When you have two days left to negotiate new laws on Australia's tax and energy systems with the whole nation waiting on the outcome and a close relative dies suddenly in another city, what do you do?Â
If you're Nick Xenophon, there's only one thing you can do. Everything, all at once.Â
![Nick Xenophon is as wily a politician as you'll find anywhere.](/web/20170408101756im_/http://www.smh.com.au/content/dam/images/g/t/7/e/l/i/image.related.articleLeadwide.620x349.gvfu3u.png/1491567666200.jpg)
Australia's national-problem solving mechanism is its Parliament. If the Parliament's not working, nothing gets solved. And if nothing's getting solved, what's the point? It's just an expensive, publicly funded arena for politicians to play games and drain the Treasury.Â
When the major parties are fixed in bloody-minded combat and evenly matched, the functioning of the problem-solving mechanism depends on the parties which hold the balance of power in the Senate.
![Illustration: John Shakespeare](/web/20170408101756im_/http://www.smh.com.au/content/dam/images/g/v/g/f/o/m/image.related.articleLeadNarrow.300x0.gvfu3u.png/1491567666200.jpg)
In all three of the most recent big struggles between the Turnbull government and Bill Shorten's Labor opposition, the decisive factor in the balance has been the three votes held by the Nick Xenophon Team. That's no coincidence.
Xenophon, with his $99 Lowes suits and his dad jokes and daggy gags, manages to give the appearance of being a non-politician.Â
Famously frugal and self-effacing, he flies economy and declines free upgrades. After being recognised by staff and invited to the business class seats recently he was overheard telling air crew: "I prefer to sit at the back – at my age it's better to be close to the toilets."
But after two decades surviving as an independent in the South Australian and federal Parliaments, he is as wily a politician as you'll find anywhere.
"When you try to horse-trade," he told reporters recently during negotiations over legislation in the Senate, "you can end up with a donkey". Yet horse-trading is precisely what he does. It is how he makes change.Â
Some in the major parties call him an unprincipled opportunist; he's unapologetic about his raw exploitation of the balance of power: "I'm not the government. I'm a crossbencher. And I'll use anything I can as a fulcrum to get the best possible outcome for public policy".Â
In last week's trading, the government desperately wanted to salvage something of its signature economic initiative, a 10-year plan to cut the rate of company tax. This is the core of Malcolm Turnbull's election pledge to deliver "jobs and growth".Â
Australia has been in the grip of an "investment strike" since the mining boom. To encourage more investment, Turnbull wants to increase the return on capital invested. To do that, he proposed cutting the corporate tax rate.Â
The Hawke and Keating governments took the rate from 49 per cent to 36 per cent to invigorate the private sector. The Howard-Costello government took it to 30.Â
It's stayed at that rate for the past 16 years, though businesses with annual sales below $2 million get a concessional rate of 28.5 per cent. Turnbull campaigned on cutting the rate for all companies to 25 per cent, starting with the smallest. Labor agreed to allow a further tax cut for only these smallest firms.Â
Xenophon was the government's only chance at winning something more. Other Senate crossbenchers – One Nation and, eventually, Darren Hinch, said they'd allow the cut to flow to companies with sales of up to $50 million. David Leyonhjelm and Cory Bernardi were in favour of the full government plan. Â
In this line-up, Xenophon held the swing votes. His starting point was to say he would allow the tax cut to go to firms with sales of up to $10 million – that was the limit.
The government wanted much more. Its plan, after eight years, would begin extending the tax cut to the very biggest companies, including multi-billion-dollar multinationals.Â
Xenophon eventually told the government's preferred Senate negotiator, Finance Minister Mathias Cormann, that he was prepared to think about giving the lower tax rate to companies over the $10 million threshold.Â
In truth, though he told no one, Xenophon had already decided he'd allow the threshold to rise to $50 million. Why? "The tipping point for me was that an independent supermarket, medium sized, or independent petrol station could easily have sales of $10 million to $25 million. My rationale is that if this means independent supermarkets can get a leg-up on Coles and Woolworths, that can only be a good thing." Â
But he'd see what he could extract from the government first. He applied pressure by making an impatient government wait. He wouldn't even begin discussions until last week, the last parliamentary sitting week before the budget.Â
And only then did he name what he wanted in return – energy. The senator for South Australia has been gripped by his state's power blackouts, and the energy crisis looming for the rest of the country.Â
He sees the problem as a future-killer for the national economy: "I fear that this could be Australia's Argentina moment," he says.
