No. 80

STONE the crows!

Bribery is now the basis for reform. According to Henry Tax Review member Greg Smith, the absence of enough money to “overcompensate” households reduces Canberra’s capacity to push through needed economic change. [i]

It’s an opinion in-line with the all but universal assumption that the great age of reform is passed that neither leaders nor followers are up to it.

As Paul Kelly puts it, “The power of the negative in politics is on the rise … It is getting harder to pass reform measures that Australia needs to succeed in a globalised world.” [ii]

This intensely irritates everybody who understands reform is a never-ending process. According to Dennis Shanahan on Saturday, “Business leaders have called for partisan debates on carbon and mining taxes to be given less priority than longer-term reform issues such as industrial relations, welfare and tax which were central to the interests of Australia’s long-term prosperity.” [iii]

Certainly people pay ritual obeisance to reform and the achievements of the Hawke-Keating-Howard governments are still too recent to ignore. Thus, the Prime Minister proclaimed herself a reformer last year: “When you get economic reform right, you fuel the drivers of sustainable long term economic growth.” [iv] She once even claimed with a straight face that re-regulating the labour market was a core part of Labor’s “crucial productivity agenda”. [v]

But reform is about addressing failings in existing programs, not re-establishing old orthodoxies. Or betting the farm on visionary schemes.

Perhaps the government’s two big set-piece programs, the NBN and the carbon tax/trading scheme, will deliver – the Crows don’t have a clue one way or another. But both are what were once called “nation building” devices designed to transform the economy, rather than make the one we have work better.

Which is hard and remorseless work that does not deliver dividends for ministers who think politics not policy is what matters. But it has a small, albeit hugely cluey constituency.

Making the most of a junior ministry under Kevin Rudd, Craig Emerson hammered away at the need for reform and the dividends it would deliver. Although elevated to Trade under Julia Gillard, Emerson is nothing if not consistent. He was still making the point last year, when he argued that “the removal of internal regulatory obstacles to private business, moving Australia towards a seamless national economy” is the third stage of the transformation of the Australian economy, which Bob Hawke started and Paul Keating continued with national competition policy. [vi]

Productivity Commission chief Gary Banks says budget neutral reforms, including industry-assistance and creating competition in protected industries, such as taxis, pharmacies and coastal shipping could boost GDP by $12 billion.[vii] Senator Nick Sherry, Craig Emerson’s successor as de-regulator in chief, reckoned there is another $14 billion over a decade to save by abolishing unnecessary over-lapping regulation of every thing from property conveyancing to marine safety. [viii]

Good luck with all of that while broadband and carbon dominate debate and discretionary spending. Last week, Senator Sherry warned the states that Canberra would withhold $450 million competition payments to states which had failed to streamline the director’s legal obligations – according to a deal done three years ago. [ix]

So that’s that, the times are out of joint for reform and cursed will be any politician who tries to set them right.

To which the Crows just caw.

It is too easy to argue real reform is off the agenda. In fact, all ages are equally awful for the sort of reforms that expand the economy at the expense of special interest, that eschew alleged electoral reality and less implement policies than change paradigms.

According to Paul Kelly, Paul Keating and John Howard were up for the changes that had to be pushed through:

They knew the old methods of the Labor and Liberal tribes were finished. In the Lodge and reacting to pressure, they devised new governing strategies and positions for their parties. Keating was a Labor modernist who loved his Big Picture. Howard was a change agent who aspired to refashion Liberalism for a more turbulent age. [x]

For all the political failings of the pair, in particular the way they mistook outlays for ideas in their final years in office, Kelly is right to call both men patriots, intent on transforming Australia.

Their political genius was to stay focused on their own objectives. Like Ulysses Grant in the wilderness of 1864, they stuck to their strategy, regardless of the dangers of opponent’s attacks or the opportunities presented by their errors. And they kept at it, acting on the advice attributed to Grant (sadly, the Crows can’t find it anywhere in his papers) “in every battle there comes a time when both sides consider themselves beaten, then he who continues the attack wins”.

Perhaps there is more planning for reform underway than is obvious among the smoke and sniping of the last parliamentary session. Peter Martin argues that Wayne Swan implemented twelve of the Henry Review recommendations in the Budget, notably on FBT, the dependent spouse rebate and child support and that while, as with previous tax reports, it will take time more will follow – “Henry won’t have to wait a generation to see his package come to pass.” [xi]

Perhaps we will find out if Martin is right at the meeting of the wise and the good on tax in October. But there is no need to wait till then for politicians on both sides of the aisle to recognise their responsibility and return to the task of reforming the economy we have, rather than the one that may emerge from a wired world powered by green electricity. In tax collection and welfare spending, in state based regulation and transport, as well as industrial relations, there is a great deal to do.

Instead, the Prime Minister is promising carbon compensation will be paid as permanent tax cuts, pension increases and family payments. Opposition leader Tony Abbott replies he will abandon the carbon tax and replace the related compensation with, “broad tax cuts funded by spending cuts and productivity increases, the details of which are yet to be worked out.”[xii]

And where pray are the rock-solid assurances that any of it will be paid for by an increase in GDP? Tackling productivity sapping industrial law and industry protection arrangements is harder than airy talk of tax cuts, but the former will produce lasting wealth and the latter will not.

With nothing much happening on either side of the political no person’s land, the time is right for one side or the other to get back into policy politics.

The way things are it would certainly be a surprise attack.

ENDNOTES


[i] Adrian Rollins, “ ‘Fiscal straightjacket’ to stymie reform”, The Australian Financial Review, June 21

[ii] Paul Kelly, “Abbott’s plebiscite call a serious misjudgement,” The Australian, June 22

[iii] Dennis Shanahan, “Boom fracturing our country,” Weekend Australian, June 25

[iv] Julia Gillard, “Reform is not easy: but it works: Speech to the Queensland media club,” October 12 2010 @ www.alp.org.au/federal-government/news/speech–prime-minister,-julia-gillard,–reform-is-/ recovered on June 26

[v] Julia Gillard, “Speech: Fair Work Australia Summit,” April 29 2008, @ www.mediacentre.dewr.gov.au/mediacentre/Gillard/Releases/FairWorkAustraliaSummit.htm recovered on June 26

[vi] Craig Emerson, “One Australia, one market: towards a seamless national economy: Inaugural Address to the H C Coombs Policy Forum, ANU” July 6 2010,  @ http:// www.craigemersonmp.com/files/070610%20One%20Australia%20One%20Market%20-%20the%20case%20for%20ongoing%20economic%20reform.pdf

[vii] John Kehoe, “An opportunity not to be missed,” The Australian Financial Review, November 2 2010

[viii] David Crowe, “Sherry pushed $14bn cut in red tape,” The Australian Financial Review November 3 2010

[ix] David Crowe, “Tardy reforms could slice state rewards,” The Australian Financial Review, June 21

[x] Paul Kelly, The March of the Patriots: the struggle for modern Australia, (Melbourne University Press, 2009) 29

[xi] Peter Martin, “Henry’s legacy lives on,” Sydney Morning Herald, May 18

[xii] Phillip Coorey, “Leaders bet futures on rival tax cuts,” Sydney Morning Herald, June 25

'2012