Why Australian politics is broken as we face a fallout from the demise of Labor’s carbon and mining taxes

POLITICS in this country is broken. No wonder business is nervous and consumers are keeping their wallets shut.

Why Australian politics is broken

AND so pass into history two of the most expensive and disastrous experiments in public policy making this nation has ever seen.

Axing the mining and carbon taxes will blow multi-billion dollar holes in the budget bottom line, as spending promises linked to the taxes are retained.

Australians will also be robbed of any solutions to two of the major policy problems of our era: first, the need to capture for taxpayers a fairer share of this once in a century mining boom, and second, the need to find a low-cost and effective way to transition to a low-carbon economic future.

Hopes for reform? ... Up in smoke, says National Economics Editor, Jessica Irvine.

But the really bad news is there can be little hope the quality of policy making is about to improve.

Politics in this country is broken.

The circumstances that led to those policy failures are about to repeat themselves again with the May budget and attempts to rein in the nation’s finances.

A ramshackle Senate, a vision-less political leadership and an inability to explain and prosecute the need for reform are about to consign Australia to another episode of reform wilderness.

No wonder business is nervous and consumers are keeping their wallets shut.

Make no mistake: Aussie living standards will suffer as a result.

So anyone thinking of celebrating the repeal of the carbon or mining taxes should think twice.

There is nothing to celebrate here, but potentially, if we are wise, much to learn.

First, we need to talk about the mining tax – which shall be ignobly remembered as Australia’s first-ever revenue-less tax. It takes a lot of skill to design a tax that doesn’t raise any revenue.

The first the unsuspecting Australian public heard of the mining tax was in early 2010 when the Rudd government released its comprehensive response to the Henry tax review - before any of us had even had the chance to read the thing.

In typical control-freak style, Rudd and Co painstakingly ruled in and out every single measure, leaving little room for debate.

One obscure and highly theoretical thought bubble of the review – for a minerals resource tax – was swallowed whole.

Axing the carbon tax ... Palmer United Party leader Clive Palmer and former US Vice President Al Gore at Parliament House in Canberra. Picture: Alan Porritt

The tax had the noble goal of capturing for Australians a fairer share of the super profits being earned by miners for extracting and selling the nation’s mineral wealth.

Of course, there was a political motive too. Revenue from the tax would be used to shower voters with expensive promises like a school kids bonus, a boost low income super and accelerated business tax breaks ahead of the 2010 election.

But fundamental flaws in the design of the tax, combined with a massive scare campaign from the mining industry, led to a radical redesign and watering down under Julia Gillard.

Originally slated to raise $10 billion a year, the tax would raise just $3 billion, and then - as it turned out as iron ore prices fell - nothing at all.

Result? Gina laughs all the way to the bank and everyday Australians have to foot the bill to fix the budget despite the biggest mining boom since Gold Rush days.

Then there was Labor’s much despised and little understood “carbon tax”.

The sweltering summer of 2006 finally persuaded many Australians, including John Howard, of the reality of climate change and the need for an effective policy response.

Howard favoured an emissions trading scheme to curb emissions.

But it would fall to Kevin 07 to design and implement the scheme.

First, Labor failed to negotiate a deal with then Opposition leader Malcolm Turnbull, despite his steadfast support for the idea.

Fighting the Senate ... Prime Minister Tony Abbott re-introduces the Carbon Tax Repeal Bill in the House of Representatives.

Even when Tony Abbott took over the leadership on an anti-carbon price platform, agreement could have been reached with the support of the so-called “Greens” party.

But the Greens instead decided to torpedo Rudd’s scheme - which could have passed parliament when Turnbull crossed the floor – instead holding out for more modifications.

Rudd’s leadership imploded and Julia Gillard capitulated to Green demands for a “fixed price” trading scheme, basically a carbon tax.

Australian polluters would end up paying $23 per tonne of carbon while our international competitors paid just $7 a tonne.

Oh and household and business compensation would, again, end up costing more than the tax actually raised.

The extreme irony in all this is that Australians did want reform on both these key policy areas. We do worry about climate change and we did want a greater share of the mining boom.

Similarly, most Australians do understand the need to fix the budget and pay down debt.

There are fundamental impulses out there for reform. But our politicians seem unable – or unwilling - to connect the dots and design and sell effective policy responses.

If politics is the art of persuasion, our current crop of politicians have not real claim to the title.

Reform requires politicians with more than just an eye on the next poll.

It requires appropriate consultation with business to understand the real world impact of policy changes.

It demands sustained political campaigning to educate the public about the need for tough reforms – which invariably create some losers.

Perhaps most of all, it requires a Prime Minister with the vision and conviction to live or die by their proposed reforms.

For goodness sake Tony, stop swanning around with world leaders and go sell your budget.

Originally published as Why Australian politics is broken as we face a fallout from the demise of Labor’s carbon and mining taxes