office (PMO) for last week’s page one story in The Daily Telegraph targeting Hockey for incompetence and the government’s woes. The headline, “Joe’s on the nose”, angered the treasurer and had his staff wondering who could see it as helpful. Perhaps to shore up Abbott is one view. Whatever is going on, it points to disruptive internal politics. And goes a long way to explaining why the government’s performance has been so “ragged”.

Hockey isn’t the only senior minister with PMO troubles. Liberal deputy leader and foreign minister Julie Bishop has reportedly decided she will no longer take orders from Credlin, and other cabinet members feel the same. Just as stories of the Rudd office’s dysfunction began seeping into the media for months before he was brought down as prime minister in 2010, persistent reports are beginning to appear about the Abbott office. One of the more colourful was in The Australian. The relationship between Bishop and Credlin is said to have irretrievably broken down. The paper quotes a frontbencher saying, “They are like two Siamese fighting fish stuck in the same tank.” There are on-the-record denials all round, but Bishop has been publicly flexing her muscles.

The Australian Financial Review had an on-the-record interview with the foreign minister where she confirmed she had to overturn a Credlin ban on her travelling to the United Nations climate change conference in Lima, Peru. She did it by raising the matter in a cabinet meeting only to be mightily miffed when she later discovered Trade Minister Andrew Robb was going along as a “chaperone”. Robb was part of the putsch that ended Malcolm Turnbull’s leadership back in 2009, over his support for an emissions trading scheme. He, like the prime minister, wouldn’t want Bishop going rogue with signals in Lima that Australia was prepared to do anything really meaningful with emission reductions. These concerns, however, are more paranoia than a real possibility. The foreign minister is on the record as a friend of coal but she still seems more attuned to the changing politics of global warming than her leader and his most senior staffer.

And on the face of it, Bishop has had a big win in Lima. She announced to applause at the conference that Australia would after all contribute $200 million to the Green Climate Fund. It’s designed to help developing nations combat climate change and is a favourite with United States President Barack Obama. He angered our government by championing it at his Queensland University speech during the G20. Bishop was careful to make the announcement in the name of “Australia’s Prime Minister Tony Abbott”.

It’s quite a change of heart for Abbott. One year ago he told Alan Jones on 2GB, “One of the things that’s on the agenda is a climate finance fund and we’re not going to be making any contributions to that. We’re attempting to scale back the increase in our overseas aid commitments and that’s why we won’t be making new commitments in this area.”

It doesn’t stop there. Abbott has flagged another rethink is under way on his “signature” paid parental leave scheme. Clive Palmer unkindly linked that policy to Credlin, only to apologise later. But some on the backbench are hoping it’s a better makeover than the co-payment. Liberal senator Ian Macdonald wants it shelved. “The PPL sends all the wrong messages and has to be postponed until the budget is in order,” he says.

Abbott is very protective of his chief of staff. He told parliament Credlin is “the fiercest political warrior I’ve ever worked with”. That is probably half the trouble. She and Abbott are birds of a feather. In opposition, uncompromising pugnacity served them well. Government requires different skills. Pitting your chief of staff against senior ministers is not one of them.

But the prime minister is now listening, he says, and he’s proud of it: “This is a government which is determined to be better tomorrow than we are today.”

He may have to ditch more than policies to achieve the goal.