Danger lurks in playing it safe

THE risk to Australia can be documented: a weak minority national government, a parliament where reform will be more difficult and a group of "special interest" politicians controlling the cross-benches.

The cost to bring the Gillard-Greens-independents alliance government into existence is an additional $3.92 billion of new commitments. It would have been higher under the Coalition. No party has ever entered such pledges after election day in its bid to form government.

The nation is engulfed in a rhetoric about "new paradigms", sunshine tests and an end to partisan bickering. Many Australians will dismiss this jargon as bulldust. The political system will soon be groaning under process, consultations, ambit claims and truckloads of ethical pomposity. The truth is nobody can predict this parliament; nobody has a grip on the future because nobody controls it.

It is a fact, however, that the shift in Australia against long-run economic and social reform, manifest during the campaign, has been more accentuated in the 17-day negotiation to form a new government. The emphasis is on special deals and redistribution to the regions sanctified by fairness. The language invokes the old Australian Settlement.

The abject decline in the post-1983 vision of a competitive Australia in the globalised world, so apparent in recent years, is now compounded by a new uncertainty within the political system. The budget position is good; Julia Gillard will be a sensible Prime Minister; but Australia's risk is policy drift amid complacency driven by the resources boom and the demise of political agreement over the national direction.

Let's begin with the new political structure. Gillard has formed a government in a sizeable minority in both houses. Her survival depends on a constructed 76-74 "confidence" majority that can be negated by a single vote. The independents' pledge on confidence is qualified: the equivalent of the pink batts or school buildings fiasco may be sufficient to terminate the government. An adverse by-election would be sufficient.

For every substantive bill, Labor has only 72 votes and needs another four. The independents and the Greens MP have made no policy pledges to Labor and will vote according to discretion, each probably operating autonomously. It guarantees uncertainty, delay and compromise. Direct comparisons with the US congress would be false, yet its operating technique of "buying" a majority for each measure is a warning of the dangers ahead for policy integrity.

Gillard's position is won by virtue of three separate agreements with the Greens, Andrew Wilkie and collectively with Tony Windsor and Rob Oakeshott. The latter is the decisive agreement and runs to 33 pages in addition to Gillard's letter to both MPs. Its main themes are parliamentary reforms and a new deal for regional Australia.

This deal embodies the Windsor-Oakeshott view that the Nationals failed the regions and, as Windsor says, it "is about using the political system to advantage the people we represent".

There will be a new cabinet-level minister for regional Australia, the job Oakeshott seemed to want but wisely refused. The new department will presumably be extracted from Anthony Albanese's portfolio. There will be a regional Australia cabinet committee, a regional Australia co-ordinating unit in the Department of Prime Minister and Cabinet, an office of northern Australia, a new House of Representatives committee for regional Australia chaired by an independent, a new government-funded regional Australia think tank, methodology to enable the Finance Department to better analyse spending by location, and a review of all rural and regional funding.

The guiding philosophy is that regions "have not been given their fair share" and that "equity principles" must prevail. The name of the game is redistribution. With invocations of that ageless Australian narrative of the bush in its fight against "drought, floods, fires and cyclones" the document endorses notions such as "place-based thinking" and "localism". It is notably weak on the economic adjustments and productivity challenges facing the regions.

The agreement specifies new monies exclusively for the regions from the $1.8bn in the Health and Hospitals Fund and $500 million in the education fund.

In addition, regions will gain a new $800m from the Priority Regional Infrastructure Program and $573m from the Regional Infrastructure Fund. Much of this spending is spread over many years. Beyond this, several existing programs will be altered to direct a one-third share to regions.

There is a heavy focus on the National Broadband Network that Windsor nominated as the key in his decision to back Labor. The agreement specifies the NBN will rest on a cross-subsidy to ensure the regions do not pay higher prices than the cities. The regions "will be given priority" as the NBN is built, thereby raising a series of financial questions and again violating the NBN's commercial basis.

This resurrects an old Australian instinct described in the immortal words of historian W.K. Hancock of the state as "a vast public utility whose duty it is to provide the greatest happiness for the greatest number" (along with winning votes for several political generations).

This is the disease, enshrined from 1901 onwards, that crippled Australia for the next 80 years until Bob Hawke and Paul Keating broke the wheel.

There have been two influential political traditions that never accepted the post-1983 pro-market reform era that delivered Australia recession-free from the recent global financial crisis. They are the unreconstructed rural interventionists that often mock the Nationals as sellouts and the ideological Left, once strong in the ALP but now at home in the Greens and sections of the education establishment where the Greens draw much support.

It is tempting to see the current crossbenchers as embodying these two throwback movements, but dressed up in the fashion of caring environmentalism.

That raises the heresy that the coming parliament, far from constituting an exciting new politics, is actually a reversion to the discredited past.

Estimates from Wayne Swan show net extra funds, so far, from deals with the independents and the Greens total only $763m across the forward estimates and this is offset by savings. Yet many of the funding pledges have yet to hit the bottom line of the forward estimates. Gillard, however, is likely to govern during a time of strong economic growth that will provide both the scheduled return-to-surplus and ample scope for regional pork-barrelling.

The agreements give the independents and Greens access to ministers and departments for briefings and to help in devising their own policies. This is vital in creating trust between Labor and the MPs on whom it depends.

The main risk for Labor is manifest: that with the resources boom, capacity constraints, rising inflation and interest rates, skill shortages and pledges to cut immigration, Labor will fail to satisfy urban pressures in the main cities, thereby losing even more votes because it lacks the will and parliamentary authority to engineer the necessary supply side reforms. This scenario would doom the Gillard government.

The great trap is equally obvious: that Gillard will be applauded for tactical skills in merely showing the parliament is workable, a lowest common denominator test insufficient for national progress and re-election. The low expectations of minority government mean commonplace results are lauded as acts of astounding genius. Watch for it.

Power-sharing in minority government means Gillard will struggle to control the political agenda. The media will focus on the independents and Greens, not just Labor and Coalition. From tax to climate change to Afghanistan, stories will be running amok and issues will be framed and debated against Labor's preferences.

This week's resolution of the election via support in the House of Representatives testifies to Australia as a classic Westminster-based responsible government model.

You may like or dislike the result, but it is exactly how the system should work.

This is, therefore, the reason the commitment to a three-year term in the agreements demands permanent scrutiny. This provision is a political deal without legal meaning. It is inconsistent with the Australian Constitution, our Westminster principles and the operating rules of every parliament since 1901.

The essence of Westminster democracy is workability such that, at any time, the prime minister can procure a new election or the parliament can change the government. The three-year pledge suits Labor and the independents. But it may not suit the public. If this government and parliament fails the public interest test it should be terminated and the issue returned to the people. This week's deal is riddled with an unacceptable arrogance that the people are to be shut out for the next three years.

Tony Abbott would be a fool to demand a premature poll. But the stakes are high for the politicians who signed the documents giving life to this minority government.

If it doesn't work the blame game will be fierce and the pressure to return to the people will be immense.