2023-05-03
Time to reflect. "Budgets are about choices … and you show what you value through the choices you make" (Julia Gillard, 2013)
By David Lumsden, Green Issue Co-editor
Paul Keating is the last Labor prime minister to serve a full term in office. He is also the last labor treasurer to deliver a budget surplus. Current treasurer, Dr Jim Chalmers is such a fan of Keating that he wrote his doctoral thesis on him. He continues to be a totemic figure of the Labor Party, framing the discourse of policy aspiration for a generation of aspirant politicians, many of whom are in office today.
Keating recently declared, of the current government, that, “never before has a Labor government been so bereft of policy or policy ambition,” and referred to key ministers as “seriously unwise.” Senator Penny Wong responded to Keating’s position by suggesting that “in tone and substance he (has) diminished both his legacy and the subject matter.” However one might well wonder whether this may be truer of her government’s vacuity of policy direction than of Keating himself.
Weak government
AUKUS is projected to cost $33 million every day for thirty years. The nuclear component of the project adds a level of complexity that we do not have the infrastructure to cope with. Vocal critics have drawn attention to how reliant our navy will be on the US to pick up the slack for our nuclear naïveté, and the implications this will have for our state sovereignty. Less attention has been drawn to just how unlikely it is that will focus our scarce resources, in the long run, on maintaining such a niche nuclear capacity with no experience, infrastructure or popular mandate.
Minister for Defence, Richard Marles has suggested that this acquisition is critical for the purpose of defending our trade routes through the South China Sea. This seems odd given how much of that trade is with China ‒ the country we would be protecting those routes from. Much of our public revenue is derived from royalties paid from commodity extraction and exports to China. So, to some extent, our strategy is for China to pay a share of our side of an arms race with them, to protect our trade routes with them from them. This logic hardly bears scrutiny. Keating’s theory that Labor assented to AUKUS for political reasons seems credible, given Marles’ inability to articulate its merits coherently.
Generally, there is bipartisan support for a policy that amounts to spending more on a dubious and hopeful strategy than we do on higher education. These are Labor’s priorities. Keating argues that Labor decided, when in opposition, that it would not allow the Coalition to exploit Labor’s perceived weakness on national security, and so committed to supporting AUKUS for political reasons, merits be damned.
This strategy has typified Labor in opposition and in government. The Stage Three Tax Cuts (STTC) are projected to cost almost $70 million every day over ten years, and even more thereafter. A policy that was conceived before the global economy plunged and interest rates skyrocketed began its life in a haze of faith-based, Truss-onomic optimism. It is clear now that we simply cannot afford them.
The STTC and AUKUS together cost the government well over $100 million every day. Our government has committed to these dubious policies for political reasons. Dr Jim Chalmers, in rejecting the advice of an expert advisory committee on welfare, has suggested that Labor “can’t fund every good idea.” He does not seem constrained from funding bad ideas, as argued by Senator David Pocock:
“It appears that this Labor government can find extra money for just about anything ‒ from inland rail cost blowouts to submarines ‒ but it won’t do more to protect the most vulnerable.”
For context, the committee had suggested increasing Jobseeker payments from 70% of the age pension to 90%. This would have cost less than half the $33 million every day that we hope to pay for AUKUS. It would have helped people who need it the most. Instead, Labor has chosen to tax them, and spend the proceeds investing in the manufacturing sectors in the US and UK. The STTC and AUKUS are designed to protect our politicians, not Australia.
A pox on our houses
The housing crisis that looms over Australian society has funneled our economy’s investment capacity away from productive industries, and towards the non-productive portfolios of a fortunate few. The Grattan Institute has published pre-budget recommendations that include reform of the capital gains tax and negative gearing regime. Favourable treatment of this kind of revenue naturally encourages the creation of a housing bubble. Negative gearing puts this effect into overdrive by guiding middle-class household investment towards rent-seeking behaviour. Australia’s terrible housing policy is well known. What is new is our growing acceptance that this bubble has defeated us and there is no way out.
This pervasive pessimism shows up on the demand side, where young people who do not have landed parents have increasingly given up on home ownership. This generation will factor economic insecurity into their life choices: whether to have children; how many to have; how late to have them. This will further compound the long term threat that Australia’s worsening demographic outlook poses. This will ramify throughout our labour market and impact literally every sector of our society. This will force future governments to further rely on immigration to paper over the cracks in our defective economic model. While we will not run out of potential migrants (skilled migration is another matter), we have already run out of places for them to live. Immigration will only increase pressure on our housing market. The cycle is complete.
The really terrible news, however, is on the supply side. In response to the Greens’ policy to fund its housing policy by scrapping the capital gains tax concession and negative gearing, the Parliamentary Budget Office (PBO) suggested that the Australian economy may already be so over-leveraged and reliant on these tax concessions that reform would likely stimulate a debt crisis. The PBO acknowledges that the housing market is a bubble, and suggests that it is too big to pop. This might go some way to explaining how weak this Labor government’s response to the housing crisis has been. The path of least resistance is leading us off a cliff, and we will not turn around even when our future depends on it.
