History will judge Anthony Albanese and Jim Chalmers harshly if they waste their mandate on the sort of timid policy agenda that defined their first term.
Albanese’s May 3 election win was a landslide. He picked up 62.7 per cent of seats in the lower house; on the Labor side, only John Curtin in 1943 did better with 49 of the then 75 seats or 65.3 per cent, according to former ABC election analyst Antony Green.
John Howard won 63.5 per cent of the seats for the Coalition in the 1996 poll, and Malcolm Fraser in 1977 secured 69.4 per cent.
Albanese won with small tax cuts for all, subsidies for rising electricity bills, a pledge to lift bulk-billing rates and a promise to reduce HECS debt. Essentially, voters believed Labor would give them more free stuff than the Coalition.
Only now are economics writers admitting the HECS pledge is regressive, giving more to high income earners in law and medicine.
Health Department advice published in The Australian on July 21 says Albanese’s $8.2 billion boost to lift bulk billing will not meet its targets.
On March 23, this column said doctors rather than patients would be the big winners: “The policy will save patients $895 million a year by 2030 at a cost to the government of $2.5 billion a year.”
To that, add Labor’s plan for universal childcare that extends subsidies to families earning up to $530,000 per annum at a possible cost of more than $20 billion a year.
Tight targeting of welfare was a cherished principle of Labor’s Hawke-Keating reform era. Not so for Chalmers.
As the National Disability Insurance Scheme’s cost blows out to $52 billion a year and Labor finds itself unable to cut immigration, the prospects of economic improvement look dim. This year’s budget forecast another decade of deficits.
The Australian Financial Review on Wednesday carried an analysis by the Centre for Independent Studies showing state and federal government payments make up the majority of income for more than half of all voters.
CIS report author Robert Carling wrote: “A culture of dependency and entitlement has taken root in the population and political behaviour has become only too willing to accommodate and encourage it in a feedback loop.”
On top of this, the fact that four out of every five new jobs last year were in the public sector or government-underwritten care sector only makes improving productivity more difficult.
Business and journalists are assessing possible paths to improved productivity in the lead-up to the economic reform summit Chalmers has called in Canberra on August 19-21.
Productivity that used to average growth of more than two per cent a year in the Hawke, Keating and Howard years has been languishing at 1.2 per cent for the past 15 years. As Professor Richard Holden said in the AFR on July 20, at 2.5 per cent growth in productivity, living standards double every 28 years but rise only by a third with productivity growth at 1 per cent.
Most business lobby groups are invited to the summit, as are representatives from the ACTU, Productivity Commission and Treasury. Housing expert Susan Lloyd-Hurwitz, competition and energy policy bureaucrat Kerry Schott, Commonwealth Bank CEO Matt Comyn and Atlassian co-founder Scott Farquhar will be there.
Former Treasury secretary Ken Henry, author of the 2010 tax reform paper, will also attend. But most of Australia’s big miners will not and some fear their absence signals an interest in rekindling Henry’s super profits tax, which triggered the downfall of Prime Minister Kevin Rudd.
Whereas Keating was brave enough to champion a GST at the Hawke economic summit of April 1983, Chalmers does not want to talk about lifting the GST and is likely to push back on reining in spending, which across all levels of government was 38.34 per cent of GDP last year compared with just under 30 per cent in 1990.
Business fears a repeat of the ambush by Labor and its trade union base that defined the Jobs and Skills summit of September 2022 with a plan to re-regulate the labour market.
This time business worries the agenda is less about productivity than lifting taxes. It fears the Treasurer’s plan to tax unrealised gains in superannuation funds with balances of more than $3 million signals Chalmers’ desperation for revenue.
Not enough journalists wrote it, but the truth is neither side of politics has offered voters a genuine plan to lift living standards. And they do need lifting, given living standards rose only 1.5 per cent here over the past decade compared with 22 per cent in comparably wealthy nations.
Only a $400bn unbudgeted windfall from the mining boom has allowed Australia to sail through without structural change.
As Paul Kelly wrote in The Australian on Wednesday, the size of Labor’s win creates demands for a much stronger prosperity agenda: “The story of Labor’s governing success, whether John Curtin, (Gough) Whitlam, Bob Hawke or Paul Keating has been the ability of such leaders to reach outside Labor orthodoxy.”
With a fractured Coalition at historic lows and likely to be in opposition for several terms, will Albanese and Chalmers prefer the politically safe route of their past three years or risk political capital to do what is right for Australia?
If Chalmers hopes to emulate Keating and follow Albanese into the prime ministership as part of a long term Labor government, he will need to do better than his first term.
He will need to implement real tax reform to revive individual incentive.
He should cut corporate taxation – now higher than in comparable countries – to lift much needed private sector investment.
He should tackle entrenched taxation disincentives that are favouring the wealthy already in the housing market at the expense of the young. He is correct to tackle superannuation concessions that favour the rich.
Even Tony Abbott and Joe Hockey acknowledged that back in 2014, but Labor should ditch taxing unrealised gains.
Chalmers needs to cut government spending and streamline planning approvals for important national projects.
He will need to improve the productivity of the very trade unions that benefited from his previous summit. That looked problematic on Friday when this newspaper led on a story of ACTU leader Sally McManus criticising private sector bosses for poor productivity and claiming workers needed more time off.
Labor also needs to be honest about its energy transition and Future Made in Australia plans. Nothing will be made in Australia if power prices keep rising. Chalmers should be frank about the importance of exports of coal, iron ore, gas and uranium that are making China and India rich.
Hucksters in business and fools in media spruik green hydrogen and green steel, neither of which exist now.
Real political leaders need to ensure they do nothing to damage the very resource exports that have saved Australia.
This column reckons it’s unlikely this government is up to any of these hard reforms. But if it is it will need a new media strategy.
Empathising on podcasts and social media about how tough life is won’t sell hard reform to voters who think they have elected a government that hands out free money.
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