THE NEW SOCIAL CONTRACT – LIBERALISM AFTER CORONAVIRUS

Tim Wilson MP has been the Member for Goldstein since 2016, is Chairman of the House of Representatives Economics Committee and a Fellow of the P.M. Glynn Institute at the Australian Catholic University. Many will remember Tim Wilson as a former Human Rights Commissioner. On Monday 7 September 2020, Tim Wilson spoke for a Sydney Institute YouTube podcast on the topic of his new book The New Social Contract: Renewing the Liberal Vision for Australia. The speech was followed by a discussion with Gerard Henderson, Executive Director of The Sydney Institute

THE NEW SOCIAL CONTRACT – LIBERALISM AFTER CORONAVIRUS

TIM WILSON

Thank you very much, Gerard, for the opportunity to come and speak at The Sydney Institute again. As you know, this is, I think, my fourth visit; the last time I was here was to talk about the tension of issues around religion. Before that it was in the context of free speech. I also took part in a discussion around marriage equality, which, if nothing else, suggests that, whenever we’re coming to The Sydney Institute, we’re always talking about the future, and the contribution that The Sydney Institute makes in leading some of these discussions and debates and ideas in a non-partisan way, which remains very welcome. As a broken Victorian who will never be ashamed to be Victorian but is ashamed of his government at the moment, it’s always nice to be in another state, contributing to the debate in Sydney.

Recently we released The New Social Contract, a book that focuses on the future of Australia and Australian liberalism. It was written in the pre-COVID era, but it made its warnings about the direction of Australian society and the challenges we face and all that has happened since, as COVID has brought forward many of the concerns that have been raised of an imbalanced society. This will create challenges for the survival of liberalism and, of course, the sustainability of a cohesive nation.

Political stability over the coming decade will depend on providing opportunities for Australians who want opportunity, while respecting the security of those who’ve had a go. We have a health crisis that we need to lead and steer through. There will be an economic crisis to come. But the much bigger challenge, in the medium term, is the political crisis that many Western liberal democracies will face, including Australia. All governments are ultimately evaluated by their citizens on their capacity to meet the aspirations of their population. The ability of governments to strive towards this fundamental objective has been significantly hindered by the COVID-19 pandemic and the twin health and economic crises it has created.

And while the health security of older Australians has been imperilled by a virus that discriminatorily impacts people over the age of 60, a weakened economy will limit the opportunities for young Australians to achieve personal financial security.

Unemployment will rise. The very structure of some sectors will change and with sectors that are dependent on people movement, which is so much of the Australian economy, the opportunity for revival will be slim until we get international borders open.

We will not be just in a race to be more competitive in our own economy; it will be against the backdrop of a global race of competitiveness. This is going to raise very serious challenges for Australians and the Australian Government, and states and society, to hold itself together. There will be a fraying of the social contract itself – around what Australians can reasonably expect from their government and what it’s in a position to be able to deliver.

The concept of a social contract is one that people may not be familiar with. Figures such as Thomas Hobbes, John Locke and Jean-Jacques Rousseau intellectualise the idea of a social contract as something that provides legitimacy for governments, freedoms for citizens, and order for society. It’s about understanding, a broad concept which articulates an underlying settlement between the people and their government about how society should function to ensure citizens benefit broadly from the existence of the state itself.

Australian liberalism has understood this settlement as a balance between the freedom of the individual and the empowerment of the individual which shifts and adapts to the context of the times. Individuals should be free to live out their lives unimpeded by government interference and government intervention is warranted only when individuals are unable to stand on their own two feet.

In his pivotal five-book narrative on the Australian liberal tradition starting with the Land of Dreams: How Australians won Their Freedom, a former member for Goldstein and Howard Government minister, Dr David Kemp, highlighted the importance of a social contract to colonial settlement. Kemp argued the idea of a social contract in colonial Australia touched on an aspect of the way societies worked that could not be ignored. It involved such terms as the protection of the liberty of subjects and their property. Similarly, Paul Kelly’s thesis about the Australian settlement in the End of Certainty reflected the post-Federation idea of the social contract founded by practical men striving for income, justice, employment and security, and the establishment of institutions and policies to achieve it. This liberal understanding of the social contract carried through to the seminal years of Menzies economic development which saw Australia consecrate its position as a modern society.

