Australia has had a spectacularly successful 30 years of public policy: in economics, in health, in personal wealth, in education and in social cohesion.
According to the Productivity Commission, we earn 38% more than we did, in real terms, compared to the mid-1980s. Household income has grown around 64% in real terms. Yes, that growth has been uneven, with those on lowest incomes having lower income growth than those on high incomes — but everyone is wealthier. And we’ve avoided some of the rising inequality seen in other Western economies because of our strong employment growth. At the moment we worry about unemployment going near 6% — for a lot of the 1980s and 1990s it nearer 10%.
One of our biggest achievements on that front is the lack of a recession — with the attendant, dramatic impacts on employment and poverty — since the early 1990s, when other economies succumbed to economic slumps like the financial crisis. Female workforce participation is also at a record high, meaning better economic outcomes for women, although they still lag men.
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True, in recent years, income growth has stalled, but there’s been a trade-off for that with more Australians staying in work. And that’s occurred at the same time as record low interest rates and very low inflation, even disinflation, ensuring real incomes haven’t gone backwards.
Our success extends beyond the economic sphere
Australians are also living longer, and better, lives in one of the world’s most efficient healthcare systems. While our comparative performance internationally has slipped in primary and secondary education due to the underperformance of less advantaged students, more of us have tertiary degrees than at any time in our history. True, these gains don’t extend to indigenous Australians, who continue to endure a significant gap in health, economic and education outcomes, but both sides of politics are committed to reducing that gap.
Australia is also one of the most cohesive societies in the world. Despite our obsession with boat arrivals, Australia has settled nearly 300,000 refugees since the mid-1970s and tens of thousands more of family members of refugees, and welcomed more than 5 million permanent migrants.
Data shows that very few Australians believe people of different backgrounds don’t mix well in their local area; migrants effectively economically integrate into Australia and the vast majority want to become full members of the Australian community.
So what’s with the rise of Nick Xenophon’s openly protectionist NXT in South Australia? Unemployment in SA has averaged 7%, in trend terms, over the last three years — a higher level than before the financial crisis, certainly, but lower than it was at any time between the late 1970s and 2002.
And what about the return of Pauline Hanson in Queensland, where unemployment is currently 6.5% — lower than the level in Queensland between the late 1970s and 2002? Real incomes may not be rising, but there is no economic shock to drive people in search of fundamentally different policies, no recession to make people despair of the failure of capitalism.
One of the key problems is that, whereas in the past politics provided us with articulate champions of market economics — able to explain to voters how they benefited from an open economy and economic reform despite the sometimes counterintuitive nature of the impacts of competition — now we have a generation of politicians who are more likely to pander to protectionist sentiments.
New-look protectionist Nationals
When Pauline Hanson first erupted onto the political scene in John Howard’s first two terms, we were lucky enough to have leading the Nationals Tim Fischer and John Anderson, who supported the pro-market direction of the Howard government and who were dedicated to fighting off the threat posed by One Nation. Anderson fought hard to bring a much greater regional focus to that government’s policies; other Nationals stalwarts like Ron Boswell, who had seen first hand the toxic influence of far-right politics in the Nationals and battled against it, were also up for the fight.
Now, sadly, the Nationals are led by Barnaby Joyce, whose xenophobia and hostility to Chinese investment puts him on essentially the same page as Hanson when it comes to the crucial issue of foreign investment, especially in agriculture. Agriculture has been one of Australia’s greatest productivity success stories in recent decades as our exports have surged and investment ramped up even as the agriculture workforce has shrunk.
But for the modern Nationals, that successful outcome is a disaster: they invoke “food security” and “family farming” to justify locking out foreign investors and propping up inefficient small-scale farms with distortive mechanisms like concessional loans. Instead of celebrating the success of open markets for Australian agriculture, the Nationals paint that as a failure.
Labor clings to manufacturing
The Labor Party under Bill Shorten also panders to protectionist sentiment in manufacturing. Manufacturing unions are traditionally highly influential in encouraging Labor to prop up inefficient industries like automotive manufacturing, but under Shorten Labor is noticeably more interventionist than under Julia Gillard and Wayne Swan.
During the election campaign, Labor promised $100 million to inept steelmaker Arrium while pledging to go still further in using anti-dumping provisions to keep out foreign steel. Labor also placed massive pressure on the Coalition to abandon plans to build Australia’s new submarine fleet offshore, which will cost many billions of dollars extra and employ fewer than 3000 people.
The Liberal Party, with the departure of Joe Hockey, has ended its fleeting embrace of anti-protectionism. Hockey clumsily but gleefully oversaw the departure of the three remaining multinational automotive companies but thereafter the Liberals found themselves sucked by political reality back to protectionism.
Eventually building boats and submarines more inefficiently in Australia became a point of pride for a government terrified at the prospect of losing seats in South Australia — and even after it committed to wasting billions of taxpayer dollars on defence construction in that state, still had to sit back and watch NXT steal Jamie Briggs’ seat and what will probably be three Senate spots. A Defence Industry portfolio is now proudly at the centre of the Turnbull government’s economic agenda.
Apart from the policies of the major parties (the Greens are even more protectionist than Labor), communication is also a key problem. The mindless reliance on talking-point communication by politicians, which treats voters as children, undermines any chance of effective communication; the goal of most political communication is to reinforce the centrally determined message of the day, not address the specific concerns being raised with politicians, creating the — often entirely correct — impression that voters are not being listened to.
And communicating the benefits of policies is not a one-off task that can be declared successfully completed — it must be ongoing, as voters adjust to a wealthier lifestyle and forget that it was the result of difficult policy choices, rather than coming naturally from some peculiarly Australian bounty.
The same lesson applies regarding immigration, which is economically beneficial, and of growing benefit given our ageing population. While most migrants (like most Australians) end up in our cities, immigration is particularly beneficial for regional communities, especially those lacking a workforce for agricultural work.
Australia is an extraordinarily successful multicultural society that has absorbed successive waves of immigrants from non-Anglophone and then non-Western countries with a high degree of integration and none of the economic ghettoisation seen in countries like France. Yet opposition to current levels of immigration — even if not as overtly racist as Pauline Hanson — is routine across politics, although the left struggles with a tension between a desire for open borders for asylum seekers and a hostility to high population growth and greater labour competition that open borders would entail. And again, there are no strong champions for immigration among our political leaders.
Who will lead us?
Malcolm Turnbull could have broken this pattern: he has a demonstrated capacity to talk to voters intelligently, and he promised a new style of political debate that departed from the Tony Abbott model of three-word slogans and simplistic gotcha politics. Of course, all we got from Turnbull during the election campaign was “jobs and growth” and scare campaigns about boats, Labor’s “war on business” and negative gearing reform.
There is, therefore, no senior figure who is actively championing the benefits of open markets, immigration and liberal economics in politics, no one who is able to convincingly explain to voters that we are wealthier because of those policies and that we will be less wealthy if we abandon them for protectionism and interventionism, that closing ourselves off from the world will impoverish us. Andrew Robb was a good advocate for foreign investment in the previous parliament, but he’s now moved on.
As I’ve previously argued, the task is made more difficult by the apparent determination of business to ignore perceptions of rising inequality and voter hostility to their self-interest and continue demanding tax cuts and lower wages. But the longer we go without an effective champion of market economics and global integration, the more voters are likely to forget that retreat into the economic policies of the past will entail real costs to them and their children.