Opposition Leader Bill Shorten is providing economic leadership, and we can thank PM Malcolm Turnbull and former Greens leader Bob Brown.
The Parliamentary Budget Office (PBO) has been quietly reshaping Australian politics. During the 2013 election, the PBO was still finding its feet and the political parties were getting used to it. In 2016, its full and beneficial effect is showing up in the public debate.
In the past, the costing of policies was hugely contentious. Famously, the Abbott-led opposition even refused to accept Treasury costings. The PBO was set up to provide a new and respected umpire, which would provide reliable costings of policies — especially for non-government parties. Now Shorten and shadow treasurer Chris Bowen’s astute use of the the PBO is helping Shorten to claim the mantle of “economic leadership”.
The PBO’s reputation means the media and the commentariat instinctively believe new opposition policies are credible right from the get go. This is a critical part in the acceptance by the public of any new policy. Getting over this early “believability” hurdle is important. A PBO costing suggests a policy can be implemented and done in a reliable way that won’t later break the bank.
The Australian Greens — previously too easily accused of lacking economic competence — are also using the PBO to demonstrate that the costing of their initiatives are sound.
So the costings for a royal commission into banking, a cigarette tax, negative gearing, and a capital gains tax discount have all come with the PBO stamp of reliability. Controversial Shorten polices have been given an extra degree of respectability at the very moment of launch.
As the AFR‘s Laura Tingle notes, the PBO is giving the opposition parties confidence to be bolder on policy. No doubt many policies are refined and stress-tested and some even dumped thanks to the work of the PBO — saving the opposition the embarrassment of errors or assumptions being exploded later.
Shorten should be thanking Turnbull for this gain. It was Turnbull’s advocacy for a PBO during his 2009 budget reply speech that helped make it happen.
His support galvanised the Greens to pursue the idea, which they had already proposed but failed to get traction on. I remember, as a Bob Brown staffer at the time, realising Turnbull’s advocacy opened the door for the idea to be pursued more robustly.
Following Turnbull’s speech, Brown renewed his calls and then made it a key election commitment, giving it prominence at his Press Club speech on the eve of the 2010 election. In the days after that election, with newly elected Adam Bandt in the balance of power, a PBO was one of the first things Brown put to Julia Gillard as a condition of forming government. Independents Tony Windsor, Rob Oakeshott and Andrew Wilkie also pursued the idea. And to their credit, Labor followed through in government, even though the institution was of little use to them at the time. Gillard set the PBO up as promised.
In effect, Turnbull helped give Shorten the tools to show the economic leadership that Turnbull himself promised when challenging Abbott. And congratulations to the new PM; the PBO is one of the most important recent innovations in our parliamentary democracy. Together with the Parliamentary Library, it is a key research institution for non-government MPs that helps overcome the political advantage of government incumbency.
But now is the time for Turnbull to go one step further, to show his economic leadership and raise the tone and quality of the economic debate overall in Australia. He should reach out to Shorten in an act of bipartisanship and offer better resources for the PBO and the Parliamentary Library, with their budgets set independent of government.
The PBO needs the resourcing to go to the next level. In the medium term, Australia would be best served if we had more competition in the public policy economic scene. The PBO needs to become an alternative to Treasury and not a parrot of its orthodoxies. Of course, like Treasury, the PBO is not perfect and its ideas and assumptions need better testing and scrutiny as the recent HECS debt-modelling controversy attests.
The PBO should be resourced, for example, to set up its own modelling branch able to run models similar to, say, the National Centre for Social and Economic Modelling (NATSEM) with full distributional analyses of proposed policies. At the moment, the PBO mostly has to rely on information supplied by government departments and Treasury and while this is useful, the service could be enhanced.
The recent furores surrounding economic modelling and need for a code of conduct for the industry also highlights a need for the PBO to have the wherewithal to be able to test some of the more outrageous modelling claims being made. For example, the absurd suggestion by some supposedly reputable big business clients that a “company tax rate of 25% would pay for itself in 5 years“ would no doubt have been quickly debunked by a well-resourced PBO.
Finally, we need a cultural change from political parties in their use of the PBO. Backbenchers from all sides of politics should use the PBO to float ideas that aren’t necessarily party policy. Currently, the office is mostly used by opposition parties to formally release their costed proposals. Occasionally government backbenchers float a costed idea but this is rare.
The act that governs the PBO gives all MPs equal access; they don’t need the permission of their parties to use it and our political culture would be better served if they let the ideas bloom.