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Neither Coalition, Labor have answer to arresting long-term drift and decline

17 May 2019 No Comment


It’s depressing isn’t it?

Whatever the result of this election, Australia’s dismal decade of mediocre-to-poor government is likely to continue. Our economy is stagnating and our strategic environment is deteriorating. Yet none of what’s being offered by either side will make it significantly better and much will make it seriously worse. We have to have a government after tomorrow, and by a fair margin the Coalition one is preferable to the Labor alternative, but neither outcome will arrest what is becoming a period of long-term drift and decline.

By the end of the Howard era, Australia was in the enviable position of being a harmonious society with a stellar economy and little threat to peace due to the seeming convergence of China and America. Admittedly, much was due to factors largely outside our immediate control: an abundance of natural resources, a benign climate, relative proximity to expanding markets, and western liberal institutions. But much was due to a quarter century of good government under the late Bob Hawke and John Howard. Hawke had liberalised financial markets, freed up trade, and — paradoxically for a former union leader — reduced organised labour’s handbrake on productivity. Howard reformed the tax system, continued the privatisation of government business enterprises, improved the welfare system, and — notwithstanding some late-stage fiscal indulgence — gave Australia the Western world’s strongest budgetary position. Despite Islamist conflicts in Iraq and Afghanistan, the world thought it could rely on America’s continued ability and readiness to be a benevolent, if sometimes blundering, policeman.

Yes, Australia’s economic growth has continued in the subsequent decade-plus. But it’s been largely driven by record immigration levels that have put downward pressure on wages and upward pressure on house prices, clogged roads and public transport, and, at least in parts of Melbourne, severely strained the social fabric. Although more trade deals have been done and there’s been some tinkering with tax rates, there’s been no serious economic reform. Well-managed, the National Disability Insurance Scheme could be an important social advance but it could also become another scarcely-controlled entitlement program in a country where too many people, to echo Robert Menzies, are striving to get themselves off the list of contributors and on to the list of beneficiaries. Indeed, much of the past decade’s political contest has been a sometimes-almost-hysterical argument over climate change with carbon dioxide taxes imposed, then removed, while urban and regional Australia divides over the moral viability of coal — our biggest export. In the face of China’s bullying and militarisation, and America’s strategic retreat, the government claims it’s embarked on the “largest peacetime naval build-up in our history”; but it’s also the slowest, with the last of our new submarines due to come into service fully 40 years from now.

In this election, both sides agree that we need even more renewable energy, even though the present expansion has driven prices up and reliability down and threatened the future of heavy industry. The only argument is over the speed at which we should “decarbonise” the economy; it’s steadily versus rapidly, even though previous episodes of climate change (such as the medieval warm period and the mini ice age) had nothing to do with human CO2 emissions. Both sides agree that more money is the key to better schools and universities (despite falling international academic rankings coinciding with higher spending) and to better healthcare. Again, the choice is between much more spending and much, much more spending — even though the government’s vaunted return to surplus is based on a frugality at odds with its endless election commitments, and on future economic and wages growth that’s unlikely to be realised.

In this election there’s been no discussion of nuclear energy (even though it’s Australia’s only feasible way to emissions-free base-load power), no discussion of optimum immigration levels (indeed there’s been something of an auction over which side can bring in the greatest number of elderly parents), no discussion of defence or foreign policy (despite the US and Iran now rattling sabres at each other over the abrogation of the nukes deal), no discussion of industrial relations reform (other than abuse of Bill Shorten for his union background), no discussion of big new infrastructure projects (because that might upset the anti-dam lobby), and no discussion of productivity-enhancing tax reform (other than accusations over who is and who isn’t beholden to the “big end of town”).

The only real argument is over tax levels: the additional tax Labor will impose on most self-funded retirees by ending franking credits, and the impact on home values and rents of Labor’s capital gains tax increases and negative gearing restrictions, with a vague background threat of death taxes. There’s no doubt that Labor is deliberately targeting older voters and aspirational voters for habitually siding with the Coalition and there’s no doubt that this will depress economic growth-per-capita even further. But it’s an argument about not making things worse rather than about improving them. The sole real reform that the Coalition is offering is a slightly flatter tax system — but only in five years’ time if the government lasts.

PM Scott Morrison will deservedly become a Liberal hero if the government pulls off a come-from-behind win. But it will be a triumph of savvy politics rather than sound policy. What is the point of a Liberal government these days other than to keep Labor out? And if Morrison has to negotiate his way back to office with a quasi-green crossbench, it would be a Labor-lite government anyway.

Ross Fitzgerald AM is Emeritus Professor of History & Politics at Griffith University.

The Australian, Friday May 10, 2019, online

Dear Editor
From Kevin Rudd’s 2007 through to Scott Morrison’s 2019 government the common fact about our Federal governments is that they have been propelled by globalization. Our political leaders have limited their contribution to claiming credit when the global economy delivered for Australia and blaming globalization when it did not. Little wonder, as Ross Fitzgerald (Neither Coalition, Labor have answer to arresting long-term drift and decline. The Australian, Friday May 17, 2019, online) makes clear, that these political pygmies have failed to capture the respect of voters or of their party members who have all been let down by the seemingly never-ending contest between the Tweedle Dums and Tweedle Dees.

Dr Peter Smith
Lake Illawarra, NSW 2528

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