Despite the ability to prosecute reform being the raison d’etre of the Turnbull prime ministership, his government has no economic reform agenda and may be unable to develop anything other than a business-inspired pastiche of reform.
A quick run-through of the most pressing areas of economic reform in Australia shows that, under (mostly) Abbott and Turnbull, we’ve gone backwards:
- The need for a medium-term path back to budget surplus has instead become blow-out after blow-out as the government ramped up spending from the Labor years;
- The need for what bodies like the Reserve Bank and the International Monetary Fund called a consistent pipeline of major infrastructure investment, backed by an efficient infrastructure pricing system, has instead become a massive collapse in public infrastructure investment and the deliberate sabotage of the nation’s most important infrastructure project, the NBN;
- The need for an efficient, effective mechanism for decarbonising one of the world’s most carbon-intensive developed economies remains (instead a cheap, effective carbon price was abandoned);
- Funding reforms to fix Australia’s increasingly uncompetitive primary and secondary education system — particularly in terms of improved outcomes for disadvantaged students — have been ditched;
- A retirement incomes policy — which has had the perverse effect of causing the cost of the incentives to encourage Australians to not rely on the aged pension growing to a higher cost than the pension itself — has been left in place and reforms by the previous government to address the problem abandoned;
- Tax policies that badly skew the housing market remain in place, distorting other parts of the economy by establishing punitive barriers to labour mobility;
- Competition law reform to prevent misuse of market power remains on the backburner; and
- Hurdles to foreign investment have increased rather than fallen.
Only on the long-term but important issue of bank capital requirements to address the systemic problem of too-big-to-fail institutions — and the implicit government guarantee they enjoy — has there been significant movement, and that was by the financial regulator, not by the government itself.
The blame for most of these reversals lies with Tony Abbott and Joe Hockey, but the NBN sabotage was Turnbull’s work and the budget blow-outs have continued under Scott Morrison, who in contrast to the “budget emergency” rhetoric of his predecessor, appears to have a delusional insouciance about our fiscal position.
In the absence of an agenda to address actual reform priorities, the Turnbull government has so far offered one part sloganeering — despite the leadership coup sneering at Abbott’s reliance on three-word slogans — and two parts focus on the agenda of the Liberal Party’s major donors. Its “agenda” is almost entirely unrelated to genuine priorities for reform.
The government’s “innovation policy” was a mostly harmless, low-key piece of industry policy that swaps Labor’s obsession with inefficient but big-employing heavy manufacturing with efficient but small-employing start-ups. And Morrison has thankfully shown some acceptance that superannuation tax concessions are an exorbitantly expensive impost on the budget — but the government’s demonstrated priority on retirement incomes so far is its attack the industry super sector, reflecting the high status of their competitors, the big banks, as Liberal Party donors.
And of course when it comes to any sort of economic reform narrative, the government wants us to think that tax — for which a white paper is being diligently prepared by Treasury — is the main game. Not tax reform to fix Australia’s fiscal position, but deliberately zero-sum reform in which the revenue pea is swapped between various thimbles of governments, consumers, workers and businesses. The actual economic benefits of this are minimal — the abolition of inefficient state taxes will have some marginal economic benefits but they’re minor compared to getting rid of negative gearing, establishing a proper land tax system, or requiring road users to pay efficient congestion and infrastructure charges (which has been recommended to the government but shelved like it has been shelved under previous Coalition and Labor governments alike).
Similarly, lifting the GST to pay for income tax cuts is a primarily political exercise. Cutting corporate taxes will have little benefit — there is no clear evidence lower company tax boosts employment or growth (Warren Buffett called the link “baloney”) — and, in any event, most large international companies appear to regard paying tax as optional in Australia, rendering any benefits from cutting the nominal rate they’re supposed to pay moot.
But tax reform is the bulk of the government’s faux-reform agenda because it’s what the Liberals’ big business donors want. That’s why the options at the top of Morrison’s tax reform agenda reflect the wishlist of the Business Council — lower corporate tax, higher consumption tax — rather than genuine reforms that will yield substantial benefit.
That’s also why there is no interest within Liberal ranks for an effects test change to competition law, given the opposition of the Business Council (Labor also opposes the change). Similarly, on penalty rates the government is also keen to fulfil the agenda of its small and medium business support base — as backbencher after backbencher makes clear whenever a public holiday comes around — despite no evidence the sector that would most benefit from penalty rate cuts, hospitality, is doing anything other than undergoing an extraordinary boom in employment and revenue. Only political calculation prevents the government from openly embracing penalty rate cuts.
The other element of the government’s faux agenda, so-called free trade agreements, are much-hyped but, as the Productivity Commission has demonstrated, have little economic benefit. The World Bank agrees: the Trans-Pacific Partnership, according to the bank, will provide almost negligible additional economic growth. The primary benefit of the TPP will again be for big business — mainly for the copyright cartel (big donors to both Liberal and Labor and, in the case of News Corp, a Liberal-aligned media company) and for multinationals wishing to sue the Australian government.
Political parties fulfilling the agenda of their donors is hardly novel — that’s the entire rationale of the ALP as the parliamentary wing of the labour movement, after all. But it’s genuinely unclear whether the Turnbull government is able to do anything other than implement the agenda of favoured and influential sectors in the same crony capitalist way that marked the Abbott era. If the widely acknowledged high-water mark of economic reform in Australia was the Hawke-Keating governments undertaking reforms that actually undermined and harmed their key support base for the national good, there’s no evidence so far that Turnbull and Morrison are willing to undertake genuinely necessary reforms, rather than implement the wishlist of business, which will bolster profits but have negligible and incidental benefits for Australians.