Government blinded by its optimism delusion

The historic tax bonanza is feeding Labor’s optimism delusion. Picture: NCA NewsWire / Martin Ollman

Jim Chalmers calls it the “defining, decisive decade ahead”, of monster-sized challenges and big opportunities.

What the Treasurer has failed to do, however, is provide a strategy, a model if we’re being fancy, to deal with the polycrisis that is unfolding: forever deficits, slow-mo growth, strategic distemper.

What is the Albanese government’s answer?

Optimism.

Labor is saying, “We know we have make-or-break problems but we’ll eventually get around to fixing them, because we always have. We’re Aussies, resilient and intrepid”.

That’s the optimism delusion.

Part of it stems from a sense of exceptionalism; the world keeps buying our commodities and the bounty gets shared, perhaps not as fairly as many would like.

But in recent years, the outsized optimism also comes from our national leaders. After every overseas trip, the incumbent Prime Minister and Treasurer return with the humble brag: you wouldn’t want to be anywhere else but here. Crisis? What crisis?

Anthony Albanese met Rishi Sunak in a Coronation London side gig. He brought the news to his caucus that the besieged British Prime Minister wouldn’t mind swapping places. I bet.

But using old Europe as a comparator for how we’re travelling is not going to cut it anymore, although the tepid growth rates Treasury has forecast for the next few years won’t be the envy of anyone in the New World.

We know the big issues right now: a budget chronically in deficit for another decade; productivity growth stalled and imperilling the future living standards of our children; a high cost base for doing business here, and; a capital class grown soft because it’s best at clipping tickets.

To be fair, Labor has been busy. In just under 12 months, the government has delivered two budgets, initiated a referendum for constitutional change to establish an Indigenous voice; launched a decades-long nuclear submarine program, and; set off a multitude of policy reviews.

It’s now firmly established in the minds of Australians that there’s a new gang in the capital.

Labor has hit the ground spending. And taxing. And saving. Chalmers has fallen face first into a pot of gold, as one seasoned observer put it. He promises to bank most of the revenue upgrades.

This historic tax bonanza, too, is feeding the optimism delusion.

In the climactic final burst of his budget speech, Chalmers waxed lyrical and patriotic about our progress in the 122 years since federal parliament first met, as it was “called to serve a new nation on an ancient continent, created by a vote of the people”.

“Today Australia is bigger, fairer, more diverse, more open to the world and more engaged with our region than anyone alive at Federation could possibly have imagined,” the Treasurer went on.

“And yet what brought this country together was a belief that the future could belong to Australia and that we would be stronger, safer and more prosperous if we worked to seize its opportunities and share its rewards. A commonwealth of common purpose.

“That optimism and resilience has sustained us – and carried us – through downturns and disaster, through recession and pandemic.”

That spirit “drives our government, and it shapes this budget”, he said, which shows “a determination to tackle the big challenges – and seize the big chances”.

Labor’s second budget doesn’t come close to delivering what Chalmers claims is “a plan for security, for prosperity, for growth”.

The Treasurer wants a gold star for keeping real growth in spending to an impressive 0.6 per cent “over five years”. But that includes the year we’re in, when almost all of “temporary, targeted” budget stimulus has washed out of the system and real spending falls by a hefty 4.3 per cent, a year after the pandemic peak in outlays.

Call me a traditionalist, but if you take the four years of Tuesday’s budget, real spending grows by 1.8 per cent a year, still better than the Coalition’s 2.6 per cent a year prior to the pandemic.

Labor has made inroads into health costs and has a “mates rates” deal to cap the growth in the NDIS to 8 per cent. Making government services more efficient in an ageing nation is an enduring task, but one that is being shirked. The Productivity Commission has shown a path to get better returns.

There’s a way, but no will.

Labor lacks a solid productivity agenda, but talks a big game about the industries of the future that will be subsidised by taxpayers.

Worryingly, there are still no fiscal rules to steer the budget to safe waters, although there is confidence among officials in the power of an interest-rate dynamic that gives and gives.

OK, there’s something to be said about the glass-half-full narrative from a newish government.

No one wants to hear more of the misery narrative as pandemic psychology recedes. Enough of death, disruption and global disorder! Sure, accentuate the positive and feel the pain of everyone.

But that means nothing if we don’t make fundamental changes to how we earn our way and pay for the services the community has come to hold as a birthright.

All through the Covid-19 crisis, Boris Johnson maintained the crazy optimism that it would turn out fine: keep calm and carry on at home. Or at parties at Number 10.

As BoJo discovered, there is a cold, hard reckoning for the optimism delusion. Albanese Labor needs a reality check and a plan.