Launches had too much sugar, not enough substance

After a fortnight of sugar hits from Anthony Albanese and Peter Dutton, policy launch day was an opportunity to show their platforms could meet current challenges. They fell way short. In a dispiriting day for the nation’s future, the structural reforms the economy and the budget needed to increase productivity and salvage falling living standards were missing from the Prime Minister’s speech and got scant attention from the Opposition Leader. Soaring debt and years of deficits ahead did not rate their attention, making it difficult for informed voters to take them seriously.

For the benefit of a seemingly myopic electorate, conditioned by handouts and politicians’ consistent failures to discuss the nation’s mammoth challenge, the leaders concentrated on simple sweeteners. Every dollar counts but Mr Albanese’s $1000 “instant tax deduction” provides no accountability. “No paperwork, no box of receipts, no scrolling through your online banking – just tick the box and your return is ready,” he boasted. Mr Dutton’s one-off $1200 tax offset giveaway for 10 million people earning up to $144,000 in 2025-26 is also rank populism and short-term thinking.

Neither measure addresses bracket creep or comes close to the structural tax reforms the budget needs. Business groups’ calls for tax relief have fallen on deaf ears. As Business Council of Australia former chief executive and Reserve Bank governance board member Jennifer Westacott says in Monday’s Business section, Australia’s comparative tax ­settings are a risk. “Donald Trump will lower the corporate tax rate to 15 per cent,” she said. “He got it done last time down to 21 per cent. The economy really took off. Investment will flow back into the US … And we should be … looking at our own competitive settings about whether or not we’ve got enough investment driving productivity, which drives wage growth.”

The launches highlighted contrasting values. Mr Albanese focused on intervention and what the state could do for people; Mr Dutton’s outlook was more about helping Australians make their way as self-starters. At his launch, Mr Dutton confirmed two good policies announced previously – restoration of the Australian Building and Construction Commission to improve efficiency in the industry and abolition of the Environmental Defenders Office, a taxpayer-funded brake on development. We also welcome his recognition that the education system needs curriculum reform, not more money. He also has promised a substantial upgrade of defence but there is no sign yet of how he intends to pay for it or for his promised seven nuclear power plants. Our strategic circumstances have not been as dangerous for 80 years. And soaring energy prices are a heavy burden on households and businesses. Increasing gas supplies is essential, as Mr Dutton says. But taxpayers deserve to know how his defence and nuclear policies stack up financially.

Both sides’ overly generous housing policies, pitched as a popularity contest among first-home buyers, were a focal point of the launches. True to the pattern of the past three years in other spheres such as the “care economy” and industry policy, Mr Albanese’s proposal centres on government intervention – spending $10bn to build 100,000 homes exclusively for first-home buyers and underwriting their 5 per cent deposits. Mr Dutton would enable first-home buyers to deduct mortgage repayments on new homes for five years. Bigger land releases by state and local authorities are a must if either approach is to work. Judith Sloan raises an interesting point: “According to Housing Minister Clare O’Neil, government-funded houses will be cheaper than privately funded ones. How this could possibly work is totally unclear.”

While Labor occupies the box seat in the polls, including the latest Newspoll, which shows the ALP retains a 52-48 two-party-preferred lead over the Coalition, the government’s launch had an undertone of smugness. Its overarching message promised three more years of the same. That is disturbing. In March, OECD data showed our living standards falling faster than those of any other developed nation. While the average gain in living standards by advanced nations since March 2022 was 5.5 per cent, Australia suffered a 7.9 per cent fall. By way of comparison, Denmark suffered the second-worst decline of 2.8 per cent.

While admiring the political courage of John Howard, whose tax reform and industrial relations changes altered the economy for the better, Mr Dutton and his team have not shown they have done the necessary policy work to produce comparable initiatives to meet the challenges. Despite Mr Howard’s loss in the WorkChoices election in 2007, IR cannot stay in the too-hard basket forever. The price of leaving it there would be more serious falls in living standards. Labor’s IR changes this term have dragged the economy backwards to the heavily regulated, union-dominated times before the Hawke-Keating era, which ushered in greater workplace flexibility and linked pay rises to productivity gains.

But as the opposition and government showed at Sunday’s launches in western Sydney and Perth, neither has the political courage even to mention the subject. Yet it is very difficult for an economy to support real wages growth in the longer run without productivity growth, as Reserve Bank head of economic analysis Michael Plumb told business economists in February. Productivity growth also supported consumption, he said: “When productivity and incomes are growing more strongly, people are able to spend more and consumption grows more quickly. Weak growth in consumption per capita over recent years has coincided with weak growth in productivity, real incomes and real wages.” The main party leaders need to grasp those realities and how they affect living standards, and take the public with them in the hard decisions needed. Failing to do so will have serious consequences. Voters dithering around with minor parties will make the situation only worse.

It’s a sobering thought, but unless the Coalition or Labor finds the resolve to look beyond populism, “giveaway” policy launches such as these could become almost impossible for Australia’s body politic in a generation. Without reform, the challenges of an ageing population, weak productivity and lack of competitiveness will bite in a way politicians and voters cannot ignore. It was a disappointing day for good governance.