In his memoirs The Measure of the Years, Sir Robert Menzies describes how the post-war social contract recognised that it is the individual whose energies produce progress and that all social benefits derive from his efforts. Menzies’ government focused on promoting home ownership to encourage Australia’s “little family platoons” to take a stake in society as “little capitalists”. For each generation the social contract has been renewed. People can point to many moments where it’s been shifted and renewed, based on the context of the times.

Our history demonstrates that each new generation has been richer than the last in inheriting a stronger economy, a more forward-looking society and cohesive nation from which to build their own security and opportunity. At a global level, the last 25 years has seen over a billion people lift themselves out of poverty while technological advancements have worked to improve our quality of life. However, it presents enormous challenges around the consequences of globalisation and what I call the “era of equity extraction” that we’ve come to the end, which highlights how there can be tension that exists in society because we are eating into the equity of institutions.

At the same time, we find young workers have been increasingly funnelled into parts of the economy which are low-growth, that have high employment requirements, as opposed to the mining agriculture sectors which create new wealth but sometimes have different skillsets. Similarly, the number of Australians enrolled in domestic universities each year is growing rapidly from just over 600,000 in 2000 to over a million in 2016. Most students who work, are employed in low-skilled sectors like retail, hospitality and tourism because they’re accessible and flexible.

The increase in student work supply has been matched by constant demand in the economy, leading to even greater casualisation. What we’re seeing, increasingly, are lower wages for young Australians. The Productivity Commission recently outlined that there has been a decline in wages since 2000 for younger Australians under the age of 35. More challenging, in the COVID era, is that people employed in those sectors are of course on the frontline of those who have lost jobs. And those who were in the service economy – the “froth of the latte” economy – have been those most punished as a consequence of the measures introduced by governments. This creates serious issues about their sense of opportunity and, frankly, justice in a society about their opportunity to be successful in their own right: be able to have a job that pays well, that reflects their effort to have a family, and ultimately to buy their own home.

Moreover, the tax system unnecessarily penalises income, which ultimately is the primary source of how young Australians get ahead, while it preferences and favours – in a structurally imbalanced way – growth that comes off the basis of capital which favours established and older Australians. In 1989, an average under-65 household earning a $100,000 per annum was paying 1.5 times more tax than a household over-65 earning the same income today. Today they pay 2.4 times more tax.

Demographic changes have seen older Australians draw more from the public purse than ever before. But they have not increased their share of the overall contribution to the tax base. Monetary policy has worsened the situation by inflating asset prices, particularly housing, disproportionate to incomes. With all these forces depressing working-age incomes, many younger Australians increasingly feel like the deck is stacked against them. This has a negative knock-on effect on their confidence in democracy and its institutions.

In Western liberal democracies, the underlying diagnosis of these trends and structural divides has created a focus on what is dividing our communities. America’s Charles Murray wrote a book called Coming Apart, looking at the state of White America. Britain’s David Goodhart’s focus on The Road to Somewhere looked at the gap between those who are Somewheres and Everywheres based on their professional capacity and their ability to live out their lives. Matthew Lesh’s Democracy in a Divided Australia focused specifically on the gap associated with geography.

Each outlines a slogan to define the divide. Murray’s is a divide between Americans living in “super zips” over the new lower class, based on access to economic, institutional and cultural power. Goodhart’s British Anywheres and Somewheres is focused around people’s potential to harness the opportunities of globalisation. Lesh’s Australia’s “inners” and “outers” is based on the broad benefits of proximity to capital cities.

Nowhere is there a divide and the erosion of a liberal social contract clearer, than the divide between under-35s and over-65s and it’s an under-analysed area. Despite our yearning for individuality, most people’s lives exist along a relatively linear plane – from an opportunity stage of life, where people pursue education, employment, family and the security of a first home, to a maturity stage of securing that home ownership, managing retirement savings and maintaining personal health and aged care. People’s capacity to progress through these stages of life, and a public policy that reflects their concerns, is critical to the sustainability and the stability of our society.

A recent Newspoll identified that young people were the most concerned about government increasing their debt, while older Australians the most concerned about the health risks of COVID-19. This sort of divide isn’t new. A 2012 Pew Research Center survey found young Americans under 30 were most concerned about the size of the deficit, whereas older Americans were more concerned about supporting social security and Medicare. There has always been a generational divide between the priorities of younger and older voters, encapsulated in the quip that we use colloquially here: if you don’t vote Labor under 40, you have no heart; if you don’t vote Liberal over 40, you have no brain.

