Malcolm Turnbull has but a year to inject confidence and strength into the economy or else he will be swept from office and condemned to history as a wrecker of a first term Liberal government.
The prime minister, and his likely new treasurer, Scott Morrison, take over the economic levers at a time when economic growth is sluggish, unemployment is high, real wages are falling and consumer and business confidence are weak. Add to that a still-hefty budget deficit and escalating government debt and the picture of the economic challenge for Turnbull and his new team is stark. This is especially the case when the next election is just a year away where the economy will almost certainly be the dominant issue for voters.
One major shortcoming of Tony Abbott and his treasurer Joe Hockey was their failure to articulate the challenges before the Australian economy, instead continually reverting to slogans about “jobs and growth” and “stopping the boats”. This made it impossible for them to outline a framework of essential economic reform to deal with those challenges and to set the economy on a path to growth and lower unemployment. The fact that the Abbott reform agenda was like Old Mother Hubbard’s cupboard – bare – compounded their dismal failure. For the lost two years of economic management, Abbott and Hockey will stand condemned.
For Turnbull and his team, a revamp of policy is not only essential for the economy, it is vital for their electoral prospects, given the likely sniping they will face from the rightwing, particularly on social, environmental and international policy issues.
Turnbull has to acknowledge the fact that government spending is at levels only ever before seen in Australia during times of recession, which means some careful pruning of spending is needed. Either that, or Turnbull must come clean with the electorate that tax hikes â€“ money from their pockets – is needed if the Coalition’s policy agenda is to be achieved within the framework of a return to budget surplus and a stabilisation of government debt.
For Labor, the change in the leadership of the government will focus its policy agenda ahead of the election. While it has boldly outlined a series of policy proposals on superannuation, the environment and broader social issues, it too needs to be alert to the cynicism of the electorate especially in a climate where national income growth is likely to remain subdued in the near term and where real household income growth is falling.
One can only hope that the demise of arguably the most economically damaging prime minister and treasurer in living memory will sharpen the overall policy debate from all sides of politics and lead to better policy and therefore economic outcomes over the years ahead.
Perhaps there can be a discussion of industry policy, industrial relations, tax, housing affordability, aged care, retirements incomes – to name a few – without there being some glib Abbottesque comeback.
Australia is in its 25thÂ year without a recession. It is still a rich and vibrant economy, even though it has significantly underperformed its peers in the last two years. To get back to the pack, let alone over take it and become world-best in the economic space as it was previously, some changes are needed soon and, depending on global economic conditions, perhaps urgently.
It is to be hoped the new Turnbull team can deliver better economic policy and therefore outcomes in the near term because 2% GDP growth, 15 straight months with unemployment at 6% and higher, falling real wages and budget ineptitude are not acceptable.
The Coalition’s current policies more or less guarantee low performance for the next few years. This is a critical reason why Abbott and Hockey were so disliked and why Turnbull has a chance to change things. But he needs to act quickly. The next election is just a year away and unless the economy improves he will be swept away by an electorate facing genuine financial stresses for the first time in several decades.