We did our best; nobody’s perfect

Anthony Albanese acted as if he were among friends at the National Press Club in Canberra on Friday in what was billed as a headland address to kick off the federal election year. Regrets? Not really. Ambition? To not leave anyone behind. A scorecard for term one? We did our best. No government is perfect. Indeed.

Overall, the Prime Minister says he is pleased with the results of term one. In his view, inflation has fallen, unemployment has stayed low, wages are rising, and Australia has avoided recession and has not had a single quarter of negative growth.

The problem with this analysis is in the detail. It is what Australian Chamber of Commerce and Industry policy chief David Alexander writes on Saturday is the tyranny of averages. Mr Albanese is glossing over the fact households have faced a dramatic slump in their standard of living and are experiencing a long-running per capita recession.

The Prime Minister talks about fair reward for effort, sacrifice and aspiration that power our economy and nourish our society. But for Mr Albanese that involves “building better Medicare”; picking industry winners through a Future Made in Australia, including taxpayer subsidies for aluminium production; paying for 600,000 free TAFE courses; and subsidising apprentice wages for house building.

This is on top of subsidising a range of government-dependent jobs in the “care economy” and lifting welfare payments, boosting rent assistance and paying household electricity bills after failing to deliver on a promise to cut them.

During the Albanese government’s first term there have been interventions across a full suite of policy areas, from energy to healthcare, that all produce distortions elsewhere in the economy by weakening productivity and lifting competition for workers in an already tightly constrained labour market. As Mr Alexander puts it, the private sector is freezing and in fact it has been going backwards for the past two quarters.

The government sector, on the other hand, is boiling, with extraordinary growth in spending and hiring. Mr Alexander says while the naive interpretation is to look at the average and think “everything’s fine”, the deeper analysis shows an economy with a deep structural problem: “Put simply, an economy with a private sector going backwards cannot sustain a public sector blowing out.”

Throughout his address, Mr Albanese focused on the things that would keep the public sector blowing out and paid little attention to what was going to sustain it. He talked about aspiration and lifting everyone up, but the actions of his government have been to slow productivity and suck energy from reward for effort.

This includes what Mr Albanese nominated as perhaps his greatest achievement and act of courage – to break his election promise and unpick the legislated stage-three tax cuts. This turned a taxation reform that was designed to encourage people to work harder and replaced it with an effective cash handout to deal with immediate cost-of-living pressures. The result is tax scales that continue to punish workers through bracket creep and line the government coffers with funds to be redistributed to favoured areas.

Electricity subsidies are another example of buying good news that cannot last. Mr Albanese focused on the headline rate of inflation but the Reserve Bank of Australia already has said this has been artificially lowered by government interventions that are not permanent and will be ignored when it comes to determining future interest rate movements.

Looking ahead, Mr Albanese says he wants to be known for introducing universal childcare, a measure that has not yet been introduced and something where the productivity-boosting capacity is in dispute.

The lesson Mr Albanese should take from term one is that policy misadventure in areas such as the voice referendum and energy transition disable the opportunity for good government. Covering it up with more public subsidies and attempts to pick the industry winners of tomorrow will only make things worse.