The practical political problem for liberals is that the conversion from voting with your heart to your brain occurs because of changing life priorities that are increasingly less likely to occur or are being delayed. A 2014 research Reason Foundation study into the attitudes of US millennials found that many identified as being independent because they are “social liberals and fiscal centrists” with the potential to become more fiscally conservative as they age.

Critically, the study found the core drive for people to go out on a journey of conversion from identifying as politically independent to politically centre-right occurred when they got married or they bought a home, and often both in the same circumstance. These two life events are typically intertwined with people’s shifting sentiment from the opportunity stage of life towards having something to secure and to conserve. A 2012 Oxford Economics study found intergenerational redistribution tension is intrinsic in life cycle models. Young cohorts have few assets and wages in the main sources of income. Older generations work less and prefer a higher rate of return from their savings. As a consequence, they have distorted priorities about what they want to see from public policy.

The same basic trends appear in Australia. ABS census data shows that home ownership rates are highest in Coalition electorates and lowest in Labor and Greens electorates. Ironically, along the same political divide. Additionally, ANU data clearly shows that 46 per cent of homeowners vote Liberal, 33 per cent vote Labor, and only 6 per cent vote Green.

The concern should not just be about the impact this will have on electoral fortunes but on the width of mainstream political discourse. A 2020 study by academics David Adler and Ben Ansell found that populist voting behaviour correlated with the Brexit referendum and France’s 2017 presidential election, where areas that have gained from house price inflation are far less likely to vote for populist causes or parties than areas that are being excluded from those gains. Former British Conservative MP David Willetts wrote in the book The Pinch that fears about our society and the strain on our economy reflect a breakdown in the balance between the generations, leading to a more radical younger polity.

Younger voters overseas who flock to support the unreconstructed socialists of Jeremy Corbyn and Bernie Sanders provide clear evidence of this occurring. Australia has largely avoided this phase – so far. But the key difference, following the global financial crisis that both the United Kingdom the United States experienced, was much clearer unemployment prospects for younger Americans and younger Britons, which has only led and exacerbated that. We are now on the doorsteps of a potentially much more radical political movement in Australia.

We did see some of it in the last election. Bill Shorten attempted to stoke the intergenerational divides in 2019. Much of Labor’s election policy platform sought to encourage large cash flows into their organised capital masters – industry superannuation – but it was draped with a pro-youth veneer. Greater government revenue would be seized by harnessing the interests of retirees by higher taxes. As demographer Bernard Salt wrote, “While it is true that boomers saw off this challenge at the May 2019 election, underlying age-based tensions remain.” And the data backs it up.

At the 2004 election, nearly 50 per cent of Australians under 35 voted Liberal. Today it is 23 per cent. The ANU’s electoral study found that while younger voters are moving further to left, older voters are moving further to the right, and it’s consistent with a growing generational divide in the voting behaviour of younger and older Australians. Of course, we should not want a society where there are divides at all, and we certainly should not one where the young are pitted against the old or the old against the young. The very principle of being a steward of a society and a leader is to understand how to bring people together and to recognise that we have to have a society that finds a sense of place and purpose for everybody.

The challenge to sustain the existing Australian social contract is that with home ownership rates declining each year, the personal stake of younger Australians in supporting the current pillars of our society is slowly being eroded. Melbourne University’s HILDA study found that home ownership rates amongst the young dropped by nearly one percentage point every year between 2002 at 35.7 per cent to 25.2 per cent by 2014. This trend is only likely to get worse. Recent Productivity Commission data shows that between 2008 and 2018 incomes for people aged between 15 and 24 fell by 1.6 per cent every year while incomes for those aged 65 rose 3.2 per cent per year and that was pre-COVID. So, it is only going to get worse and compounded as the gap between the capacity for young people to work in proportion to their home ownership rates and their capacity build their lives deteriorate.

Part of the problem lies with our vocational training system which has been ill-equipped to open new and ultimate career opportunities for a young workforce, and many people have found a system that offers over 1400 qualifications and a huge variation in fees between states too incoherent to navigate, instead reverting to the conventional university option. The number of vocational qualifications-seeking students fell from over 1,550 in 2012 to under 1200 in 2017. Part of the problem is the TAFE courses have been hollowed out by state governments, and VET funding has fallen by 25 per cent on average across all states and territories except Tasmania over the past decade. The current National Agreement for Skills and Workforce Development simply hands $1.5 billion to states without the clarity necessary. Positively, in the “JobMaker” plan, the Prime Minister has highlighted skills as an area which will be reformed as part of a post COVID-19 recovery.

