The economy is everyone’s business
News Limited Network
February 20, 201312:00AM
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Labor has delivered an economic holy trinity. Wayne Swan must be wondering what more he can do. Source: Bloomberg
IF the polls are to be believed, Australians are about to boot out a government that has delivered an economic holy trinity: Unemployment with a “5” in front, inflation with a “2” in front and low interest rates.
Ungrateful bastards, Treasurer Wayne Swan no doubt thinks. What more do they want from me?
Conventional political wisdom used to have it that governments change only after some dire economic failure or recession.
But Australians have started kicking out governments with strong economic credentials.
Just ask Peter Costello.
Perhaps it’s because these days the Australian economy largely runs itself.
The Treasurer still controls the purse strings, but the heavy lifting of day-to-day management of the economy resides with the independent Reserve Bank setting interest rates.
The role of the treasurer today is more about difficult microeconomic reforms, such as making the tax system more efficient.
Ever since it was revealed the mining tax had raised a paltry $126 million in its first six months, blame for the Government’s bad polling has turned on Swan and his skills in the Treasury portfolio.
Let’s be honest, Swan is not a convincing public speaker.
Rarely does he stray off a predetermined, carefully considered script. And rarely is that script particularly rousing.
We say we want substance, not style, from our politicians. But it turns out we want both. We want to be convinced.
The success of a modern treasurer lies not in their technical competence to design reforms – they have Treasury for that – but in their political skills to sell them.
A successful treasurer understands that economic reform creates winners and losers and possesses the political nous to smooth the path for reform by selling the message that we’ll all be better off in the long run.
It is here that the current Government has fallen down.
Competent technocrats they may be – acting quickly and decisively during the GFC to kickstart economic activity – but they have since failed to construct a convincing narrative for voters.
Confidence – that most ephemeral of economic indicators – has been damaged.
And lately, Prime Minister Julia Gillard and Swan have created a holy trinity of policy bungles: The carbon tax that cost more in compensation than it raised while doing little to cut emissions; a mining tax that, again, cost more in associated spending than it raised; and a Budget surplus promise that was foolish from the outset, potentially counteractive while it lasted (by dampening economic activity) and humiliating in its abandonment.
But policy on the run didn’t start with Gillard. So much of former prime minister Kevin Rudd’s policy agenda lacked rigorous analysis.
Think FuelWatch, Grocery Watch, home insulation, set-top boxes for pensioners, the alcopops tax and the ambitious National Broadband Network – all conceived and implemented with no public cost/benefit analysis.
It suddenly just feels like one bungle too many.
Labor has let the losers of reform feel like losers and the winners feel like losers too.
But it’s not all their fault.
In key areas of economic reform, including taxation, the Government has had to contend with an increasingly rambunctious and self-interested business lobby.
The Government may be lily-livered in not standing up to the interests of big companies, but big business has gone feral. Our business leaders have become bloated and fat off the good times.
The bully boys of business have become a pack of whingers and rent seekers. Business groups, which once sensibly recognised the need to reduce carbon emissions to ensure continued economic growth, saw the chink in Labor’s political armour and turned, lobbying against any action.
Mining companies, which make a crust exploiting minerals owned by the Australian people, deployed tens of millions of dollars campaigning against a tax that would have seen a fairer return to Australian taxpayers.
Since when did the business community have a responsibility only to shareholders, not the communities in which they exist and society as a whole?
Since when was it OK to make a buck by screwing customers, government and small business suppliers?
There are lessons for Tony Abbott and Joe Hockey in all this.
First, they must ditch the scaremongering about the economy. We are doing well. Government debt is low and manageable. Confidence, however, is a fragile thing.
Second, they must stop pandering to big business. Perhaps they will be in a better position to do so as conservatives, who are not traditionally seen as anti-business.
In the longer term, something must be done to put finances on to a more sustainable footing.
Spending cuts will only go so far. A fair-minded Coalition government would reconsider its promise to axe the mining tax and instead redesign it to make it a more efficient and effective tax.
Australia needs a strong government able to stand up to vested interests. On present form, it seems the current Government is no longer up to the task.
But it remains to be seen if the Opposition is either.
Jessica Irvine is News Ltd’s National Economics Editor