Who is now the party of small government in Australia? Where do the remaining neoliberals in politics go for a political home? There’s been a sea change in Australian politics, one thoroughly unconducive to advocates of the core tenets of economic orthodoxy over recent decades — fiscal constraint, small government, the automatic belief that private is superior to public.
Maybe they can join the ALP. The evidence has long shown that Labor is the party of smaller taxation in Australia. It is the Liberals who are the big taxers, and now even bigger spenders. Despite the absence of a major economic crisis, with unemployment at mid-5% and strong growth forecast, Scott Morrison and Josh Frydenberg intend to spend 27% of GDP next year, and then above 26% of GDP in the following two years.
Kevin Rudd and Wayne Swan never got above 26% even during the darkest hour of the financial crisis. And Wayne Swan’s efforts to get spending back under control in 2012 will now remain the high point of disciplined post-crisis budgeting for a generation.
Spending now looks to be permanently well above a quarter of GDP or more under the Coalition, a level unthinkable during the Howard years, when spending average just above 24%, or even in the Labor years, when it average under 25%.
And on tax, even during a recession, the Coalition still retains its bragging rights as the party of high taxation — despite Frydenberg’s reflexive assertion that taxes will always be lower under the Coalition.
Despite the pandemic, tax collection by Morrison and Frydenberg will only briefly and marginally fall below 21% of GDP. Under Labor, the tax take spent two years at 20% and the following year at 20.8%, while the Coalition and the media lambasted their inability to return to surplus.
The Coalition: big taxing, very big spending, and huge deficits. Net debt is deliberately being pushed over $1 trillion. Forget the hypocrisy of all those years of debt ‘n’ deficits rhetoric — how far has this fundamental change in the Coalition’s approach to fiscal policy been debated within the parties, and especially within the Liberal Party? Where are the hardline neoliberal backbenchers — the hairy-chested advocates of small government, low taxes and individual freedom — to object?
It’s possible to argue that it’s a political expedient, a cash surge designed to recover the government’s standing in the face of a bungled vaccine rollout and a crass mishandling of gender issues, with one eye on the coming election. And this government has a history of announcing big spending, failing to deliver it, and then boasting of its fiscal discipline in bringing spending in under forecasts, while re-promising the same funding again. And spending for this current financial year remains tight compared to what was forecast last year, and only really ramps up from next year.
So is it a half-baked conversion to big government? The problem with that argument is that large slabs of the new spending are permanent, recurrent spending: billions of dollars a year extra going into funding residential and home care for the aged care sector, and mandating set care requirements for residential care that will inevitably push funding requirements up in the future.
Moreover, the Morrison government now owns aged care scandals: it has promised a generational reform in the sector, and goes a solid part of the way to actually delivering that, even if it could have gone much further. Future scandals will only put further pressure on the Coalition to further increase funding
Even if the intention is that this will be a medium-term embrace of bigger government that is permanently above a quarter of the economy, future treasurers may find it very hard to return to the days of Wayne Swan, let alone Peter Costello.
So — where does a neoliberal go now?
There is a parallel here in the USA, where successive Republican administrations have built up enormous deficits (Reagan, Bush 2, now Trump) and left Democratic successors to mop up the red ink. In part, this has been a deliberate strategy to hamstring Democrat administrations. Republicans thus spend up big on their corporate friends, especially in the arms industry, and cut taxes, which the Republican base likes. If they left surpluses for Democrats to spend, the Dems would have the wherewithal to implement progressive policies (if they were so inclined), or as Republicans see it, squander the money on the less well-off, especially from minority groups Republicans see as undeserving. And so, it fell to Clinton to cut welfare harder than Reagan did, and Obama took over the same gang of neo-liberal economic advisers that let deregulation rip under Clinton.
How is everything else going in the US like inflation for example.
The rich are still getting richer, the poor are getting poorer, and the middle class are still treading water…
Good points, neo-liberalism is a political strategy as well as an ideology, no matter that funded handmaidens like the IPA try and wrap it in faux academic robes. One part of the strategy is exactly to create (or destroy) structures and institutions in order to hamper any future progressive government.
It should also be noted that, while neo-liberals overtly object to budget deficits and debt per sae, what they really object to is redistributive budgets, unless the redistribution is about improving on how the market distributes our commonly created wealth to business.
Over 20 years of privatisation and contracting out makes even spending on social goods more palatable, since business gets to make a substantial clip of the ticket on the way through.
Neo-libs squeal like pigs when somebody else makes a ‘socialist’ redistributive gain from, or is catered to, by govt.; when they are in fact using the state whenever possible….
Yes, this is the real ‘blow up the joint’ movement, been going for a long time now.
who cares where the neo-liberals go? – as long as the bastards don’t come back
I am surprised that experienced journalists have been so easily conned by this government to believe that what they have set out to do up to ten years in the future will actually occur. Morrison is a con man and always has been. Once this mob are re-elected see how quickly these visionary projects disappear. Leopards don’t change their spots.
Maybe my mind is bitter and twisted as the War with China has now been pushed off the front page. I checked the three substantial ships sitting off Point Cartwright and noted they are all Hong Kong registered.
The evil of the CCP has taken a back seat until the election hysteria abates.
I have an evil mind. – Xi should register the Shandong in Honk Kong and have it enter the trade between the countries. Bringing in some foreign students. When it docks perhaps we could all take tours.
You may thing I am nuts but I am more even keeled than our pollies and I have a sense of humor. LOL
A temporary state of conditions before a return to bleating about expenditure when the next Labor govt comes through, amplified by Murdoch blowhards who only see benefit in govt funds when they go directly to them.
Couldn’t you have added a photo of Fraudenberg’s ‘Back in the Black’ coffee mug? It would make a pleasing juxtaposition.