This is critical. As we recover from COVID-19, given what we already know about the scarring effect of recessions on young workers, recessions typically burn those in the early stages of their career with persistently lower levels of employment and wages, and there is ongoing compounding effects for the remainder of their career.

While commonly thought to last a decade, researcher Jesse Rothstein of the University of California Berkeley has found evidence that lower unemployment rates may in fact be lifelong. Meanwhile, since the GFC, central banks have continued to engage in monetary expansion that props up asset values, compared to incomes. It will be worse if the Alan Kohler generation get their way through the adoption of Modern Monetary Theory. Inflation is not registering in consumer products because there’s been counterbalancing deflation from technological innovation, efficiency, competition and global pricing.

But there has been inflation as a consequence of quantitative easing, which has only harmed young Australians to protect the interests of the wealthy. In their 2019 paper, “A model of the Australian housing market”, the Reserve Bank of Australia’s Trent Saunders and Peter Tulip outlined that inflation from monetary expansion had instead been absorbed in the least mobile and internationally tradable asset: housing. The result is fine if you own your own home, like myself; we just see rising house prices. But, essentially, it boosts the wealth of those who were established at the expense of young Australians, who face higher barriers to home ownership.

Data from the Institute of Health and Welfare found homeownership for Australians aged 30-34 has dropped by 14 percentage points from 64 to 50 per cent since the 1970s, and 13 points for those aged 25 to 29 from 50 to 37 per cent. This is why a reprioritisation from 20-year-olds focusing on their superannuation balances,  enabling them to buy their own home, is so critical. It is simply madness to think that a 20-year-old should be saving for their retirement 50 years into the future when they get the compound benefits of homeownership for more than 50 years.

Compounding these trends is the disproportionate benefits many young Australians gain from emergency spending programs like JobKeeper and the JobSeeker coronavirus supplement which have long tails and legacy effects. Data provided by the ABS rails reveals that workers under the age of 20 actually saw their wages increased by an average of 16 per cent from 14 March into May while for people aged 20-29 their wages shrank over the same period but at a lower rate than anyone else under 60.

The idea that temporary increases in public expenditure reframe popular expectations in a way that makes it increasingly difficult to undo these implications for a liberal constituency when feeling for disenchantment with the status quo combined with a beneficial experience under an alternative debt funded socialised economic system are obvious. For liberals, the task is to illustrate the dramatic state interventions during COVID-19 are fundamentally temporary in their nature. They will not lead to any real world economic recovery. They will only dampen productivity with worsening inflation.

That doesn’t mean that there isn’t an important role for government in COVID-19 recovery. There critically is. Because the need for security is going to become essential for investment. But it has to be one that creates the opportunities for the next generation of Australians. The extended divide in attitudes and outlooks between the young and old has led historians Niall Ferguson and Ike Fineman to warn in the Atlantic recently of “The Coming Generation War”. One of the key deficits among liberalism’s advocates in Australia is their failure to recognise that, in the twenty-first century, they need cultural currency more than ever before.

The largest voting demographic in Australia is 18 to 35. Part of the reason people are increasingly voting with their hearts rather than with their minds is that they’re more connected with those deeply embedded ideas of equality and fairness in a national consciousness. That must be at the heart of the fundamental pillars in which we build a future liberal society. Philosopher Edmund Burke recognised that each generation stewards their responsibility to each other and to future generations.

Burke recognised the contract is not only between those who are living but between those who are dead and those who are yet to be born. With millennials now the largest voting demographic, having eclipsed Baby boomers, the social contract will have to be renewed to avoid a soft revolution at the ballot box that could dramatically and radically change the direction of liberal democracy in Australia.

Ultimately, solutions rest in modern liberal economic reform: promote home ownership, harmonise and make the tax rates consistent and, especially after COVID-19, have an industrial relations and skills training system that gets young workers back into sustainable career pathways that have been always at the heart of the Australian promise.

DISCUSSION – LIBERALISM AFTER CORONAVIRUS – TIM WILSON MP WITH GERARD HENDERSON

Gerard Henderson: Well, thanks Tim. It’s great to have you back again. How did a busy man like you do a book like this so quickly after the election?

Tim Wilson: Well the ideas that ruminated at the heart of the book sit well beyond that time frame. I started thinking about the book and the ideas behind it over a decade ago because what I saw was the increasing divide that was emerging, politically, between different generations of Australians and what their aspirations were. Particularly, it came from the consequence of my going through my own experience around trying to buy my own home and how that was compounding perceptions and concerns about a sense of justice within society and in what was going to be necessary.

