It was somewhat unfair to suggest earlier in the week that whingenomics was only the official economic policy of Tony Abbott’s opposition.
This morning Wayne Swan issued a press release, similar to ones he and other ministers have issued at the start of financial years past, detailing an extensive list of measures to help with cost of living pressures. “The Gillard government recognises there are genuine cost of living pressures across the country and not everyone is seeing the benefits of a strong economy,” says Swan.
Pandering to voters’ flawed conviction that they face “genuine cost of living pressures” is a bipartisan policy.
But politicians need to be careful. One of the characteristics of whingenomics is the insatiable nature of voters’ demands of government. The Howard government threw billions in middle-class welfare and tax cuts at voters, but they took them as no more than their due. Kevin Rudd was still able to exploit their sense that they were “doing it tough”, faced unbearable cost of living pressures and that John Howard and Peter Costello just didn’t understand.
It’s unclear whether Abbott and Joe Hockey, who want to go further than Swan and repeat the Howard-Costello approach of spending the proceeds of the mining boom on bribing voters resentful of not benefiting from it, understand that this didn’t work politically the first time around.
The failure was partly due to the simple maths of whingenomics — the more handouts and tax cuts wasted by Howard and Costello trying to bribe voters, the more the Reserve Bank increased interest rates, a vicious circle of pain inflicted first on mortgage holders and business and then, on Howard and Costello themselves. It was a fictitious solution for a fictitious problem.
It was also partly because (cf. Swan’s media release) voters didn’t connect the tax cuts and handouts with their grievances, a failure of marketing by the Howard government, and also reflective of the entitlement mentality it was up against — a nice irony given it was a mentality much encouraged by that government.
Alternatively, Rudd’s approach failed as well. Under Rudd, Labor connected with voters, convincing them of its empathy with them and their plight in the face of alleged spiraling prices. Labor’s strategy was to retain most of the whingenomics handouts but add to them an impression of “cop on the beat” via initiatives such as Fuelwatch and Grocerychoice. Voters, given the vague sense that Something Would Be Done, were underwhelmed.
So let’s take politicians at their word and think sensibly about whingenomics. Instead of using handouts to play an eternal and futile game of catch-up, what if you wanted to put downward pressure on the cost of living, even recognising our current low inflation environment? What should you do?
Fortunately it’s not hard, though some patience is required.
For starters, convince the NSW and Queensland governments to flog off their power assets. As Ross Garnaut recently demonstrated, the government-owned power sector has been jacking up prices even more than privately owned generators and networks owners. Second, dump the array of highly expensive non-market measures intended to encourage a shift to renewables, such as the Renewable Energy Target, in favour of the lowest-cost option, a carbon price. Then overhaul the electricity market regulatory framework so that the Australian Energy Regulator can stop operators rorting the current pricing rules.
Even the Liberals, currently wandering the broad, sunlit uplands of Abbott’s economic populism, can buy into some of that.
Next, instead of attacking supermarkets that cut prices for family staples, applaud them. Retailers should never be hauled before a Senate committee to explain why they’ve made a product such as milk significantly cheaper for families. Then, rather than seriously entertaining the idea of lowering the $1000 GST import threshold, lift it and index it. At the very least, raise it to $1270, which is where it would be now if the entry threshold had been indexed from where it was in 1976. Shopping online can dramatically cut the costs of household items such as clothes, footwear and small appliances, and will in turn put competitive pressure on Australian wholesalers and retailers to cut their margins. Better yet, investigate the scam of manufacturers refusing to sell online because of contracts with bricks-and-mortar retailers.
Then, force the states to lock in consistent, coherent residential development approval processes that encourage developers to add to new housing stock, instead of trying to deter them through NIMBY-based regulation. Couple it with a significant increase in federal government assistance for the provision of basic residential infrastructure by local councils to start narrowing the gap between our population increase and our housing stock.
It’s unlikely that putting downward pressure on electricity, retail and and housing costs will sate the entitlement mentality of many voters, for whom governments are essentially a source of support for lifestyle choices beyond their current income level. But they’d be of benefit anyway. If politicians are going to pander to voters’ delusions, we may as well good some half-decent reform out of it.