Populist ploys and woke frolics won’t cut it with an electorate under financial stress
Populist ploys and woke frolics won’t cut it with an electorate under financial stress.
Five years have passed since the Black Summer bushfires. Collective memory holds this catastrophe near. The traumas of those demon days resurfaced as Los Angeles communities burned this month: fear, helplessness, panic, anger and grief.
“When you have been through a fire,” The Wall Street Journal’s Peggy Noonan wrote amid the LA conflagration’s early days, “it leaves you determined that things around you be sturdy and grounded.” The doyenne of America’s press poets recalled the time when her childhood home burnt down. But, as is her way, in the next breath she connected the personal to the political.
“It reminds you that government must be driven by respect for one thing: reality. It must focus its greatest energies not on second- and third-tier issues but primary and essential ones.”
After Black Summer and the pandemic – its interminable disruptions, assaults on mental health and childhood development, and sheer daily grind – came wars, the big inflation and a plunge in living standards. Australians, too, are over a life disrupted, and expect things to be sturdy and grounded.
That’s a long overture but fundamental principle to hold as we approach a federal election, which must be held before winter. There are global, cultural and social issues that dominate the attention economy and punditry that, really, aren’t on the radar of most voters. Think AI, gender clinics, identity politics, judicial creep, the ABC, and even the Middle East. Every one demands proper scrutiny, of course, but they’re swirling beyond a family’s bare necessities.
On polling day, it’s the basics, as Noonan observed, that will determine the outcome: living costs, jobs, housing affordability, health, education standards, public safety, the energy transition, and national security. Has Anthony Albanese been driven by respect for reality? Has Labor devoted its best efforts on first-order issues? And when it has, has it made things better?
First, the state of the economy. Politicians take too much credit and, likewise, cop too much of the blame for the vicissitudes of capitalism; a medium-sized trading nation like ours, overly exposed to the fortunes of China and world demand for ores and fuels, lives on the edge in every sense.
For Australia, good management is taxing fairly and efficiently, while getting full value for taxpayers; running balanced budgets over the cycle; investing in the skills of its people; providing infrastructure and supporting innovation; reducing the impediments to hiring and investment; well-planned, skills-based migration. When governments get these basics right, the private sector drives growth, raises productivity, which leads to higher material living standards.
In all sorts of ways, Labor has become more interventionist, seeking to shape outcomes it does not trust the market to deliver (or cannot enable politically), notably in pricing greenhouse gas emissions. For every promising deed such as revamped competition policy, a central bank refresh and sensible aged-care funding, it has regressed: re-regulating the workplace, delaying migration reform, and risking funds on local solar panel production.
The big picture, too, is mixed. Unlike many peer nations, Australia has avoided a technical recession, even a negative quarter of post-pandemic GDP growth. Yet the latest national accounts were abysmal, revealing annual growth of 0.8 per cent, the weakest result outside the Covid shock in three decades. Per capita income has fallen for seven straight quarters.
But the experience of families is better reflected in the grim fact the nation’s living standards have been squeezed by inflation, especially the cost of home building, insurance and energy, while mortgage repayments are eating up a record one-in-nine dollars of disposable household income. Personal tax cuts, tweaked a year ago to benefit middle earners rather than to flatten the system, have been saved rather than spent.
Consumer spending is in a rut because of the Reserve Bank’s interest-rate assault, taking a bigger toll on mortgaged millennials and Gen X and younger renters. Did someone say cashed-up boomers, those most discerning voters? The Commonwealth Bank’s head of Australian economics Gareth Aird says the bank’s data of six million customers shows “younger Australians have, on average, felt the economic pain a lot more than the older cohort of society”.
Under Labor, consumer prices have increased by just over 10 per cent; measures for average wage growth over the term, due in a few weeks, are likely to come in just below prices. This week’s welcome news on inflation suggests that a cut in official interest rates is on the horizon, perhaps just over a fortnight away when the RBA board meets for the first time this year.
With underlying inflation of 3.2 per cent in the year to December, a little lower than the central bank’s staff expected, some economists are pencilling in three to four rate cuts this year, leading to a recovery in household spending, business confidence and growth.
EY chief economist Cherelle Murphy urges caution, arguing the data suggests the start of a rate-cutting phase is closer, but “a February rate cut is not a done deal”.
