Social Democracy in Focus, Issue 3

February 20, 2015


20 February 2015

We began this Per Capita series to track the evolution of a new social democratic government in Victoria. Since that time, a new Labor government has, quite unexpectedly, come to power in Queensland. Accordingly, the commentary we provide here will have a broader focus on social democratic government in Australian states and territories.

East West Link

During February the saga of the East-West Link road proposal has grown more heated and turned back into a race against time.

Throughout the Coalition’s term of government, 2010-14, the proposed road project was racing permanently against a political deadline, with the government trying to turn it into a polarising symbol of the choice to be made at the polling booth

Fortunately for Labor, it made the right strategic call on whether to back the project. Leaving open the option to build the road would have cost it urban electorates that it cannot afford to lose.  The post-election release of the business case showed that, as far as value for public money goes, the road was a dog.

Now a new race against time has emerged.  Behind the scenes, the Andrews government is exploring the best negotiated route out of the contract.  This may take some time, but Andrews has signaled publicly that Labor is prepared to legislate if necessary to make sure that the ‘side letter’ signed by former Liberal Treasurer Michael O’Brien before the election promising compensation to the road consortium of up to $1.2 billion, is invalid.

Last weekend, Labor’s refusal to release the contract to Parliament, and speculation over the negotiations threatened to turn the story into one of obfuscation, delay and political tit for tat.

This week, Andrews has clearly moved to change the game.  While negotiations over the road contract continue, with some speculation that it may be exited for as little as $220m, the government has put the spotlight on urban rail.

On Monday, Andrews announced that the government will pursue the construction of the Metro Rail tunnel project, its alternate project to ease congestion pressure on Melbourne. While the full funding of the project remains uncertain, Andrews committed to begin construction in 2018, before the next state election.

On Wednesday, the government confirmed that Flinders Street station, an integral part of the new Metro rail proposal, will get a $100m refurbishment, keeping the focus on the renewal of urban rail infrastructure.

These decisions illustrate Andrews’ big switch: rather than allowing the focus on East West and whether it was value for money to drag on, he has placed a better-functioning urban rail network at the centre of Labor’s priorities for Melbourne.  It is not just a week of news management, but the beginning of a new race: to ensure that Victoria’s infrastructure planning can meet the new government’s deadlines, and to frame the state’s priorities in a way that both the public, and the Commonwealth government, eventually come to support.

How the race plays out is wide open – and will depend as much on whether Andrews’ new machinery of government and its focus on infrastructure planning work properly, as its capacity to withstand the shifting sands of federal politics. Such a pledge, not delivered, would provide an easy target for public cynicism.  But by thinking long term and speaking clearly and boldly, the government has signaled its strategic intent, and created space for a substantive, ongoing debate about what transport infrastructure will best meet Melbourne’s future needs.

Andrews needs to get creative in affordable housing policy

Say “housing” to most Victorians and the first place their minds go to is property prices. Fair enough, given that Melbourne’s median house price in the final quarter of 2014 was $669,000 according to the REIV. In the same quarter the median house price in regional Victoria was less daunting, at $334,000, but this masks the fact that regional prices are growing at a rapid rate.

The second thing people think of is the proliferation of inner-city apartments, many of which seem to be barely larger than the dimensions of a child’s cubby house.

This focus is driven by the media, which gives little space to the alarming state of Victoria’s social and public housing sector and the plight of the state’s most vulnerable citizens. Figures from the Australian Institute for Health and Welfare show a 30% rise in demand for homelessness services in Victoria over 2014. Only 3.4% of Victoria’s housing stock is social housing against a national average of around 5%.

Lack of investment in new affordable housing is one reason for the state’s poor performance in this area. According to the Andrews government, there has been no new investment in the purchase or construction of new public or social housing since the Coalition came to office.

The new government was elected on a platform that promises a whole of government affordable housing strategy to expand the supply, security and quality of low-cost and private housing.

Andrews has called on the federal government to renew its funding for homelessness services, due to expire in mid 2015. No such commitment has been forthcoming. Minister Kevin Andrews has noted that the housing is primarily the responsibility of the states. So there’s little cause for hope there.

The state government therefore needs to get creative if it is to deliver on its election commitment. It can do this by following-through on another of its platform promises: investigating innovative investment models to stimulate the development of affordable housing. Housing bonds are one way to achieve this. Another way is direct government investment through, for example, the provision of land together with co-investment from other parties.

An important first step the government can take is to get various parties investors, developers, service delivery agencies around the table to consider what models of social investment in affordable housing can work.

Lessons from Queensland

The prospects for fairness in Australia took a step forward this week with the swearing in of Annastacia Palaszczuk and her cabinet as the new government of Queensland.  The health and education services on which ordinary Queenslanders rely every day will be protected, and the public assets which provide income to fund these services will not be sold off.

This outcome is remarkable on a number of fronts. It is the biggest two-party swing against an incumbent Queensland government, a first-term government no less. It marks the first time any Commonwealth or state cabinet has contained a majority of women.  It’s an extraordinary reversal of the Newman landslide in 2012.

But what can this development tell us about the broader evolution of the Australian political landscape? There are two main lessons to be drawn.

The first is about a polarising style of government on the rise in recent years being comprehensively rejected by voters.  This style draws much of its political capital from consistent, direct attacks on its political opponents who are presumed to be both wreckers and incompetents.  The policy agenda under such governments is dictated to the electorate and interest groups, and those who disagree are told they simply don’t understand the policy problem at hand.  In arguing its case, the government asserts support from a silent majority of voters who are nowhere to be seen or heard, certainly not in the opinion polls.  There is no room for negotiation or attempt to build consensus; it’s my way or the highway.  This was the style of the Newman government, and remains the style of the Abbott government.  The voters have passed judgment on this style in Queensland and the implications for Canberra are clear as day.

The second lesson concerns the social contract: what Australians expect from a capable state and what costs they are willing to bear in pursuit of austerity.  Through the 1990s and 2000s, Australians had accepted an agenda of privatisation and outsourcing which, although reducing service delivery, had enabled regular income tax cuts. Now the electorate appears to have decided that the contraction of public services has run its course; they’re no longer willing to accept cuts in spending, certainly without the offsetting sweetener of tax cuts which are not possible in the current climate.

This was clear in both the response to the 2014 Federal Budget and the Newman privatisation agenda.  The austerity argument as currently constituted just doesn’t wash.  This suggests the need for an informed debate about how to rebuild public finances while maintaining public services.  Self-evidently, tax levels must be part of that debate but it’s not yet clear that either side of politics is willing to go there.