Stone the crows! Everybody’s a reformer, as long as it does not mean doing anything.
Last month Julia Gillard wrapped herself in reform.
The Labor Government I lead puts reform at the centre of all our economic decisions, and I also believe the way we approach reform will be a case study for the best way to govern – methodical; making steady progress on our plans, day by day, week by week; working hard for all Australians.[i]
So did Tony Abbott, when he promised: If the government does propose real reform the Coalition won’t get in its way”, before quite reasonably detailing the Howard Government’s achievements.[ii]
So that’s okay, we are all reformers now. As long as you ignore the way Ms Gillard claims her re-regulation of the workplace “will improve economic productivity and create rising national prosperity” and the way Mr Abbott sold his pre-election idea of taxing business, so a parent with a new born child could take six months off work on full salary (up to $150,000 annual), as better than the ETS, because it provides “a practical, direct benefit”. [iii]
But it’s not okay. In a hung parliament neither serious side of politics is likely to have the enthusiasm for unpopular reforms, which major change, like floating the dollar and privatising government owned industry, always is.
Especially when what everybody ignores is that the great reforms of the last 30 years were not the norm – that Australians have always hated change and still do, even though the economic impact of inertia is enormous.
Anybody who remembers the rage generated by deregulating the dairy industry in the 1990s and the way the GST came close to costing John Howard government in 1998 knows that big reform is always tough and dangerous. Given our druthers, we like to leave things alone. As Amanda Fitzgibbons proves, for all the talk of capitalists driving deregulation the banks were not big on the Campbell Report, the first great manifesto of financial reform:
… far from the financial sector initiating deregulation, the reforms were implemented despite (sic) opposition from both the regulated banking sector and the non-bank financial institutions.[iv]
It’s only in crises that we cop the case for change. As John Edwards argues, John Curtin’s great insight was to understand that WWII gave him convincing cover to restructure Australia:
He understood that the circumstances of war offered him a chance to change the way Australia worked. Though remembered now for bringing the troops home, his primary intellectual interest was economic policy rather than defence policy and the biggest influence on his thinking was not Australia’s experience of war against Japan in the 1940s but its experience of the Great Depression in the 1930s. His enduring achievement was not saving Australia from Japan but in creating modern, post-war Australia. [v]
Similarly, Paul Kelly argued in The End of Certainty that Australia was shaped by bipartisan support for a state regulated economy for its first 80 years, which ended only when politicians of both major parties realised the jig was up, “The 1980s campaign to re-invent the Australian political tradition was driven by economic crisis.”[vi]
As Gary Banks has argued our iconic achievements in reform were not all that dramatic, “simply removing the lead from our saddle bags. … The natural forces of political economy are not conducive to reforms that potentially provide diffuse benefits to the concentrated cost of the few.” [vii]
In general, we are happy to just jog along. In 2008 we dodged the GFC bullet and indulged in nonsense about the collapse of capitalism rather than accepting we had better build on our luck through structural reform, in case we are not as lucky in the next international crisis.
So what to do without a good crisis not to waste?
Alan Mitchell argues the case for a big bang approach, saying that while there are always winners and losers from reform the more changes the better, because “the losers from reform are likely to be winners from other reforms”. [viii]
But there is a corollary to Mitchell’s law; groups who lose a lot on one reform ignore what they win on others. While the economic case for the Henry tax reforms is obvious, the political chance of them being adopted by a minority government, whose members can imagine the howls from middle-income earners whose PAYE tax would increase, are less than unlikely.
So what’s Julia Gillard to do if she really is a reformer?
Gary Banks makes the case for budget-neutral reforms such as ending industry assistance, (easy if you say it quickly) and creating competition in industries such as taxis, pharmacies and coastal shipping. Floating the dollar they are not but Banks says such steps could boost GDP by $12 billion.[ix]
And new small business minister Nick Sherry is continuing the campaign of his predecessor Craig Emerson, arguing there are 27 areas of unnecessary regulation, ranging from property conveyancing to marine safety, with the potential to save $14bn over a decade.[x]
Emerson himself suggests “the removal of internal regulatory obstacles to private business, moving Australia towards a seamless national economy” is Phase III of the transformation of the Australian economy, which started with Bob Hawke opening up the economy and continued with Paul Keating’s National Competition Policy.[xi] Funnily enough John Howard’s tax and waterfront reforms do not get a mention.
Of course this is all easier said than done. Kristina Keneally has ratted on national health and safety laws for her own parochial purposes. Harmonising state and federal consumer laws is not the heroic equivalent of the great reforms of the 1980s and 1990s and national trades registration is no big deal given what we need now – which is tax reform.
But with nothing impressive occurring in a hung parliament some movement on reform is better than none and perhaps this as much as we can expect. It is certainly better to keep reform moving, even if the pace slows.
While the low hanging opportunities are gone there is still plenty of obscure reform fruit.
[i] Julia Gillard, “Reform is not easy but it works” Australian Labor News, October 12 @http://www.alp.org.au/federal-government/news/speech–prime-minister,-julia-gillard,–reform-is-/ recovered on October 6 [ii] Tony Abbott, “Alfred Deakin lecture 2010” @ http://www.tonyabbott.com recovered on November 6 [iii] “Fair Work Bill, 2008 second reading speech, the Hon Julia Gillard MP Minister for Employment and Workplace Relations”, The Australian November 25 2008, AAP, “Parental leave better than ETS: Abbott,Sydney Morning Herald, March 10 [iv] Amanda Fitzgibbons, “The financial sector and deregulation in Australia: drivers of reform or reluctant followers”, Accounting, Business and Financial History, 16,3 (November 2006) 371-387, [v] John Edwards, Curtin’s Gift: reinterpreting Australia’s greatest prime minister (Crows Nest 2005) 11-12 [vi] Paul Kelly, The end of certainty: the story of the 1980s (St Leonards, 1992) 18 [vii] Gary Banks, “Australia’s economic miracle” (in) Banks, An Economy-wide view: Speeches on structural reform, 35-44, 42 (Canberra, 2010) [viii] Alan Mitchell, “Reform is best in bulk” Australian Financial Review, November 3 [ix] John Kehoe “An opportunity not to be missed” Australian Financial Review, November 2 [x] David Crowe, “Sherry pushed $14bn cut in red tape” Australian Financial Review, November 3 [xi] Craig Emerson, “One Australia, one market: towards a seamless national economy” July 2 2010 @ recovered on November 6