This year, with an election around the corner, there’s been none of the traditional late January official commencements to the political year. Instead, both sides are straight into campaign mode and unlikely to deviate from that until 6pm on polling night. That’s perhaps the reason why what was billed as a “major speech” by Treasurer Josh Frydenberg yesterday got little attention beyond what was dropped to newspaper journalists ahead of time. Or it could be that people are so convinced of a Labor win that Frydenberg could announce the nationalisation of the banks and still struggle to get a headline.
Frydenberg has the makings of a good treasurer and is rightly touted as a potential future leader, but has failed to make the portfolio his own in the limited time he’s been there, and yesterday’s “major speech” showed that there is little awareness in his office, or in senior Treasury ranks, of just how radically the political environment for economic thinking has shifted in the last three years. The speech would have been a workmanlike effort if delivered by Joe Hockey in 2014. Early in 2019, it was remarkably out of sync with political reality.
In summary, Frydenberg argued the Coalition and Labor had both created Australia’s long economic boom with economic reform but now Labor had lost its way in favour of trying to tax its way to prosperity, class warfare and “false prophets” whereas the Coalition “has continued to carry the baton of economic reform” and would keep the faith with the “invisible hand of capitalism”.
The usual furphies were there. Contra Frydenberg, the Coalition is the party of high taxes; missing from the statistics he reeled off is that tax has grown from 22% of GDP when Labor left office to a whopping 23.6% now and is forecast to get worse. The “free” trade agreements he touted have been demonstrated to have minimal benefits for Australia, and may even harm the economy. And in any event, courtesy of our anti-dumping tariffs and multibillion-dollar defence protectionism, Australia is an increasingly closeted economy, not the open free trader we claim.
But those are mere facts. The rhetoric is what’s important. Given the Turnbull/Morrison governments has embraced radical interventionism, including a proposal for a divestment power wielded by the executive, funding power stations, dictating banking remuneration and telling gas exporters what to do with their products, the penny might have dropped in Frydenberg’s office that continuing to talk as though the age of neoliberalism was in full swing was at odds even with the government’s own policies, let alone broader political reality. Sure, the speech was to the Sydney Institute, where unalloyed neoliberalism might still find favour; perhaps Frydenberg sticks to the party line in such fora, knowing full well it will be a very different story when making decisions in government — neoliberal in the sheets, interventionist on the streets, as it were.
But in the lead up to an election in which much of the electorate is looking for politicians who will commit to making the economy work for them, not elites, it was extraordinarily tone deaf. Expect that “invisible hand of capitalism” line to find its way into Labor advertising. For millions of Australians, the hand of capitalism has indeed been pretty bloody invisible in recent years, and given them nothing.
And on the most prominent example of that, Frydenberg was silent. Wages are virtually absent from the speech, receiving a solitary passing mention that “the pick-up in wages growth remains gradual.” Well, gradual if you’re a public servant or health professional. Many private sector workers are going backwards in real terms. Despite downgrading budget wage forecasts five out of the last six years (and the year they didn’t, 2015-16, the forecast was badly wrong), the government still seems to think there’s no need to address wage stagnation. Not even after the head of the Reserve Bank explicitly identified the issue as an impediment to support for economic reform of the kind that Frydenberg “carries a baton” for.
Only on financial regulation did Frydenberg betray an awareness it was 2019, although diehard interventionists would have been disappointed he appeared (probably correctly) to lean toward better enforcement of existing regulation rather than a suite of new laws to curb the banks. Otherwise, on the economy, it seems the Liberals will enter the coming campaign all set to fight the 2013 election.