The pantomime being played out in Canberra has only served to divert attention from the grim reality facing the economy and the absence of any cogent plan to restore the nation's finances, writes Ian Verrender.

Everyone loves the circus; the spectacle, the drama, the danger, the sheer exhilaration.

When the chips are down, when all seems lost, the tantalising prospect of escape, no matter how temporary, can be a wonderfully therapeutic experience.

Take our current predicament.

A breathless silence has descended through the big top. Fear and apprehension have gripped the assembled throng.

After an endless series of back-flips, the acrobat, having taken to the high wire in desperation, has lost his footing and is clinging on by his fingernails as the enthralled crowd far below gazes on at his hopeless predicament.

Entertaining it may be. But the pantomime being played out in Canberra has only served to divert attention from the grim reality facing the nation and the absence of any cogent plan to restore the nation's finances.

Glenn Stevens jetted into Canberra last week to outline his immediate vision for the future to Cabinet. And it clearly wasn't pretty.

Just hours earlier, the Reserve Bank's big kahuna had slashed interest rates in response to plummeting commodity prices that were having a savage impact on Australia's nominal income and our future prospects.

Already sluggish growth forecasts were lowered to 2.25 per cent for this financial year, unemployment was tipped to move higher - and that's assuming the interest rate cut has a beneficial effect.

Australia is facing a revenue crisis, far worse than former treasurer Wayne Swan was forced to confront. This time, China will not be riding to the rescue. If Goldman Sachs economist Tim Toohey is correct, $40 billion in previously estimated income is likely to evaporate over the next four years.

What is the Federal Government's response? It crows that it has eliminated revenue sources to the tune of $8 billion or more a year.

Why? Because it has pandered to the interests of big business rather than act in the best interest of the nation. And it is not the first government to do so.

Money has always bought political influence. But as Australian business power has become ever more concentrated among a collection of cosy duopolies, or at best oligopolies, the situation has become worse.

Kevin Rudd was rolled as prime minister in part because the mining lobby objected furiously to the imposition of a Resources Rent Tax on iron ore and coal.

Malcolm Turnbull was dumped as opposition leader around the same time over industry disquiet at his advocacy for a price on carbon and an emissions trading scheme.

The Gillard government eventually introduced a diluted version of the mining tax. But it was a scheme designed by three multi-national mining groups determined to maximise returns regardless of sovereign rights. Not surprisingly, it collected almost no revenue.

The extent to which big business has captured government was highlighted by Tony Abbott's election platform - to rid the nation of the two things that most riled business leaders.

At his ill-fated address to the National Press Club last week, the Prime Minister again rammed home what he considered to be his two major triumphs on the economy - ridding the country of the mining tax and the carbon tax.

It is astounding that so few economists have bothered to pick up on the obvious; that why on earth during a revenue crisis, would a government's most urgent action be to eliminate revenue.

Even worse, with the carbon tax, it has replaced a revenue source with a multi-billion dollar spending program that is likely to make Labor's pink batts fiasco look positively tame.

It has abandoned free market thinking by removing a price on carbon and substituting it with a subsidy that the nation simply cannot afford, which is at odds with its own philosophy of ending handouts.

Australia is a raw materials exporter and, when it comes to minerals and energy, we are talking about non-renewable resources that belong to the Commonwealth, not the mining companies.

A Resources Rent Tax was the centrepiece of the Henry Tax Review and the former treasury secretary advocated a resources tax on all mineral and energy extraction.

It wasn't an entirely original idea. Paul Keating introduced one almost 30 years ago on oil and gas deposits in Australian territorial waters. It's worked brilliantly. And it is still in operation today. In fact, the Abbott Government endorsed its extension, to include oil and gas operations on land.

So, if there's one thing Abbott and his Treasurer, Joe Hockey, have never explained, it's why a mining tax on iron and coal is evil and a "handbrake on the economy", when they happily accept the revenue from a mining tax on oil and gas.

Where is the outcry from mainstream economists over this anomaly? Apart from a few academics, it's sadly missing. That's because most are employed by big business, either directly or through consultancy work.

Has the Petroleum Resources Rent Tax been a "handbrake"? Has it deterred foreign investment?

Judging by the number of multi-national energy companies operating within Australia and in our waters, clearly not. Not one oil company has ever complained about the petroleum tax. It has not deterred one cent of foreign investment. In fact, more than $200 billion has been invested in LNG projects in Australia.

And it would have been the same for the minerals resources rent tax.

In a good year, the petroleum tax tips more than $2 billion in revenue into the federal budget coffers.

A properly constructed mining tax would have delivered far more. Had that cash been deployed into a sovereign wealth fund, as Malcolm Turnbull has rightly advocated, it could have provided income for future generations of Australians.

The debate among the economic fraternity instead is over the extent to which the Goods and Services Tax - a highly regressive tax that hurts those who can least afford it the most - should be raised or extended.

Given our mining industry is about 80 per cent owned by foreigners, it is astounding that most business economists happily endorse the idea that the one-off profits from mining should be allowed to flow offshore and that the burden of budgetary repair should instead fall on ordinary Australians.

Maybe it's all too late. The best of the resources boom is behind us and Australia faces years of declining living standards.

But it is time governments woke up to the fact that they are responsible for governing for all Australians, not just powerful sectional interests.

Equally, as my former colleague Ross Gittins so eloquently put it last week, the nation's economists need to go back to basics and understand that economics is all about maximising the benefits to consumers, not producers. They should not be apologists for business.

Meanwhile, the circus goes on. The finale approaches. Bring on the clowns.

Ian Verrender is the ABC's business editor.