Federal and state government subsidies have taken the sting out of exorbitant electricity bills, but rebates will expire. As a group, governments have made it more difficult for the RBA to bring down inflation by pumping in dollars in an economy that, while weak, is operating above its capacity; debt-addled provincial administrations have been, relatively, more derelict in driving public demand.
Nonetheless, Canberra has set a poor example. Flush with revenue, Jim Chalmers is running up a big tab this year. The Treasurer has delivered two budget surpluses and some experts believe a third could eventuate if his cabinet colleagues don’t try to panic-buy votes in the run-up to the poll.
The funds-hungry areas of disability services, aged care, health, debt interest and defence are keeping the federal budget under structural stress; off-budget forays, touted as “investments” in clean energy, manufacturing and housing, are unlikely to bring financial dividends. Still, Labor continues to find new areas of forever spending, be it on skills education, a looming universal childcare scheme, a larger bureaucracy and pay rises for care-sector workers.
Employment growth, in aggregate, has been spectacular while the economy has been in the slow lane. Few Australians feel their job is at risk. Part of it is due to the RBA’s tolerance of high inflation to achieve full employment.
Another factor is the expansion of the care sector and other taxpayer-funded services, which is holding back productivity growth. Still, a job, is a job, is a job; labour market participation is at a record high, not least boosting the tax take, as well as stoking the social and personal benefits of work.
Health is a core issue, and a traditional area of strength for Labor. The government has delivered cheaper medicines and will likely direct more spending on primary care. It’s also warming up a Medicare scare campaign, centred on Peter Dutton’s brief time as health minister in the Abbott government, when it tried to introduce a $7 co-payment for visiting a doctor.
Politically fraught decarbonisation continues apace, as Labor pursues a policy of solar, wind and hydro generating 82 per cent of electricity by 2030. The latest report from the Australian Energy Market Operator shows renewables supplied a record 46 per cent share of the National Energy Market in the December quarter, with coal slipping below 50 per cent for the first time.
But when the wind doesn’t blow or the sun doesn’t shine, the AEMO report confirms a spike in wholesale prices, which can feed into baseline tariffs known as the Default Market Offer. Government subsidies cut electricity prices by one quarter in the year to December; expect more rebates, although maybe not an Oprah-style “everyone gets a prize” like Chalmers’ third budget.
Keeping the lights on, at a reasonable price, is squarely in the basic needs category, as is affordable shelter. The goal of 1.2 million new homes by mid-2029 in the national accord is unlikely to be achieved. We don’t have the workers. But a target keeps pressure on all governments to boost supply.
Albanese has failed to make good on his campaign pledge of reducing power bills by $275, a folly that ranks with his election-night overreach to pursue an Indigenous voice to parliament. Voters rejected the proposal 60-40 in October 2023, and the episode, clearly not in the first-order of voter needs, has damaged the Prime Minister’s personal standing.
As political pollsters insist, unless politicians are directly addressing kitchen-table concerns, voters aren’t interested. That’s not to say in a fractured and less partisan electorate, with the duopolists losing market share at successive polls, there won’t be support for post-materialists, anti-woke warriors, look-at-me populists, local champions, and shamateur teals.
The coming election campaign is a referendum on Labor’s competency and, like it or not, Albanese’s capacity, credibility and durability. The government is not reckless; but it has put cabinet discipline and caucus hygiene ahead of policy dynamism, creativity, energy and courage. So the government feels older than it is and there’s a whiff of desperation creeping in.
The prospect of sitting on the losers’ side in parliament, let alone minority government, elicits more cash giveaways. An interest-rate cut, possibly more than one pre-poll, would change Labor’s resting heart rate, as it argues a monetary easing was due to its carefully calibrated plan … so keep the faith.
The Opposition Leader’s “back on track” slogan is now rolling out across the land. Differences in core values and beliefs are sharpening. The Coalition’s policy cupboard, however, is not only bare, there’s little to like in what it has conjured. In a retail sense, it’s not simply a small Target, it’s a Big W, or wager. Let’s face it: Dutton is a punt.
The alternative prime minister – policy-lite and fancy free, a mainstay of the rambling former show spurned by voters – has found momentum in the polls before the Albanese government has clocked up a thousand days. It’s a savage indictment on the incumbents’ record on first-order issues. Not only does reality bite, it burns.
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