Real Reform Not On The Political Agenda
All smoke and mirrors - no fire.
That essentially sums up the state of public policy making at the national level these days and it is likely to dam the Australian economy for years to come unless it changes.
Despite endless reviews of the tax system, climate change and competition policies, very little is being done in Canberra. Both sides of politics seem to like it that way.
To the immense frustration of the Federal Treasury I’m sure - not to mention corporate Australia - the current Federal Government seems happy to coast along and not ruffle any feathers after the debacle of last year’s surprisingly unfair Federal Budget, which also contained a litany of broken election promises.
Tony Abbott has learnt his lesson. His reforming days are already over.
After facing a near-death leadership experience earlier this year, Prime Minister Tony Abbott appears increasingly smug and confident that he can win the next election against a hapless Labor party opposition. Of course, the polls currently suggest that Labor current has an election winning lead, but voters are clearly switched off from Canberra’s soap opera.
I regard current poll results as merely a weak protest vote by a disinterested and disparaging electorate.
Based on the current situation, I’m sure the Abbott Government can win the next election by rolling itself up into the smallest ball possible and simple try to scare voters into fearing another Labor Government would re-introduce a carbon tax and risk household wealth by taxing the sacred family home.
Of course, Tony Abbott – like his mentor John Howard - will also tightly wrap himself around the Australian flag, and focus on the grave “national security” threats we face from terrorism and boats laden with desperate asylum seekers. To my mind, Labour doesn’t have a hope in hell. With both parties uninspiring, the next election will be about which side the electorate fears the most. Given the benefits of incumbency – and Tony Abbott’s ruthless focus – he should win that battle easily.
Sadly, introducing controversial reforms – however good for the economy – would now only threaten the Abbott Government’s near-certain re-election prospects. Every time a certain tax change is proposed – such as cutting back excessive superannuation concessions, negative gearing, or a broadening in the goods and services tax – Treasurer Joe Hockey is trotted out to hose down the speculation. Joe Hockey makes fine speeches but, even if he had the will, lacks the cabinet power to push through decent economic reforms.
Corporate Australia is despairing over the lack of leadership in Canberra. It hardly seems worth spending the time on detailed submissions to the innumerable reviews that Government has going – because nothing seems likely to ever get done.
Labor is not much better. It is toying with the idea of proposing a carbon emissions trading scheme at the next election – but has already been placed on the back foot by the Abbott Government’s immediate labelling of this yet another carbon tax. Labor I suspect will squib it – and go to the next election with a mealy mouthed climate change policy. Labor can’t sell decent policies, and so lacks the courage to pursue its convictions.
As in the United States, we can only hope our economy manages to stumble forward in spite of the lack of policy drive from our central Government. The United States succeeds because its central government is largely ineffectual – as it can rely on its highly competitive economy.
I’m not sure Australia can continue to be so lucky.
David is one of Australia's leading economic and financial market analysts. His is Chief Economist with BetaShares, and an Economic Advisor to the National Institute for Economic and Industry Research (NIEIR). His has held former roles as senior commentator with The Australian Financial Review, Macquarie Bank interest rate strategist and Federal Treasury economist. He is also author of the online e-book, TheAustralian ETF Guide.