Argentina moment? At the dawn of the 20th century, Australia and Argentina vied for the title of the world's richest country, measured by income per person. Their fortunes have diverged dramatically since.Â
Argentina took the course of ruinous populist politics; Australia was more successful in pursuing broadly rational policy. The result is that the World Bank ranked Australia in 2015 as the sixth richest nation on earth and Argentina as the 51st. Once closely matched, today Australian income per person is four times Argentina's.Â
"I've been contacted by businesses saying they can't survive more than a year or two because of the rise in energy costs. I visited a business whose gas bill is going to triple and they need the gas to run the business. Unless we deal with this crisis, we're going to de-industrialise the economy, shedding jobs by the tens of thousands."
The terms of the horse-trading were set. As Xenophon puts it: "I had to focus on company tax cuts. In turn, I wanted the debate to focus on the energy crisis. You can't only be concerned about the tax rate for a small-to-medium business when their energy costs are going to rise by three, four, five, up to 10 times as much as the size of any tax cut."
The government agreed to talk terms. Yet Xenophon didn't get his opening demand. He told Cormann he wanted the government to enact an emissions intensity scheme.Â
The government had weighed that idea earlier but then ruled it out, intimidated by vocal conservative Liberals and the Nationals. Tony Abbott had described it publicly as "a carbon tax by stealth". To embrace it now would be to bring on an internal insurrection.
Xenophon soon found the Prime Minister on the line. Turnbull told him that his demand was too much. It was something that would have to go to the Coalition party room. Turnbull couldn't usurp his party.Â
Xenophon's fallback? If you can't agree to specific policy measures to fix the energy crisis, you can at least agree to a process. That then became the focus of a frenetic week of negotiation. Turnbull stepped back and left it almost entirely to Cormann, getting involved only a couple of times.
Cormann and Xenophon had somewhere between 15 and 20 conversations. Half were face to face in Cormann's office. The rest were by phone. After launching into the negotiations, on Tuesday afternoon, Xenophon got the news that a dear uncle had died. The funeral would be held in Adelaide on Thursday. That was scheduled to be the Senate's last sitting day.
His death was sudden, the family much upset. Since infancy, Xenophon had been close to him. Xenophon left Canberra on Wednesday and returned on Thursday afternoon. But, apart from four hours during the funeral ceremony, he had his phone on. The negotiations with Cormann continued; the Senate sitting was extended to Friday.Â
At 4.40pm last Friday, Cormann announced the result to the Senate. The net result? The government had the numbers in the Senate to cut the company tax rate to 27.5 per cent for firms with sales up to $50 million a year. This meant the government would be able to enact the first three years' worth of its 10-year plan. Enough to take it to the next election where it could campaign for the next phase.
In return, Xenophon extracted six main undertakings to fix energy policy, plus a cash benefit for pensioners. On changing policy, the government promised to change the National Electricity Market Rules by July 1, 2018.Â
To make the new rules as sensible as possible, the government agreed to commission the Climate Change Authority and the Australian Electricity Market Commission to conduct independent modelling and to produce an independent report. Their work would be published in June and factored into the Finkel review of the electricity market, supposedly the basis for Turnbull's new energy policy.
The aim? "To improve the affordability and reliability of energy supplies," as Cormann put it.Â
Second, the government is to enact a "use it or lose it" law to force gas-supplying companies to start selling, not hoarding, gas reserves. Third, if big gas exporters can't agree voluntarily to provide sufficient gas to the local market, the government will force them to a deal.Â
Fourth, the government will enforce specific transparency mechanisms in the gas market so companies negotiating supply contracts will not be kept in the dark about the gas companies' pricing.
Fifth, the government will ask the Productivity Commission to report on gas company joint ventures to minimise any collusion.
Sixth, the government will give a $110 million low-interest loan to install a solar thermal plant in Port Augusta to improve supply and reliability of power in SA.
Finally, single pensioners will get a one-off cash payment of $75 and couples $125 to help tide them over with rising power costs till the system can be fixed. The cost to the taxpayers to be $260 million.
Both sides claim victory, horse trading delivering each a noble racing steed. In fact, they've each managed to get a pack horse that will do some useful trudging. Neither ended up a complete donkey.
Tony Abbott, famously unsuccessful in negotiating most of his government's agenda through the Senate, has given up on any possibility of making the Senate workable. He's lately proposed a constitutional referendum to make wholesale changes. That will never happen.
Xenophon and Cormann demonstrated that compromise in a democracy can produce results.
Peter Hartcher is political editor.
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