The adventures of Bridget McKenzie have left Scott Morrison with a ghastly choice

Sarah Martin Chief political correspondent
Photograph: Mike Bowers/The Guardian

The matter of Bridget McKenzie’s survival has become a wicked political problem for the Morrison government.

After digging in behind the embattled Nationals deputy leader for more than a week over her abominable handling of a $100m sports slush fund, Scott Morrison on Thursday gave himself some political wriggle room.

While continuing to defend the government’s handling of the community sport infrastructure program, Morrison zeroed in on the “very, very different” matter of McKenzie’s membership of a shooting club that received a $36,000 grant under the scheme.

This potential conflict of interest is being examined by the Department of Prime Minister and Cabinet to see if McKenzie was in breach of ministerial standards, along with the scathing findings of the auditor general’s report.

Morrison said the report, being prepared by his former chief of staff, departmental secretary Phil Gaetjens, would guide his next move. He pledged to “take whatever action is necessary”.

Related: Sports grants: Michael McCormack stands by Bridget McKenzie, saying she has done ‘outstanding job’

This was a significant shift in language from Morrison, who had previously insisted that no rules were broken, and said there was no reason for McKenzie’s job to be in doubt.

On a simple reading of the ministerial standards, it is difficult to see how McKenzie is not in breach.

One of the first obligations under the code is to “observe fairness in making official decisions” in a way that considers “the merits of the matter”, while also acting with “integrity”.

Disclosures of personal interests are also required, meaning there are multiple clauses that could trip McKenzie up and allow Morrison to justify her removal from cabinet while still defending the (indefensible) grants program.

But despite the public interest argument and overwhelming evidence that McKenzie must go, the view among Coalition MPs about McKenzie’s fate remains mixed.

Sadly, the argument for her removal is not based on the substance of the auditor general’s report, which found she prioritised funding in Coalition marginal and target seats while ignoring a merit-based assessment process undertaken by Sport Australia.

Simply put, the audit found that hundreds of needy clubs that would have increased participation in community sport were overlooked for those that were less deserving because of rank political considerations.

No, that is not what bothers the government.

The only argument of concern is one of “distraction” for Morrison as he seeks to begin the new parliamentary year with a clean slate.

After a rocky summer that saw him under fire for a trip to Hawaii and criticised for his response to the bushfire crisis, Morrison has spent most of January in purgatory, anxious to redeem himself while opinion polls show his approval ratings in freefall.

The PM needed a ministerial scandal like a hole in the head.

But if the calculation for McKenzie to stay in the ministry is political, not ethical, then removing her presents a fresh set of problems for Morrison and the Coalition.

McKenzie could step down to end the distraction – but that is not her style.

For her to be removed from the ministry, the etiquette of the Coalition agreement between the Nationals and the Liberals requires the decision to be that of the Nationals leader, Michael McCormack.

For both Morrison and McCormack, the distraction that will come from keeping her in cabinet could be less damaging than that which might ensue if she is sacked.

Make no mistake, the Nationals party room has been a tinderbox of egos looking for a spark for some time now.

It was only about three months ago that McKenzie faced the prospect of a spill motion over her handling of the dairy code of conduct, with Queenslander Llew O’Brien leading the charge.

Former leader Barnaby Joyce and Victorian Darren Chester fancy themselves back in cabinet, while Queenslander David Littleproud would also be likely to put up his hand up for deputy if McKenzie’s position became vacant.

Related: We missed out on a sports grant for our club. Now we know how unethical the process has been | Martin Smith

It would be hard for McCormack to prevent the fallout of McKenzie’s removal that could lead to a complete partyroom implosion.

There is widespread dissatisfaction with the performance of McCormack, and there are some Nats who might see the leadership turmoil as an opportunity to knock off the uninspiring former newspaper editor from Wagga Wagga at the same time.

A full-blown Nationals partyroom ding-dong and the potential return of Joyce to cabinet would hardly give Morrison clear air.He would then also be forced into a reshuffle that would likely provoke agitation for Angus Taylor’s demotion, and risk another bout of Liberal instability.

The other risk for Morrison is the threat of McKenzie dumping him (and potentially other Liberal colleagues) deeper into the grants scandal, given her office knows the full extent of the PM’s involvement in the program.

The outspoken Victorian is no shrinking violet and any threat to remove her could be met with retribution.

Morrison will have a keen eye on the political risks either way and, depending on the findings of the Gaetjens report, he may decide that sticking with McKenzie is his least worst option. McKenzie will then have to hope her Nationals colleagues stick with her against the odds.

Either way, Morrison is not going to get the fresh start he was hoping for as the 2020 parliamentary year begins.