Tuesday, September 10, 2013

How much will the change of government change Australia?

I returned to Australia last Saturday, just in time to vote, after having spent a month travelling around Britain and Ireland. That means I had the good fortune to miss the election campaign.

However, missing election campaigns is not always an unmixed blessing. The last time I missed an election campaign, in 1983, when the Hawke government was elected, the country seemed to change in my absence in ways that I found difficult to understand. Prior to leaving Australia I think there was a fairly common perception, which I shared, that Bob Hawke was a divisive figure in Australian politics. After I returned just a few weeks later, it took some time for me to adjust to the fact that Hawke had come to be widely viewed as a national leader, capable of bringing the nation together to deal with difficult issues. The mood of the country seemed to have changed while I wasn’t looking.

I don’t think I missed much by being absent during the most recent election campaign - there doesn’t seem to have been any marked change in public mood. It was predictable that voters who were having doubts in 2010 about the leadership offered by the old Kevin Rudd, would realize during the campaign that the new Kevin was still the same person. It was also predictable that people who were having difficulty bringing themselves to vote for Tony Abbott prior to the campaign would not suddenly see him as offering inspiring leadership. The issue was whether Tony would be able to demonstrate during the campaign that he had learned how to keep his foot out of his mouth. 

How much will the change of government change Australia? There are some who argue that when the government changes, the country always changes. Paul Keating famously put that view to voters in 1996, as his period as prime minister was drawing to a close.  I suppose some of the people who decided to vote for John Howard would have disagreed with Keating’s warning, but others would have actually wanted the country to change.

In my view, the Howard government did not actually change the country to a huge extent relative to the course that had been set by the Hawke and Keating governments. The size of the federal government (measured in terms of cash payments as a percentage of GDP) contracted from 25.6% in 1995-96 to 23.1% in 1999-00, and then rose again, peaking at 25.1% in 2000-01. The trend toward greater centralisation of power in Canberra continued unabated. There was a change of style and some change of emphasis – possibly including greater enthusiasm for privatisation of government business enterprises - but the direction of policies did not change to any great extent until the final term of the Howard government.

In its final term the Howard Government introduced ‘work choices’ in an attempt to further free up the labour market. The net result, however, was one step forward and two steps backward. The reform encountered so much political opposition that it helped Kevin Rudd and Julia Gillard to gain power and introduce tighter labour market regulations than had existed prior to the Howard reforms.

In my view, the Rudd-Gillard-Swan governments changed the country to a much greater extent than could reasonably have been anticipated in 2007, when Rudd came to power. As well as the change of direction in industrial relations, the emphasis of policies turned towards redistribution of wealth as opposed to wealth creation with the introduction of an additional tax on mining profits. The change of style of government in the Rudd era – a prime minister with delusions of infallibility announcing policy on the run – made government seem chaotic. The Rudd-Gillard-Swan governments also brought about a substantial expansion in size of government – cash payments rose from 23.1% of GDP in 2007-08 to 26.1% in 2009-10. On the positive side of the ledger, the changes to health policy are possibly having positive outcomes (but I haven’t seen the evidence) and changes to education policy might also be positive. However, these policy changes have occurred at the expense of further centralisation of power in Canberra.

There seems to be a widespread expectation that the Abbott government will cut back the size of government, but I’m not sure that view  is warranted. The government will probably reduce the number of federal public servants, but when election  promises of increased spending are taken into account it seems unlikely that there will be a substantial reduction in government spending.

It is possible that the new government could take action to reform federal-state relations, by retreating from some policy areas that are more appropriately dealt with by the states. However, I will not be holding my breath waiting for that to happen. As noted a few years ago in my review of Tony Abbott’s book, ‘Battlelines’, he seems to be in favour of greater centralization of power in Canberra.

Perhaps the government will move on tax reform in its second term of office. But the most likely outcome will be a higher rate of GST to raise more revenue. If we continue to drift toward a European style welfare state, we will need a European style tax system to fund it!

I am not sure that we can even expect the new government to maintain policies favourable to free trade. Policies proposed with respect to ‘dumping’ suggest a lack of understanding of normal business practices and the role of international competition in the economy.

The main change the Abbott government seems likely to bring about is a return to more orderly government processes. In that respect, the contribution of the new government could be quite similar to that of the Fraser government in the 1970s, which brought to an end the chaos of the Whitlam years. In fact, the more I think about it the more I think that, with the exception of policies toward asylum seekers, the Abbott government could end up looking quite similar to the Fraser government. There will be plenty of talk about tough decisions, but I don’t think there is likely to be much action.

I had intended to mention that I was prompted to begin thinking about this question by a post last week on Jim Belshaw's blog. Jim's post was entitled: 'What can we expect of a new Coalition Government?'

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