Phil Ruthven considers Australia’s economic growth over the past five years and explains why there is no better time to re-evaluate the state of politics.

    There is considerable unease in the business world and community about the state of politics at both federal and some state levels. Polls make this abundantly clear. Government leaders struggle to get anywhere near 50 per cent in terms of electoral respect. Indeed, a 2014 Roy Morgan survey on ethics and honesty placed MPs at state and federal level, as well as union leaders, at a low 12 out of 100 points. Health professionals on the other hand were over 80 points, with nurses at 91 points.

    Single-term governments can now be treated a likelihood when non-performance is evident. This is also the case for arrogance or rampant corruption. Australians have very low tolerance of perceived arrogance: it cost the late Wayne Goss, Nick Greiner, Jeff Kennett, Paul Keating and even John Howard (at the end of his term) their jobs; and more recently, Campbell Newman in Queensland. Yet most had been good leaders. Another related factor is the Australian envy gene, which contrasts sharply with the American aspirational gene. This egalitarian – yet flawed gene – seems to be fading with the newer generations. But they still do not accept arrogance.

    Non-performance cost a number of governments of both persuasions and at both state and federal levels their reign. The Cain/Kerner Victorian government in Victoria was one, the Fraser federal government another (although rightly credited with important social and international inititatives), and more recently the dysfunctional Rudd/Gillard terms. It is yet to be seen whether the Abbott reign will join this inglorious list.

    Corruption, fortunately, is a rare cause for collapsing governments. Yet the Bjelke-Petersen Queensland government and the last ALP NSW government (with honest premiers that had not stopped the rampant corruption) lost government with an electorate that had lost patience.

    So, here we are approaching the middle of 2015 with new governments in Queensland, Victoria and Tasmania, and a federal government halfway through its tortuous term of office, a 2014 budget in tatters and a new one coming up in May.

    It is difficult to remember any budget in post-WWII years that was still struggling to get senate approval for many of its proposed changes 10 months after being handed down. While seen as mean-spirited and ignorant of tax reform, it was not as biting as many budgets of recent decades. For pure economists, it was not that good a budget, but not that bad a budget. There are plenty of other initiatives awaiting attention and some of those could help the budget bottom line.

    So what went wrong?

    What has changed is the character and make-up of the senate. It has always ignored the one-man/one-vote principle from the time of federation; although states, which have upper houses are following this democratic principle. Having the same number of senators across states as diverse as two per cent of the population (Tasmania) to 32 per cent (NSW) is hardly sensible: this distortion was intended to protect state interests, which it does not. 

    One can now add the ludicrous situation of the preference system allowing special interest candidates to enter parliament with tiny numbers of prime votes. Paul Keating once referred to it as a house of “unrepresentative swill”. It is now a house of ideological and narrow interest members. And it doesn’t follow the Westminster system, since the upper house can reject bills of any kind forever, rather than just stall them. 

    This situation demands extraordinary lobbying, and even unconscionable trade-offs. It is now far more difficult to balance budgets and implement long overdue reforms.  But it is not impossible.

    It should be said that the current structure of the senate is as much the default of the major parties to move with the times. The coalition’s perceived rejection of climate change initiatives is fuel to the Greens. There are many other examples.

    What reforms are important? The author’s list below is admittedly skewed to the economy, business and productivity; without apology, as these things raise our standard of living and international competitiveness.

    History demonstrates that nothing really ever goes right unless finances are well managed; balancing the budget over a term of government.   Households and businesses know that by default, but governments are given more leeway because of their ability to borrow more or raise taxes. They can and do abuse those privileges. 

    So how bad is the deficit problem?  We return to that shortly, as it is one of the issues front and centre in the media at present. Some of these issues above are being fleshed out: tax reform via a white paper; and industrial relations reform via the Productivity Commission. The lagging digital issue, where Australia has dropped out of sight in terms of broadband speed and connectivity across the developed world, seems to be very slowly being addressed. But much too slowly.

    The Futurist Budget Graph April 2015

    Losing direction

    Vision is lacking at the federal level and in most states, with the populace generally directionless and increasingly frustrated. And it shows too in the business world.  Privatisation is proving to be the “bête noire” in many states, with too many rent-seekers and political opportunists distorting sensible reasons for the sale of government assets.

    We still seem to have, as a nation and a culture, too high a regard for hard assets (land, buildings, machines and natural resources) and too little regard for innovation, intellectual property and productivity.

    These and other reforms and actions call for governments with vision, wisdom, courage and selling skills. Otherwise they sell the community short, and become yet another statistic or one-term government. As the 2015 budget is nigh, it is worth a little extra attention. The figure adjacent shows the picture of budget balances over six decades.

    We do not yet have a debt problem. Indeed, we still have one of the lowest net debt/GDP ratios in the OECD – thanks to the Howard/Costello years that removed debt – but we do have a deficit problem that can lead to a debt problem down the line. The Intergenerational Report has turned the spotlight on this challenge.

    But there is a general denial of realities, if not collective dishonesty, with the budget process. Major and minor parties and independents all fail to educate the public about the necessity to balance budgets and what the options are – less outlays and/or higher taxes. 

    If we do not recognise all these challenges, find solutions, then do a proper educational-cum-selling job, then we can hardly blame the electorate for voting out governments for others as a protest or in frustration. 

    Our economic growth over the past five years was just 2.7 per cent per annum compared with a long-term average of 3.5 per cent, with no domestic global financial crisis problem and a free kick via the mining boom. The next five years looks no better at this juncture.

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