No time to rest on our laurels

COMPLACENCY is threatening to derail the country, just as it did our cricketers.

THE astonishing 2010 year has been the most brilliant for political drama, intrigue and combat since 1975, but such events have bequeathed a sullen mood in the community and alarm in the power centres beyond politics that Australia is losing its way.

Rarely has the gulf between the "insider" culture of the political-media class and the "outsider" perspective been greater. The mantra rammed down the public's throats post-election that the hung parliament was good news, that the new paradigm should be celebrated, that the Labor-Greens alliance was smart politics and that the Labor Party had secured our unparalleled economic success compared with other nations looks increasingly unconvincing.

More than ever, Canberra politics is a furnace of activity, overwork and exhaustion, yet the locomotive is running on borrowed intellectual diesel. Despite its good fortune, or maybe because of its good fortune, Australia is operating far below potential.

The failures of the Australian cricket team have become a bizarre metaphor for the nation; too pampered and too complacent, it has lost competitive excellence and successful implementation.

In The Weekend Australian's survey of 45 business chief executives last weekend, John Durie summarised the mood: "Never in the 10 years the survey has run has the level of exasperation run higher." Foxtel's Kim Williams said: "We have been through an extended period of 'blanding out' and that can only fail the nation." His solution went to the survey's unifying theme: it's time for action and some old-fashioned Australian optimistic persistence. If only.

On Monday The Australian Financial Review published its roundtable with the board of the Business Council of Australia, a discussion that "cast doubt on whether Labor has the political will to set down a strong policy agenda". The report highlighted worry about Labor's minority government, scepticism about the National Broadband Network and frustration at skill shortages, infrastructure, red tape and the inability of federal and state governments to unite and cut through. In case you are sceptical about business, such alarm transcends corporate Australia.

Last week Productivity Commission chairman Gary Banks, in a speech, warned the nation was in danger of fooling itself over the present prosperity. Banks named the great risk for Australia: surging national income from the resources boom concealed our poor productivity performance during the past decade. Yet rising incomes and weak productivity "cannot go on indefinitely" and "if 'productivity enhancing' reform is indeed becoming a no-goer, Australia is in for a tough time." Is this Labor's legacy?

Banks reminded "there is nothing easier for governments to do than to introduce bad policies".

Labor's double dilemma is to deliver fiscal restraint post the global financial crisis yet to manage the structural pressures arising from the mining boom. In this situation, Banks listed what was essential; that policy should deliver labour mobility, less industry assistance, reform of high-cost local defence procurement, avoidance of anti-competitive regulation and reform of regulation that increased business costs.

He called the industrial relations arena "the most crucial to get right", warning it was vital to ensure actions to promote fairness did not damage productivity and declaring Australia's productivity potential would not be realised while the labour market remained a "no-go" area for evidence-based policy. He said that perhaps the strongest argument for carbon pricing was to substitute for more costly alternative measures.

Ask yourself: outside carbon pricing, does this long list sound like Gillard Labor? In fact, the gap between Banks's prescriptions and Labor's performance is glaring.

The warning bells are assuming a clamour. Ross Garnaut continues his recent speeches lamenting the "great complacency" he believes has undermined Australia's national purpose and direction.

One of the nation's prominent labour market economists, Judith Sloan, in a rare analysis of Labor's Fair Work Act for the Centre of Independent Studies, warns that it contains the "mechanics of a deeply interventionist approach", that it constitutes an overall retreat to the pre-1996 system and, while its impact cannot yet be known, there are distinct risks for the economy.

At the same time last week an OECD report based on the Program for International Student Assessment with tests in 65 nations showed that while Australian students performed strongly the number of high achievers in maths and science fell significantly in some states. In Shanghai 50 per cent of students performed at the same maths levels as the top 16 per cent of Australians. Australia also was only one of five OECD nations to record a significant fall in reading levels in the previous nine years. The gap between Australian students from the lowest and highest socioeconomic groups was the equivalent of three years' schooling.

The point is the Labor Party seems confused and divided about the fundamentals; that is, about the sort of society and nation it wants Australia to be. Such economic, social and educational challenges penetrate policy and values. What are Labor's core values? Julia Gillard talks the language of economic reform and educational standards, yet the gap between talk and delivery is vast.

During the past generation the OECD praised the "Australian model" of pro-market reform based on leadership, identifying and selling reforms that united equity and productivity. But that model has faded, lost in a mire of retail politics, short-termism, renewed regulation and faith in deeper government control.

Treasurer Wayne Swan rightly says Australia is perfectly placed to enjoy the transfer of global economic power from the West to Asia. Sounds great. But ask another question: is Australia in its values more at home with declining Europe or with rising Asia? In Asia the values are personal improvement, economic competition, educational excellence, national pride, strong family ties, cultural traditionalism and rising religious faith. Are these Australia's values? Let's get honest: this list is anathema to much of the social-democratic and Green progressivism that shapes Labor thinking.

The GFC has delivered a shattering intellectual and moral message to the world: while the US is wounded, the European model is crippled. Europe's system of government debt, entrenched welfare, extensive regulation and mushy "tolerance towards all" as its unifying value is broken. Does Labor not see the obvious?

It is time Labor put steel into its intellectual thinking. The requirements for national success have rarely been more obvious. Yet they are never articulated in Canberra's insider political-media culture.

Over the summer Gillard should do some hard thinking, then lay down a few home truths about Australia's direction in place of the weasel words that pass for such debate.

What has she got to lose?