It became obvious to me that most of the people who were able to buy their own home were people who got support and assistance from their parents. What we were finding was, increasingly, that younger Australians’ capacity to achieve what used to be reasonable expectations about their own life was dependent on their parents and their success. Then the tax system contributed and compounded that. So it’s a discussion about not just where we are going to be now but where we’re going to be in a decade’s time if we don’t look at how we can address many of these challenges. They were already there and were going to lead to a soft revolution at the ballot box but are now being pushed forward by COVID-19.

Gerard Henderson: To what extent is this related to  the forthcoming death of the Baby Boom generation? Presumably people who have houses are going to pass on money to those who inherit from them. Will that make a difference?

Tim Wilson: It will make some difference but we’re still aligning it against the realistic expectations of people being able to achieve their own success. The whole basis of the great opportunity of Australian society has always been that everybody, meaningfully, can go about trying to achieve their own sense of success. We never had an hereditary based system of entitlement. In fact, that goes right to the core of the foundation of the modern colony/modern state. What I’m arguing is that there is now serious pressure where we’re almost creating a property owning class at the expense of the rest of the community.

Of course, with people living longer the transfer of that wealth is happening later and as a consequence many have no real sense of ownership within their society. This is coming out in the data. Younger people are becoming not just more left wing they’re becoming more radically left wing. We have seen that particularly in the United States and the United Kingdom with Corbyn and Sanders. They may not have won but the numbers showed that the underlying issues they were addressing are still there. High unemployment amongst young people is going to very clearly a problem. In three to five years I think we could have serious political consequences and a political crisis associated with it.

Gerard Henderson: Looking back it seems to me, in the Liberal Party, that those who most openly spoke about the need for home ownership were Robert Menzies and then John Howard. Howard was very much influenced by the Menzies tuition costs. Apart from reasons of equity, John Howard spoke about social stability. Are you in that tradition or in another kind of tradition?

Tim Wilson: I’m in that tradition but I’m a Menzian liberal and I very much identify with the values  at the heart of Menzies. Menzies always talked about himself being a liberal, and I really stress that. He always went to trouble to describe himself as not a conservative because he saw conservatism as essentially creating a class based society. Menzies very clearly said he was not in favour of that. His Liberal Party was in favour of a society where everybody could see their progress and future.

Howard used a different vocabulary around his political philosophy. I’m going very much back to the ideals that Menzies articulated because home ownership is the foundation of social stability but it’s also the foundation of social progress. Go back and look at the 1949 speeches given between Ben Chifley and Sir Robert Menzies. They are available on the Museum of Australian democracy website. Chifley was primarily interested in how we use housing as an opportunity create a class of renters. Menzies talked about it being how we create a class of homeowners which is really the transfer of, in his words, little platoons to little capitalists. It sets a foundation and a sustainable sign of strength in society.

Gerard Henderson: Well let’s take up the Ben Chifley point. As Labour leader he lost the election in 1949. We’ll come back to that in a minute. But you talk about Chifley wanting a generation of renters. I recall growing up in Melbourne in the 1950s. The Housing Commission. My father worked as a clerk for a very senior person there. There was a great emphasis on the Housing Commission under a Liberal government at the time in Victoria. There had been a Labor government briefly in the 1950s. It seems to me that the left today is talking about going back to social housing. They want to go back to kind of the great forces on social housing. What’s your objection to social housing? I know why you favour ownership but why do you not see a future in social housing?

Tim Wilson: We all acknowledge that there’s a place for social housing but it’s really where you want the emphasis and the norm to be. One of the reasons we have such a high demand for social housing – and Victoria in particular is the example where investment in social housing has been the lowest in the country –  is because the private market isn’t making housing affordable for young Australians who go on about their lives. I don’t want the default setting to be social housing and maybe in time get home ownership. It should be homeownership and we have social housing as the exception. That is why we need to refocus and re prioritise how we see the role and the power of homeownership as part of the future of the country. And that means we’ve got to do some quite dramatic things as well in the space around home ownership to promote affordability.

Now we’ve had a massive decline as a consequence of COVID in terms of demand with fewer people movements and the like. And younger Australians are going to take a big hit in their incomes. Meanwhile, monetary policy is keeping asset prices high and they could potentially continue to rise. Younger Australians aren’t going to be in a better place to be able to buy their own homes.

