It’s all Kevin Rudd’s fault. Here we are, nearly two years out of the Howard years and happily consigning them to well-deserved oblivion.
And then Rudd has to mention the war; and of course John Howard and Peter Costello lurch out of the political cemetery to boast about the size and quality of their tombstones and pretend they are not really dead after all, and Malcolm Turnbull feels that he has to join in and defend the two people in the world he most wants to forget. Such is the level of discussion in contemporary Australia.
The trigger, of course, was Paul Kelly’s latest blockbuster, a weighty, indeed ponderous, attempt to spin the 24 years of government by Bob Hawke, Paul Keating and John Howard with (in alphabetical order) Peter Costello into one seamless thread of economic reform.
Launching the book, Rudd predictably dismissed the Howard-Costello period as a mere hiatus; he and only he was the true bearer of the flame kindled in 1983. This admittedly partisan view was derided as mean-spirited and mendacious, but it did invite a critical appraisal of Howard’s legacy and what, if anything it has left us. And on close examination it is not a legacy which can be dismissed lightly. It can, however, be dismissed heavily, so here goes.
The proudest boast of Howard and Costello was that they handed over a robust and vibrant economy, free of debt and sizzling with growth. It was indeed free of government debt; on the other hand private debt, vigorously encouraged by government policy, was through the roof and still climbing. And certainly Australia’s economy was growing and had been for many years.
The problem was that the growth had been squandered on election bribes to middle class voters. Vast quantities of tax had been collected only to be handed back, although the hand outs disproportionately favoured the top end of town. Very little was invested in infrastructure and still less set aside for the inevitable downturn – thus Rudd’s need to borrow large amounts, which is now the target of coalition outrage.
Indeed, so extreme had been Howard’s profligacy that if all his 2007 election promises had been honoured, the budget would have gone into structural deficit even if the boom had continued. Not much of a bequest after all.
Howard also claims credit for workplace reform and indeed the legislation introduced early in his term built on the work of Keating. And it would have gone much further: we would have had WorkChoices in 1998 if the Democrats had not held the balance in the senate. And if we had there’s every chance we would have been rid of the Howard gang at the 1998 election, in which they were rejected by a majority of voters anyway — but not, alas, in the crucial seats. And of course WorkChoices would have been dismantled, as it has been. No monument there.
The Democrats also played a part in watering down Howard’s big one: the GST. The main — perhaps the only — point about a GST is its efficiency, which relies on its universality. As soon as you remove this, as the Democrats did, you are left with just another messy indirect tax. And like all flat rate taxes the GST is regressive: it hurts the poor more than the rich, and so effectively redistributes income upwards, just like Howard’s other so-called reforms.
Even economists admit this is unfair, but they justify it on the grounds of efficiency — it is easy to collect and hard to avoid. Rudd, incidentally, spoke passionately against the GST and has ruled out putting up the rate. He would undoubtedly like to repeal it altogether, but it’s too late to unscramble the omelet. We’re stuck with it, but we don’t have to like it. And in the end it remains a political cop out: we accept an unjust and inequitable tax because raising the same amount from a fair one is just too much like hard work. No wonder Costello was so keen.
He is also very proud of another cop out: handing the power to set interest rates over to the Reserve Bank. Taking his hands off the steering wheel is a matter for self-congratulation. Howard inveighs against a Bill of Rights because it would hand over decisions on human rights to unelected lawyers and judges, but he thinks handing over decisions crucial to the economy and living standards to unelected bankers, financiers and business tycoons is courageous and forward looking policy. Go figure.
And that’s about it. It is true enough that the economy was basically sound, with the big four banks providing a solid foundation: with the added protection of a government guarantee they were never going to suffer the fate of many of their overseas counterparts. Howard and Costello can take some credit for the most un-liberal regulatory regime by which the banks are governed, a regime on which Rudd will cheerfully build, but it is hardly what they themselves would characterise as economic reform. That consisted, in their view, entirely of deregulation, of giving the market more freedom, not less. And here, even by their own standards, they did very little.
Rudd’s principal charge against them is that they did almost nothing to boost productivity against the inevitable time when the mining boom came to an end. Education, research and innovation were all allowed to run down, almost to the point of stagnation. This is where the bonanza should have gone and this will be the priority in the years ahead.
In other words, economic reform will certainly continue, but not as an end in itself: it will henceforth be a means towards social reform. And it is by this criterion that Rudd’s own legacy will be judged.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.