Economic policymaking is in crisis among conservatives at a moment in Australian politics when we need a coherent narrative about liberal economics in the face of resurgent populism.
And while Labor has — despite an almost reflexive and damaging pandering to economic nationalism and neo-protectionism — got its policy house in order on infrastructure, fiscal policy and reducing inequality, the right are fighting among themselves on key issues:
- The entire future of the peak business lobbying body, the Business Council of Australia, is being debated by senior Liberals and business figures, and there is an open dispute between the chair of the BCA and one of its highest-profile directors about the fundamental role of the lobbying body;
- The fiercest opposition to the government’s high-quality and entirely appropriate superannuation taxation changes is coming from within its own ranks, and Treasurer Scott Morrison, who to his credit has been fighting the good fight on the issue, has been unable to work out a deal to satisfy internal opponents, especially with the dispute fueled by right-wing enthusiasm for undermining both Morrison himself and the Prime Minister; and
- Morrison’s pandering to economic nationalism in his decision to ban Chinese firms from bidding for electricity assets has wrecked the NSW Liberal government’s plans to use privatisation to leverage further infrastructure investment in that state, while signalling a new era of xenophobic head-under-the-doona policymaking about foreign investment.
Throw in that Morrison is attacking his Coalition partner’s Western Australian branch for proposing higher taxes on mining companies and you’d be forgiven for thinking the right is in total disarray on economic policy.
This morning’s speech from the Treasurer confirmed that the government is bereft of ideas beyond its current awkward mix of defence neo-protectionism, free trade deals of minimal benefit and trickle-down economics based on tax cuts for big business. Like the Prime Minister’s CEDA speech last week, Morrison ignored infrastructure, mentioning it just once in passing like his boss did, leaving the government as the sole absentee from a political and economic consensus about the need to lift infrastructure investment. And like Turnbull’s speech, climate change was absent, as well.
It was, however, big on the kind of “budget emergency” rhetoric that we used to hear from Tony Abbott and Joe Hockey in the early days of their government — although the phrase itself was of course absent. Morrison devoted considerable time to conjuring debt scenarios and warning of debt exceeding $1 trillion, the kind of figure likely to scare Telegraph readers. “The period of this term could well prove to be the tipping point on the trajectory of debt our children and grandchildren will be saddled with,” Morrison declared.
On that he is correct — but how long this sort of rhetoric will last from the Treasurer isn’t clear. Hockey and Abbott went from warning that the fiscal bushfire was about consume us to expressing a certain contentment with debt reaching 60% of GDP. It was Abbott and Hockey who, as Morrison himself reminded us after he took over as Treasurer, had allowed spending to reach 26.2% of GDP, higher than at any level in the Labor years. Will Morrison, two years from now, be declaring himself satisfied with current debt levels as well? “We have consistently rejected Labor’s tax and spend approach,” Morrison insisted in his speech, which is a complete lie — spending is still well above the level of every Labor year but one, the 2009 GFC stimulus year, and taxation is well above any level reached under Labor. The Liberal Party is currently the party of tax-and-spend in Australia.
This lie matters, because it’s not just about crass partisanship or hypocrisy, of which both sides are constantly guilty, but because it reflects a continuing incoherence from the Liberals about what their economic agenda actually is. And that incoherence is at a time when we need the forces supporting the liberal economic consensus of the last 30 years (viz, the Liberal Party and most of the Labor Party) to be explaining its benefits to voters and the risks of turning our backs on it.
Labor, at least, is offering a coherent economic narrative centred on health, education, infrastructure, long-term fiscal repair, carbon pricing and renewables investment and addressing inequality. What is the government’s agenda? It is opposed to tax-and-spend, but it taxes and spends at a higher rate than Labor. It is “open for business” but opposes foreign investment. It says infrastructure investment is crucial, but that investment has collapsed. It says we must make tough fiscal decisions but offers a huge tax cut to the world’s biggest companies. It preaches free trade but is spending billions propping up the local defence manufacturing sector for political purposes. It says we need a more sustainable retirement incomes system but then has a pitched internal battle over relatively minor adjustments affecting high-income earners.
No wonder economic populists is resurgent. No matter where they come from on the political spectrum — from the racist far right like One Nation or the political centre like NXT — they offer a simpler, more coherent narrative of Australia-first economic interventionism.
Saying one thing and doing another is never a good look for a government, but at a time when the core economic consensus of the last three decades is under serious threat, it means handing the opponents of the economic agenda that has delivered such great outcomes to Australia since the 1980s an easy win.