Gerard Henderson: Towards the end of your book you did speak about the post pandemic. I think your argument is that the problem as you described before the pandemic will continue after the  pandemic but become more substantial

Tim Wilson: And faster. There are problems that I thought would emerge in about 2030. I now think they will probably occur in 2025.

Gerard Henderson: You’re an MP in southeast Melbourne.

Tim Wilson: Sure – bayside Melbourne.

Gerard Henderson: So, you’re a liberal in bayside Melbourne. How’s a liberal survive Dan Andrews’ government post-COVID?

Tim Wilson: Well a liberal will survive because in two to three years, when, hopefully, we have the health consequences of COVID-19 over, the economic consequences of the decisions this State government will be so extreme that there’s a realistic scenario that Australia might be in recession. But Victoria could be in depression. And be quite separate because of the volume and scale of decisions that this government made and its complete abrogation of responsibility. Under the current lockdown measures Victorians are less citizens of their state and more serfs to a mad king. At some point, when people realise the full scale and cost of what he is doing, it’s going to be very clear to everybody that a different way is needed.

Gerard Henderson:  To get back to the Second World War. Some harsh things were done. There was far too much concentration on certain matters. The harshest of all was probably that many Italians who didn’t deserve to be interned, were interned. But by and large the restrictions in Victoria now are much more substantial than the restrictions were in Victoria between 1941 and 1945. Without the same reason. So why is it that Victorians tolerate them, or so many of them do?

Tim Wilson: There’s a number of factors that are playing out. Firstly, I think Victorians have been demoralised by being kept at home for so long that they are not in a position to push back. There’s a hope and willingness that it’s a successful strategy that works. But, of course, ultimately as in other parts of the country, the federal government has been providing assistance and support to keep Victoria going. But we all know that it can’t go on forever and it’s lessening the pain rather than the actual pain which will reveal itself over the coming months.

Gerard Henderson: But, as you know, the opposition in Victoria is a Liberal Party plus the Nationals. leader. What does a Liberal Party leader do in two and a half years in Victoria?

Tim Wilson: In two years in Victoria they will need a substantial program of microeconomic reform to rebuild the basis of our economy. Victoria has limited primary industries. We have agriculture but there’s not much in terms of mining outside a specialised area. We have manufacturing in some key areas like aluminium and some moulding of metals and die casting. But most people are in the service-based economy so they’ve got to find ways to make them competitive. It cannot  be solved in isolation. As I said in my speech, there’s going to be a global race to competitiveness for every country around tax, industrial relations and affordable energy. The main inputs to the economy. We’re going to have to be very nimble. You need a substantial program of reform that leads to investment. Critically, what’s going to become essential is providing different forms of government guarantee to support mobilised private sector capital to build the future of the state.

Gerard Henderson: That’s consistent with your version of liberalism in a couple of years?

Tim Wilson: It’s like tariffs. I support free trade as you know. But when you have a government that creates artificial constructs through tariffs, then part of the obligation of the state is to undo the damage that has occurred. The free market solution to managing COVID-19 is people take responsibility for their behaviour. They respect each other and find that space. As I’ve said, we’ve had the massive interventionist hand of government smash right into the heart of the economy. The reality is we’re going to need to rebuild aspects of the structure of the very base of the economy.

Gerard Henderson: Let’s go back to Menzies and Chifley briefly. As you know, Menzies was devastated when he didn’t win the 1946 election. The essential errors the Chifley government made was continuing the restrictions well beyond the end of the war and attempting to nationalise the private banks. In a sense, 1949 is a reaction to what seemed to much too harsh a government across wide sections of the economy. You’re thinking that might happen again and similar things might happen in two and a half years in Victoria?

Tim Wilson: The Victorian economy has basically been locked down now since March, in different forms. And while some people have managed to keep things going what’s actually happened is habitual change and because so much of the economy is based on service based sectors – people going to cafes and restaurants and the like. It takes a long time to rebuild but it’s also an issue of confidence.

Savings rates gone up because even if people mightn’t have as much income they’re much more uncertain about the future. That’s going to be set against a global backdrop where there will be global recession as well as what will happen domestically. It’s very serious and everybody will know in two and a half years who was responsible for what will be the huge separation between the situation the rest of the country faces and the unemployment levels in Victoria.

Today, we are talking about unemployment in Australia being below 10 per cent by the end of the year – and a lot higher in Victoria above 10 per cent. So, it is a big challenge we face. What we’re going to have to do is find the opportunity in this to not try and reconstruct the economy as in the twentieth century but how to build the economy in the twenty-first century.