This is what the Liberal-Labor regime has delivered Australia. An extraordinary mineral boom, decades of uninterrupted growth, and yet there are more Australians living in poverty and homelessness than there has ever been in the history of this federation. Our leaders waste our natural resources and under-invest in our human resources. The latest report from the Productivity Commission functions more as a doorstop in Dr Chalmers’ office than as a directive for policy reform. Its focus on education as the key determinant of productivity in the long run echoes a long tradition of research findings. Labor has made much of its intention to “get wages moving,” but wages are driven by productivity. Given that the strength of a developed economy is determined by the size of its workforce, and its productivity, education is a primary driver of economic growth.
Our future
On this issue the Liberal-Labor regime has been uniformly dire. Australia is anomalous in publicly funding private schools that charge fees, and underfunding public schools that cannot charge fees. The public school system has generally devolved into an option of last resort, as parents understandably do all they can to enrol their children into better-resourced private schools even if it means paying a premium. We discriminate against children according to the wealth of their parents.
While this might benefit children of wealthy parents, it has disproportionately negative effects on students in public schools who suffer from a lack of resources, as well as a concentration of negative peer effects. These schools then struggle to keep quality staff. This easily descends into an entrenched spiral of disadvantage by design. Where one might see a child full of potential, hope and aspiration, the Liberal-Labor regime sees a political football.
Despair
Given our rich tradition of poor government, our social, economic and political decay is entirely predictable. The centrists within the Liberal party were battered by culture warriors even before Australia had the chance to break-up via ballot paper. The truth is, neoliberal extremism has delivered terrible results. For decades, we have inflated our public coffers with royalties from the sale of primary resources to a country we have now militarily aligned ourselves against. Last year, the treasury came tantalisingly close to achieving a momentary surplus due to booming commodity prices resulting from Russia’s invasion of Ukraine and China’s demand for coal. It is a damning indictment of our fiscal ineptitude that the health of our budget is more dependent on Vladimir Putin and Xi Jinping than on Anthony Albanese and Dr Jim Chalmers. And yet for all of that, Australians have had to pay over the odds for energy regardless.
This Labor government has no plan to rescue Australia from marching off a fiscal cliff. Dr Chalmers is hamstrung from any reform by Anthony Albanese’s promises to align Labor policy as close to the Liberals as possible. It is this surrender of principle in favour of power that has driven Paul Keating to despair.
Our democracy
Craig Emerson has argued that maintaining practically untenable Liberal policies is important for maintaining cohesion and stability of Labor in government. This commitment to terrible government may explain why Australians increasingly distrust the major parties. Phillip Lowe alluded to this recently when noting that interest rate rises were more feasible than relying on politicians to negotiate contractionary fiscal policy. Our democratic institutions are so broken that we must rely on an undemocratic institution to make the decisions that matter. This failure has forced the Reserve Bank to funnel the responsibility of anti-inflationary policy disproportionately on debt-holders. A government worth its salt would assume this responsibility itself. The Liberal-Labor regimes’s infatuation with culture wars over real issues has effectively outsourced government outside the reach of public accountability.
In sum, this budget is symptomatic of a liberal democracy in decline. Our governing regime is bad, worsening, and worsening at a worsening rate. As Greens, we can smugly wait for demographic forces to deliver us into government so that we can fix everything. This sentiment will be tempting to some, in light of the Liberal-Labor regime’s recent travails. Conservatism is certainly much less attractive to young people who have little to conserve, and little hope of ever achieving the same level of enfranchisement enjoyed by previous generations. The Coalition has sunk to the right and abandoned the centre to Labor. Labor, for their part, are shackled by indifference and entering an enormously difficult policy environment that will test them beyond their imaginative and intellectual capacity. It is worth asking what is holding the Greens back from taking advantage of this situation and providing the leadership that Australia desperately needs.
The point
Can we rely on Labor to resolve the crises ahead of us? If not, what changes should the Greens make in order to provide a viable alternative government? How long can Australia afford to wait for the Greens’ to emerge from its political infancy, before it feels compelled to resort to right-wing populism? Is our highest ambition to “push Labor to do more on climate change”? Is that enough of a platform from which to convince the Australian people to vote for us, instead of our more “serious” opposition?
This budget will not bring much joy to the Greens. But we can use this as an opportunity to reflect on what matters to us, and to Australia. What do we need to change if we would like to, one day, deliver a budget of our own?
Header photo: Credit: https://probonoaustralia.com.au/news/2023/02/eyes-turn-to-federal-budge…
[Opinions expressed are those of the author and not official policy of Greens WA]