Labor conference cannot hide the party’s true nature

The ALP did what it does best on the first day of its tightly managed national conference in Brisbane on Thursday. It put a lid on the extreme positions of its left-wing fringe on contentious issues such as the AUKUS nuclear submarine deal and union demands for a super profits tax on big business. But it could not hide its true nature, which is lax fiscal management and an attraction to a new and dangerous era of industry protectionism. Anthony Albanese said his government was delivering the biggest investment in Medicare since Bob Hawke and Bill Hayden created it. The biggest boost to Commonwealth Rent Assistance since Paul Keating. The biggest investment in social housing since Kevin Rudd. The biggest expansion of public TAFE since Julia Gillard. And, through the National Reconstruction Fund, the biggest investment in Australian manufacturing since John Curtin.

Former treasurer and now party president Wayne Swan gave a clear insight into what he thinks the future should hold in an address to a side event designed to stoke the culture wars while blaming Labor’s opponents for indulging in them. Mr Swan bemoaned the financial discipline he was pressured to follow but failed to do so. His lesson from the Morrison government’s pandemic spending was that all bets are now off when it comes to budget responsibility and the need to constrain borrowings.

Mr Swan said the Morrison government’s big-spending approach had taken the heat off Labor by changing the conversation around debt. Missed by Mr Swan was the fact that throughout the pandemic, Labor had urged the Morrison government to spend more. The desperate budgetary situation now facing Victoria is evidence of just where budget ill-discipline will get you. Missing, too, was acknowledgment that much of the inflation problem the world has been grappling with can be traced to the boom in pandemic spending by governments during a period of historic low interest rates.

The truth is the Albanese government has claimed budget responsibility but continued to increase spending. As Judith Sloan has noted, spending will rise from $632bn last year to $682bn this year, and to $764bn in the final year of the four-year forward estimates. This excludes off-budget spending such as the Rewiring the Nation and National Reconstruction funds.

The big danger lies in a misreading of the Biden government’s misnamed Inflation Reduction Act, which risks entrenching global inflationary pressures through a trillion dollars worth of subsidy measures designed to promote a low-emissions transition and attract manufacturing back from China and Europe to the US. The act was lauded at the ALP conference as a way of attracting capital to new mining projects in rare earths and minerals in Australia. This presents a big opportunity for the nation.

But the catch is in Labor’s default desire to pick winners and support local businesses wanting to downstream process our commodity exports. Former Productivity Commission chair Gary Banks is not alone in warning that climate policy has been conflated with a perceived need to develop a “sovereign manufacturing capability”, something he said had a lot of “old think” about it. The ALP last held its national conference in Brisbane when Gough Whitlam was in power. Those with a long memories see echoes of the Tariff Board and Industry Assistance Commission in the present-day ALP, and do not look fondly on what a repeat performance would bring.