Gerard Henderson: Last weekend, Victorian premier, Dan Andrews, announced what I think disappointed  business and others. The premier explains it essentially with reference to modelling. In your time with the Institute of  Public Affairs, you were not a great fan of modelling in the area of climate. To what extent does this sort of modelling work in relation to COVID-19?

Tim Wilson: I’m not equipped to give commentary on that due to not viewing the modelling. But it’s the technocratic approach to government that is wrong. People are elected to take responsibility and by abrogating responsibility and shifting onto what a computer model tells you should be done is to embrace a technocratic approach to government which essentially inverses society from free people living their lives with measures necessary to preserve the freedom of others to people ultimately living their lives to the service of the state.

That’s where Victoria now is. It’s a complete fallacy in terms of our approach to governance because it sees the complexity of society through a single lens to achieve one objective without any proportionality or weighting of consequences on any other issue. We know that, yes, there are people who sadly died before COVID-19, of health conditions. They do now and they will into the future but now we’re only focusing on COVID-19 ones. We’re not really worried about mental health stress. The most extreme form of that is suicide. They’re not concerned about the health consequences of delayed elective surgery. On top of that there are the economic consequences. So it’s a flawed logic, it’s an abrogation of responsibility in government and it only will end in disaster.

Gerard Henderson: The government’s abrogation of responsibility goes to an aspect of government which is the public service. This is where non-elected public servants speak with the authority that once the government spoke with?

Tim Wilson: Yes. And I think people accept a component of that because you’ve got a health crisis so you want things to be understood from a health lens which may not be in the politician or the premier’s area of expertise. But in the end they should not be ones deciding. The idea that you can have governments run by experts is a flawed strategy of governance because they’re not weighting competing priorities. This goes all the way back to Hayek and the Constitution of Liberty. Ultimately, it’s about information. Government can never have perfect information. The central authority cannot have perfect information. It’s through the voluntary actions of millions of people in their daily lives that inform the totality of the information that’s available to people. In the end, you basically only make people servants of the state with this approach and public servants doing it with even less accountability and less capacity to be kept in check because they don’t report to a parliament.

Gerard Henderson: You’re a Victorian Liberal speaking out on these issues. And I understand that at the moment, if you’re in opposition in Victoria, it must be hugely difficult. But we don’t hear many talking like you’re talking today coming out of the Victorian Liberal Party. Are they there or we just don’t hear them? We hear Josh Frydenberg but we don’t hear much from the Victorian Opposition even though it’s difficult to speak on some of these matters?

Tim Wilson: They speak out and they have their voices heard. There’s been many good speeches recently. But while federal Labor is relevant to the conversation they’re not the decision makers. And with respect to my state colleagues, they’re not decision makers either at the moment. Their task is to lay the foundations about why there needs to be concrete policy reform program put forward in two years as an alternative vision for government.

The people who are abrogating their responsibility right now are state members of parliament who know what their government is doing is wrong. They do exist and I understand the challenges sometimes in having to defy your own party to do the right thing.  I have done that. Within the state members of parliament, there are some within the Labor Party who have made it clear, privately, that they know what the state government is doing is wrong. But they’re not stepping up to the plate and this is one of those times where if you don’t stand up and be counted, you’re failing your electors and you deserve electorally what’s coming to you. But the bigger problem is that you’re going to take the state with you.

Gerard Henderson: You’ve got tremendous endorsement for your new book from former Senator Amanda Vanstone but also from Prime Minister Scott Morrison who says the book “prompts, stirs and challenges us”. What does he mean?

Tim Wilson: What he means is that the book says some very uncomfortable things for members of the Liberal Party. Some people identify as conservative. Some people identify as liberal. It’s about what intergenerational justice in the liberal tradition means. I talk about what liberalism itself means and what makes Australian liberalism different from other countries and why that matters. I point out what I believe to be the false logic of identifying as a political conservative. Then, to address some of the big challenges we face, I’m saying we need to change some of the structures, particularly around tax and how we favour some economic activity versus others which challenges our electoral base. My point is that if we don’t do that then there won’t be a political constituency who will be sufficient to support liberal governance in Australia.

Gerard Henderson: In these discussions in these times of pandemic we ask our members to send in questions and one of them is how during the election you argued that Labor’s policy on franking credits constituted a retiree tax. Now, in the COVID-19 economy, would not a ceiling on franking credits be appropriate on the grounds of what you’re talking about in intergenerational equity? So, have you backed off on the franking credits?

