Beware conservative complacency

December 11, 2014

By David Hetherington

Australians may come to recall 2014 as the year their long run of good fortune finally ended. More than two decades of unbroken economic expansion has driven an extraordinary rise in living standards, but the combination of good policy and good luck that has fuelled this is finally fading away. Moreover, the behaviour of some political and business leaders suggests they believe these good times are a given, and that the country no longer need to make difficult but necessary investments in Australia’s long-term prosperity.

Nowhere is this more evident than in the federal government. It is no exaggeration to say that Tony Abbott’s conservative government, and the parliament, are among the most dysfunctional in living memory. In the seven months before its first budget, the government managed to pass just seven bills, despite a comfortable majority in the lower house. By contrast, Julia Gillard’s much-maligned government passed 127 bills in the equivalent period – despite being in a minority position in the House of Representatives. Since the budget in May, things have only got worse with the bulk of the government’s agenda stalled in parliament.

The showpiece announcements of the budget, private co-payments in the public health system and the deregulation of university fees, have met with widespread opposition among the electorate. The budget deficit has risen by a further A$18bn in the first year alone, when a promise to fix the national finances was a cornerstone of Abbott’s election victory. The result is that the government is haemorrhaging support in the opinion polls; Abbott is the least popular first-term prime minister in two generations.

In its defence, the government argues that it has achieved other signature election commitments, including scrapping the carbon and mining taxes and stopping asylum-seeker boat arrivals through ever more punitive policies. While this is all true, it is far from clear these moves are in Australia’s long-term interest.

Where does the dysfunction spring from? Ultimately, it is the product of the distorted worldview of the government and its supporters. This holds that continuing Australian prosperity is somehow a given, which frees up government to pursue ideological adventures without the need to undertake difficult ongoing reform.

The Abbott government claims it is in favour of reform, but it frames this in the context of a manufactured “budget emergency”. It argues that Australia’s economic challenges stem from Labor’s borrowing during the Great Recession, and that once the “emergency” is addressed, Australia’s prosperity will once again be secure, allowing it to deliver further tax cuts. No credible economist agrees with this analysis. Australia’s debt and deficit are tiny by world standards, and its long-term challenges are defined by the need to invest in infrastructure, skills and R&D. Tax cuts are a third-order issue.

The government’s outlook has led to a distortion of priorities. Pet ideological projects have loomed large: it expended enormous capital on its repeal of hate speech laws, in support of the so-called “right to be a bigot”, before finally dropping it in the face of overwhelming popular resistance.
Abbott’s government is out-of-step with the rest of the globe. When the international spotlight was on Australia during the Brisbane G20 meeting, with world leaders focused on climate change and inclusive growth, the prime minister actively worked to sideline these issues, instead using his welcome speech to complain that the public would not accept his health co-payment plan.

In a revealing demonstration of its view on inequality, the government has divided the electorate into “lifters” (those who are in work paying taxes) and “leaners” (effectively everyone else). Joe Hockey, the treasurer, reinforced this stance with his argument that fuel taxes are progressive because, “the poorest people either don’t have cars or actually don’t drive very far.”

The big worry for Australia is that the government’s complacency is badly misplaced. The good times look to be fading: unemployment has been creeping upwards; export commodity prices have plummeted; and this week’s national accounts showed that nominal national income is falling. We cannot afford to keep blaming these ills on Labor’s borrowing and the laziness of “leaners”.

The only cause for optimism is that, after many years of easy prosperity, the public seems to recognise that conservative complacency is not the future. Last month, voters in the state of Victoria elected Australia’s first new progressive government since 2007 after a powerful grassroots campaign by disaffected teachers and ambulance drivers.

Labor’s federal leader, Bill Shorten, ends the year more popular than Abbott despite no meaningful policy development in his first year of opposition. That must be his task for 2015. Australia desperately needs it