ALP’s reckless ways shame the party’s own history

Hawke and Keating, unlike this generation of Labor leaders, understood that private business was the engine of wealth creation and the best way to help workers was for employers to succeed.

It’s strange that it’s only on national security matters, such as AUKUS, that the 80-year-old Paul Keating hurls barbs against his own party, because it’s actually Labor’s economic policy that has become unrecognisable since his time.

Remember the genuine economic reforms of the Hawke-Keating era: financial deregulation and admitting foreign banks, the floating of the dollar, cutting tariffs, and the beginning of privatisation? Bob Hawke’s Accord with the unions was about limiting union power over the economy, not facilitating it. And the national summit of 1983 was about working with business, not against it.

Whatever their mistakes, Hawke and Keating, unlike this generation of Labor leaders, understood that private business was the engine of wealth creation and the best way to help workers was for employers to succeed.

How times have changed.

The first indication that Anthony Albanese had far more in mind for the country than the “safe change” he’d promised during the 2022 election campaign was the economic summit that ambushed unsuspecting big businesses with industry-wide, union-led wage bargaining.

Then there was the abandonment of the stage three tax cuts for higher-income earners that he’d repeatedly promised to keep before the election, replacing tax cuts for our most productive and entrepreneurial people with another round of tax cuts for lower-income earners.

There’s the ongoing economic self-harm of Labor’s emissions obsession that, far from reducing power bills by the promised $275 per household a year, has added up to $1000 to household power bills since the election.

Former politician Prime Minister Paul Keating with Gough Whitlam and Bob Hawke.

But now there’s the absurdity of government directly subsidising the wages of private sector workers and pumping up demand at the very time the Reserve Bank is trying to suppress it in a bid to reduce inflation and lower borrowing costs.

Add in unfettered, record high immigration, which is this government’s only method to drive economic growth, and you can see why wealth per person has now declined for the past five quarters, housing is in crisis and people feel the character of their country is jeopardised by a government that can’t manage our borders.

Not even the Whitlam government, which was re-elected once although it lasted only three years, was as economically ignorant. While entirely lacking Gough Whitlam’s panache, where the current Prime Minister is in lock-step with Whitlam, though, is his arrogant dismissal of all criticism and insistence that policy is working perfectly even when it manifestly is not.

The Prime Minister’s and the Treasurer’s insistence that they’re not at odds with the RBA, and that their spending mania is actually driving inflation down rather than up, is probably their most brazen refusal to face an obvious truth.

Not even the dimmest undergraduate could think paying households a $300 a year subsidy temporarily to keep electricity bills down is somehow anti-inflationary given that this just gives households more resources to spend elsewhere and the short-lived reduction to nominal CPI is just a statistical fiddle that the RBA has said it will ignore.

The bank’s clear statements that public spending increases will keep interest rates higher for longer mean that Labor’s current spending addiction is not even smart politics, as voters will blame mortgage stress on the ideological bent of the government rather than the economic rectitude of the bank. It’s economics 101 that if you give relatively low-paid workers more money, they’ll mostly spend it. That’s OK if the economy is more productive, but if it’s simply a politically motivated gift, designed to get more of them into unions, it will feed straight into inflation.

Bob Hawke and Paul Keating

The recent decision to give all childcare workers (provided their employer has an enterprise deal with the union) a 15 per cent pay rise directly from the federal government will cost taxpayers $3.6bn now and around $2bn a year ongoing because a wage rise, once granted, can’t be taken back and the childcare sector lives off government subsidies.

This gift is on top of a similar 15 per cent wage hike for aged-care workers, $11bn upfront, and costing close to $3bn a year.

Inevitably, a 15 per cent government wage gift to some workers in the “care economy” will generate similar pressure from all care workers, such as those in the National Disability Insurance Scheme, who already are earning close to $50 an hour and this week demanded their own top-up.

As one hospitality industry employer has said, these government-funded pay rises are making it impossible for businesses in the real economy to keep their staff: “Whereas previously you would only be losing people to a venue down the road, now it could be the NDIS, Uber or the building industry, where people can become lollipop crossing supervisors. With the NDIS it is all taxpayers’ money, so they are paying too much.”

The Albanese government’s greatest weakness is ministers’ total lack of comprehension that workers will chase better pay and that wooing them out of productive industries that generate their own revenue into ones wholly reliant on government funding saps economic vitality. Given that almost none of Labor’s frontbench has ever run a private business, as opposed to being a union official dependent on government patronage or a public sector employee, ministers just don’t get it.

Then there’s the ongoing energy circus. For years now, tentatively under Coalition governments and resolutely under Labor ones, the electricity sector has been operated to reduce emissions rather than to generate affordable and reliable power. Yet again, ideology has trumped economics. Hence the current folly of first subsidising renewable power to get emissions down, then subsidising consumers to ease bill shock, and now subsidising coal-fired power stations to keep the lights on.

It’s giant policy-driven money-go-rounds such as this that have caused the RBA to observe dryly that it is public sector demand that’s keeping prices up.

Part of the problem is that the Prime Minister has always been an activist and a campaigner rather than a thinker and a doer. He took an extra year to complete his undergraduate degree, thanks to time off protesting. As one of his (left-wing) lecturers told a biographer, Albanese himself “would be the first to say he wasn’t an intellectual high-flyer”.

The Prime Minister has claimed to be an economic policy adviser to the Hawke government when, in fact, he was a research officer for the (left-wing) minister for local government. Notoriously, during the 2022 election he was unable to cite the jobless rate or the official interest rate.

As the Albanese government nears the end of its first term and seeks re-election, the big question is whether its senior members have grown or shrunk in office. As he nears 30 years in federal parliament, Albanese is the great survivor of contemporary politics. But how genuinely talented is our Prime Minister?

Deep in the throes of a previous episode of Labor bloodletting, Albanese confessed that “I like fighting Tories … that’s what I do”. At that, he has been sufficiently successful to lead Labor back into government, albeit against a Coalition that had well and truly run out of puff. Now he’s fighting against almost everything, including economic reality.