Albanese’s big government vision would stifle markets

Anthony Albanese’s budget reply speech and policy announcements on Thursday night were a pitch to the true believers — in bigger government, market intervention and increased regulation. From feather-bedding apprentices in the booming solar energy sector to building and running social housing on a large scale and tightening the screws on business, the Opposition Leader’s blueprint was an insight into his political philosophy. True to his base on Labor’s left, he wants a larger government footprint to meet the nation’s economic and social challenges. His mindset draws far more from the big-spending Whitlam era and Julia Gillard’s “cash for clunkers’’ than from the pro-market reforms and deregulation of the Hawke-Keating Labor governments.

After Josh Frydenberg’s spendathon, at least Mr Albanese did not stretch credulity too far by pretending to be a fiscal conservative promising spending restraint, budget repair, debt reduction or a business-led recovery. The latter is something the Morrison government got right in leading Australia through the pandemic. It is also fundamental to rebuilding productivity and paving the way for jobs and wages growth, and revenue increases to fund the vast social spending now favoured by both sides of politics. Labor has shown no signs of a plan for debt and deficit reduction.

Nor did Mr Albanese tackle tax reform, shaping as a major battleground for the next election. “Incentive’’ and “aspiration’’ do not seem to feature in Labor’s lexicon. The government’s legislated Stage 3 tax cuts for 2024-25, which would abolish the 37 per cent bracket, leaving earnings between $45,000 and $200,000 taxed at 30 per cent, would be a significant and long-overdue reform. The opposition has not declared whether it would implement or abolish the cuts.

The Australian has cautioned the Morrison government about unintended consequences, especially distortions in the price of entry-level housing, that could flow from its generous housing initiatives. These are designed to get more low-income borrowers, with small deposits, into home ownership. An Albanese government would go much further, using taxpayers’ money to set up a vast federal public housing operation. It would create a $10bn housing future fund to build social and affordable housing. In the first five years, Mr Albanese envisages, it would build 30,000 social and affordable housing properties. Of these, 10,000 homes would be allocated to frontline workers, and 4000 to women and children fleeing domestic violence and older women at risk of homelessness. The fund would also pay for maintenance, emergency accommodation and housing for veterans and indigenous people.

Other policies outlined in the budget reply also demonstrate Labor’s inclination to manipulate markets. Amid the ravages of COVID-19, Australia was the global leader for green energy uptake in 2020, with an 18.4 per cent rate of growth. But, despite the boom in rooftop solar panels, Mr Albanese wants to use taxpayers’ money for green virtue signalling, promising $100m for 10,000 New Energy Apprenticeships. “Businesses who employ apprentices receive substantial commonwealth subsidies — but at the same time most apprentices don’t get a cent from Scott Morrison,’’ the policy complains. No, they earn apprentices’ wages until qualified. But Labor is promising to hand apprentices in new energy industries $10,000 — $2000 on commencement, and $2000 a year for up to four years. The aim is to improve completion rates in rooftop solar installation and maintenance, large-scale renewable projects, energy efficiency upgrades to homes and businesses, green hydrogen, renewable manufacturing and some agricultural activities.

On Wednesday, we posed this question about the government’s budget: “For all the billions of dollars spent, prolonged deficits and debt incurred, how does the budget set up Australia for the future?’’ Businesses had used the challenge created by the pandemic, we said, to reform operations. Not so the government. As Mr Albanese said last night: “What a missed opportunity if our economy comes out the other side with nothing to show for this transformational moment but the biggest debt and deficit of all time.” True. But his blueprint, unfortunately, is also a missed opportunity. It advances nothing by way of structural reform. Worse, the interventions it proposes would act as a brake on productivity and prosperity, locking in dependency on government to the detriment of productive businesses and taxpayers. Mr Frydenberg’s budget adapted elements of Labor’s big spending; but Labor, regrettably, has not taken on the traditional Coalition principles of enterprise, aspiration and fiscal discipline.