30 August 2007

Australian distances itself from government

Today's Australian editorial "Bored of comfort: Howard's dilemma" provides a surprisingly sharp and pertinent assessment of the Howard government. Much, if not all of it could have been written by Paul Keating.


Voters know the federal Government has not properly harnessed Australia's rising prosperity. If voter attention has been increasingly distracted away from the Howard Government towards an animated Opposition under Kevin Rudd, it has little to do with being bored at having the same faces in power for the past 11 years. It has more to do with the fact that the Government has taken its own 1996 campaign slogan, relaxed and comfortable, too literally for the good of the nation.

To the extent that a reform wish-list can be identified, it must include building a world-class education system and superior medical research and hospital facilities, better road, water and transport infrastructure, more efficient export port facilities and delivering high-speed broadband. Along the way, we must also address the ageing population and set immigration policy to provide more workers for an economy stretched to capacity. Further reform of the tax system is needed, with a cut to the top marginal tax rate to attract high-skilled workers and fine-tuning at the lower end, possibly negative taxation, to remove disincentives to work for the underemployed.

Against this list, after 11 years in office, the Howard Government's achievements leave a lot to be desired. Mr Howard's big achievement this term has been the introduction of Work Choices, which we support for having introduced workplace flexibility that has allowed unemployment to fall to a 32-year low without causing a wages breakout and associated inflationary pressures. But it was introduced in haste and without adequate public consultation following the Government's su[r]prise majority in the Senate. Mr Howard is paying the price now.

The other crowning glories of the Howard years include the introduction of a GST, which - again welcome- is by no means ground-breaking in terms of public sector management, particularly when the benefits have largely been squandered by state governments on higher public sector wages.

Apart from that, the Howard years are mostly characterised as having placed a different emphasis on cultural and social issues, many of which we also agree with, such as changes to the university sector, a return to basics in school education and the belated but poorly constructed intervention in Aboriginal affairs in the Northern Territory. As in Britain and Washington, the other big issue to have dominated the period of Mr Howard's prime ministership has been Australia's involvement in a protracted war in Iraq, which has been comprehensively mismanaged by the US.

Set against the micro-economic reforms of the Hawke and Keating Labor governments during the 1980s and '90s, the Howard reform legacy is thin. Bob Hawke and Paul Keating can claim credit for the floating of the Australian dollar, opening up the banking sector, reducing tariffs, introducing the wages accord and compulsory superannuation and ending centralised wage bargaining. All were essential to modernising the Australian workplace and making Australian businesses internationally competitive. The great legacy of the Hawke and Keating years was the conditions it set for sustained productivity growth. Labor has pledged to refocus on productivity growth if it wins office.

Against this, there is little to indicate that Mr Howard and the Treasurer have used their time in office to set the country up for the decades ahead. The opportunities for reform have been many, but Mr Howard has chosen to preside over a high-taxing, big-spending and very centralised government. On infrastructure, a lack of federal leadership has allowed mismanagement by the states. Catch-up spending has come at a time when the economy is already stretched, adding to competition for labour and capital and putting pressure on inflation and interest rates.

On health, the commonwealth has failed to deal with the issues of duplication of services and shied away from tackling funding disputes with the states head on. This has left the Government making illogical, token gestures, such as the takeover of the Devonport hospital at the 11th hour.

Media reform is a good example of the Howard Government's timidity. After 11 years of procrastination, when it finally did act no-one wanted to own media anymore. It is the same story on telecommunications: after a decade spent privatising Telstra, the result is a political and policy schemozzle.

In essence, the Howard Government has succumbed to the trap outlined by Treasury Secretary Ken Henry. It has been content to consume the fruits of the present economic boom and take the luxury of the soft option. Within this option, Dr Henry said, lurks an intergenerational tragedy that would impose an unnecessary burden on all future generations.

Made worse by the long simmering leadership tensions between Mr Howard and Mr Costello, this inaction has also come at an immediate political cost. We now see Mr Howard struggling in the opinion polls not because of his age or because he has been in office for 11 years but because he appears to have little idea of what to do next. The electorate hasn't been listening because the Government hasn't said anything worth hearing. What is the compelling argument to vote for another term of the Howard Government? The big argument put by Mr Howard boils down to a fear of change.

Unlike Opposition Treasury spokesman Wayne Swan, we believe there is no sign of an end to Australia's new found prosperity because of the rise of China and India. We agree with BHP that this is a global trend with decades still to run. But Australia must act to capitalise on that good fortune. To date, despite a decade of rising demand for commodities, Australia still has not achieved any real increase in export volumes, just price. Mr Howard has been the architect of his own electoral misfortune. He has run a good government but the caution with which it has approached its task is coming home to roost. When the history is written about Australia's present golden era of economic prosperity, it is likely to focus on why so little was achieved.

This should not be seen as an endorsement by us of Labor. The Opposition Leader may not be able to deliver on reform either. It may be all talk but the opinion polls are showing that punters have picked up on the fact that he wants to have a go. We are merely saying that Mr Howard is paying a political price for his inaction. He has spoken loudly but done little. In this way, we believe his predicament is of his own making. He has presided over a golden era but not known what to do with it. Voters are bored with him for that reason.

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