“We have consistently rejected Labor’s tax and spend approach,”
Well, true in parts, in that they spend without the fortitude to tax. The tax as a % of GDP figure is really a non-statistic though, largely irrelevant. If it is spent well, tax as a % of GDP can be pretty much anything between 20-40% without having much impact on the real economy.
However equality does have a huge impact, and studies show it. People really do stop thinking that it is worth working hard if they see that other buggers get away with paying no or little tax. Big corporates, multi-national tax dodging, negative gearing and capital gains tax incentive eat at the very heart of our economy, and they all come back to that one word, fairness.
An economy built on speculation and finance fiddling is a dead place.
All we get from Morrison and Cormann is aggressive bluster … no clear vision … no clear and coherent explanation … they are totally focussed on trying to score political points …
Well summed up…..it’s bloody depressing….
Yes they are terrible blowhards with nary an original thought between them. Only consolation I can see is that at least the msm are making it absolutely clear that neither is up to the job he holds. The msm held back for too long on the lack of merit in Hockey’s performance.
What we don’t need as a narrative is the simplistic resort to an economical liberal / protectionist dichotomy. There are some cases where effective non-liberal regulation and restrictions might actually be beneficial for the economy, but this straying from the path of enlightenment is easy to criticise if you have a simplistic view that liberalisation and ‘leave it to the market’ is always the best policy. Dough-eyed economic liberals seem to assume, for example, that all foreign investment is always beneficial. Even the economically liberal RBA governor makes an important distinction between foreign investment that builds new assets and enhances productivity and that which simply changes ownership and makes the possibility of future blowouts in the current account deficit likely. A cursory understanding of the balance sheet approach to economics shows that in certain cases foreign investment simply pushes up consumption and unproductive investment, leading to high levels of debt that will need to be serviced and eventually paid back. The idea that there are other priorities – including security – is pushed aside in this purist economic liberal narrative.
The real problem with economic debate in this country is a resort to simplistic name calling and a penchant for ideological purity. What the author should be highlighting is the lack of any analysis or concern from Morrison and the Turnbull government about the unsustainable growth of private debt and its inflation of the housing market.
Did you read this over before posting, Tom? You finish with the lament that the, “real problem with economic debate in this country is a resort to simplistic name calling…” What, like “dough-eyed [sic] economic liberals”, you mean?!
There are two problems here, in my view. One is that you are not at all unusual: the calls for bipartisanship, open debate, civility in discourse and so on all come for people (cf. Abbott, T) who seek it in others but don’t perceive that what they do themselves is often just the opposite. That means they have no credibility, their babbling is ignored (an equilibrium response) and nothing changes.
The other is that the real problem with economic debate in this country is that people are remarkably intransigent on matters of economics and are incapable of being persuaded to alternative views. Exhibit A here is the fact that most Australians still believe the Coalition is the party of economic responsibility and restraint, despite continuous evidence to the contrary. Hence Morrison’s bluster. The data can contradict him all they want; so long as he and Cormann stay on script, the ordinary punter will continue to buy what they’re selling, I fear.
Doe-eyed, surely?
Good call.
Tom – I get the impression that you’ve not read much of Crikey’s resident Bambi eyed neo-liberal, NuRite drivel in the past. He is beyond reasoning even/despite providing voluminous evidence that his credo is krap.
Hear hear
Precisely, the economic discorse is dictated by a bunch of finance graduates who have no real understanding of economic theory or public policy and spend theirs lives gambling on stock and money markets
And the Liberals turn every argument to their only purpose – enriching their masters at the expense of the rest of us
So what became of the much vaunted “economic plan” that was incessantly promoted during the last election? It was pretty obvious that there was no such thing and this now seems to be confirmed. The sooner the government gets its act together the better….all we seem to have is a never ending series of political machinations that are both inconsistent and disconnected from the real world. This government was and still is a shambles…..the fact of which gives me no pleasure to observe….for all our sakes, please get your act together!!!
Agree with Tom Conley
In The Death of Neoliberalism and the Crisis in Western Politics by Martin Jacques in the Guardian on 21 August writes:
‘It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record. The most dynamic period of postwar western growth was that between the end of the war and the early 70s, the era of welfare capitalism and Keynesianism, when the growth rate was double that of the neoliberal period from 1980 to the present.
But by far the most disastrous feature of the neoliberal period has been the huge growth in inequality. ‘
So why should we slavishly be following a liberal/neoliberal economic policy?
In answer to your final question…why indeed!!