Tim Wilson: I’ve always believed you need to have a debate around tax and transfers as a holistic discussion. I maintain that view very strongly. You can’t solve public policy by demonising one section of the community. The Labor Party basically lied and said that it was a public gift to retirees because the discussion around tax and transfer ultimately came to tax and responsibility for people. You just need to look at the Productivity Commission study in 2015 called “Tax and Transfer Incidence in Australia” to identify who’s paying what taxes at what stage of life and who’s getting the benefits of them.

So, you can’t fix the problem if you’re not going to have a discussion around responsibility as well. The point of the book is to say let’s have a deeper conversation and let’s get some of these issues on the table because what I argue for is, as one person has written, quite a radical proposition around tax which is to heavily flatten the tax system to remove a lot of the systems of transfers of wealth so that we have a more liberal society that’s sustainable and more intergenerational.

Gerard Henderson: Another question one from our members is how will the liberal doctrine respond to the probable post pandemic retreat from globalisation and a free market dogma?

Tim Wilson:  Well, I go through it again in the book about how we’ve come out of essentially an era of equity extraction which is what’s happened in a post-Cold War era. There are a lot of people writing about this now, about how we need to reinvest and build. Yuval Levin, recently, from the American Enterprise Institute wrote a whole book about institutions and why we need to rebuild the structures to make it work. I recognise the importance of the neo liberal era and what value it added because there was a very important idea at the heart of that. It’s about a rebalancing and to get it suited to our time. But that time is now over.

The other thing I mentioned is globalisation, shifts in terms of globalisation around supply chains and the like and economic structures that have already started to occur. There is obviously a very heavy reliance on China. Our relationship with China is challenged at the moment.

Gerard Henderson: Another one of our associate members asks the question: if you’re a liberal where do you stand on closing the borders and the Coalition government supporting Clive Palmer’s suggestion or proposed action on Section 92 to free the border between Western Australia and elsewhere?

Tim Wilson MP: I’m deeply uncomfortable with the borders being closed. I have said so consistently and I support that area of the law being tested. It’s up to the government if it wants to join the case or not. As I said on Q&A recently I’ve been on the side of the border closures and I want them as temporary as possible. Ironically, after his spray recently at some of us about superannuation, Paul Keating even came out and said that border closures are very challenging. There’s obviously a need to manage an immediate crisis around COVID-19 and there are proportional measures that can be taken. Nobody is arguing against that. It’s whether they’re justified and they’re sustainable beyond the immediate risk and I’m not convinced that border closures are always in favour of the challenges we’re facing.

Gerard Henderson: What was good about Menzies is that he didn’t continue what Chifley had done. He didn’t wind it back much except for getting rid of everything that had been nationalised. But Menzies presided over a pretty regulated economy and he had no great desire to unregulate it. So, looking at the two of them, John Howard was much more liberal in your sense of the term liberal than Menzies was because Howard wound back a lot of government controls.

Tim Wilson: But a lot of those things are the reflection of the time. International competition and information technology is driving a lot of behavioural changes and a need to be more globally competitive. There are aspects of what we’ve done in the past that we need to re-establish because they are fundamentally good for the sustainability of our society such as a particular emphasis on home ownership. But if you want to build the future of the Australian economy it has to be for the twenty-first century. You can’t just be rehashing what was done in the past for the twentieth century. Howard, Hawke, Keating and the dries recognised the need to structurally change Australia’s economy so it made a contribution to the world. And we’re going to have to keep doing that – it’s never finished.

Gerard Henderson: After the 2019 election, I argued that you were probably the first backbencher on either side of politics who played a significant role in an election victory. Now you’re still sitting on the backbench. How do you feel about that?

Tim Wilson: I actually love my job as Chair of the House Economics Committee. I know that will sound like a trite response but I’m interested in outcomes. And that’s how I get my outcomes at the moment.

Gerard Henderson: If you go to the next election, and I assume you win, what does that mean? Another book? And what would it be on?

Tim Wilson: This book is what I call a foundations book. There’s another book that’s to come which will be focused on close to what people call “that vision thing” but much more; trying to articulate how then do we get to where we need to get to. The moments that we’re in now are so uncertain and it’s very hard to draw clarity about where you want to be. If you want to draw a map of where you want to be, you’ve got to know where you’re starting from.

Gerard Henderson: That’s a good place to conclude. So many thanks and good luck with the book.