Andrews model of what not to do

When Steve Bracks led Labor to victory over Jeff Kennett in 1999, hardheads in the new government were determined not to repeat the disasters of the Cain/Kirner era when Melbourne’s CBD was dotted with boarded-up shops and offices and the state of Victoria was often dubbed a “rust belt’’. Being economically competent, Mr Bracks and his treasurer, John Brumby, sought to keep government spending in check and worked with business to lift productivity and continue to reduce regulation. Inheriting the fiscal strength of the Kennett-era reforms, they had no need, or inclination, to indulge in business and personal tax slugs like those inflicted on Victorians by Premier Daniel Andrews and his Treasurer, Tim Pallas, this week. While the Coalition, under Ted Baillieu then Denis Napthine, returned to government from 2010 to 2014, Victorians had enough confidence in Labor’s economic management, from what they’d seen under Mr Bracks and Mr Brumby (both from the Victorian Right), to return the party to office in 2014 under Mr Andrews, a former health minister and member of the Left.

Nine years on, judging by Tuesday’s budget, built upon a desperate tax grab from large businesses and property owners to slow down (but not reduce) mounting debt, Mr Andrews’ economic legacy is veering towards a train wreck. “He (Andrews) has no sense of what he is leaving the state and the condition it’s in,” Mr Kennett told associate editor John Ferguson. Mr Andrews’ base instincts are to lock in votes in the suburbs rather than focus on the economy. In 2010, Ferguson writes, Mr Andrews and his colleagues knew Mr Bracks and Mr Brumby had courted the business sector with tax cuts, good budgets, cuts in workers’ compensation premiums, deregulation and reconnecting Labor with business that created jobs. “The problem is they don’t vote for us,” one MP recalls Mr Andrews saying.

Nor will many mum-and-dad investors (slugged this week with extra land tax) or those who lose their jobs if business investment dries up due to the extra payroll tax slug for businesses with national payrolls over $10m, which the budget imposed. Over time, good policy should be good politics, but in Victoria much depends on how long Mr Andrews intends to stay and whether the opposition can regain a smidgen of self-respect and credibility. With budget papers showing net debt will rise from $116.7bn this year to $135.4bn next year, before climbing to about $171.4bn at the end of 2027, Victoria will be an even less attractive place to invest, do business and create jobs by the time of the next election in November 2026. It is doubtful whether anyone in the Andrews government has the ability – if the Premier would allow it – to rein in billion of dollars in overruns in infrastructure projects such as the Suburban Rail Loop and contain public sector wages by staring down powerful public sector unions.

Victoria’s atrophying financial position serves as a model for the Albanese government, the Minns government in NSW, and the Malinauskas government in South Australia of what not to do. Queensland’s Palaszczuk government has many of the same instincts, but has been protected, to date, by coal revenue. At national level, while the Albanese government has had cordial relationships with business leaders, its union-backed IR agenda threatens to reach deep into the productive heartland of the nation. From BHP, the Minerals Council of Australia and Master Builders Australia, to the Australian Chamber of Commerce and Industry representing small businesses, the sector is increasingly concerned about the impact of the government’s upcoming second round of workplace relationship changes, straitjacketing casual workers’ conditions and making job creation less flexible. It will come on the heels of industry-wide wage bargaining, ushered in at the Albanese government’s Jobs and Skills Summit.

Keeping a tight grip on social and infrastructure spending and energy costs will also be vital to retaining business confidence and avoiding disasters like that being inflicted on Victorians by Mr Andrews.