Labor's predicament: an opinion

Should we be too critical of Labor. After all, it could be argued that governance is now that much harder in this ultra-competitive economic environment made even more difficult by the ramifications of the global financial crisis (GFC).

But Labor has indeed lost the plot and many voters have ample reason to jump ship.

Yes, Labor has a great history. Inspired by trade unions many years ago, its willingness to take on the status quo helped make Australia a better society in many ways. By 1996, Labor's influence on the policy agenda was indicated by the Coalition also promising to retain the popular Medicare while giving greater consideration to environmental matters. In fact, the Howard-led Opposition even promised to spend more than Labor on the environment prior to the 1996 federal election, albeit that higher spending depended upon the sale of Telstra.

But no one should live in the past. The demands of the 21^st century demand that all major parties anticipate the difficulties ahead rather than mostly rely on short-term policy considerations.

Sure policy change occurs in a gradual way, and various players will utilise a given context to promote their interests. It has always been that way.

But political leadership must express a mastery of recent policy trends in order to provide an appropriate vision (or plan) for the future. Political leadership must be driven by individuals or parties that have the guts to call a spade a spade rather than rely on spin and live in hope.

The writing on the wall about the Western world's current predicament has long been evident. In the 2006 Boyer lectures the departing Reserve Bank Governor Ian Macfarlane noted the risk caused by our greater reliance upon the financial sector. In his words,"If a major financial shock were to occur, such as a large fall in share or property prices, the effect on the economy would be greater than in earlier years … it is likely that asset price booms and busts will be at least as common as during the past two decades, and that their effect on the economy will be larger".

But a few years after the GFC began, most Australians now realise that Labor is struggling to come to terms with the nation's needs.

While Labor tells us how its policies helped avoid a major economic recession after the GFC, and how it leads the developed world in terms of economic growth, most Australians know it has much to do with what Australia has in the ground and our exports to China.

I ask this of Labor. Can they look into the eyes of Australians and say that they really understood and addressed the nation's major problems, including greater job insecurity and housing affordability.

Can Labor say to Australians we understand what is needed to make our economy more efficient, productive and prosperous?

I don't think so.

Take Labor's determination to implement a carbon tax, a tax which only a minority of Australians support. While Bob Carr told the ABC audience last week that Australia was an "environmental superpower", most Australians know that a carbon tax will make absolutely no impact on global greenhouse emissions, a reality even more ridiculous given our reliance on exporting more and more coal and gas to Asia.

Sure Labor has implemented some good policies, including the need to ensure greater means-testing for social welfare.

Sure it has offered some vision in terms of providing fast broadband that can help deliver better services to all Australians, albeit that there is disagreement over the high cost.

I am sure that there are many policies that do make an important difference.

But on the whole, Labor has failed.

This goes well beyond the considerable waste associated with the Home Insulation Program and Building the Education Revolution alone.

Labor has failed to be honest with the Australian electorate about our rocky road ahead, preferring to live in hope that Chinese and Indian demand for our commodities will save us from hard decisions.

Take Labor's recent budget effort. Not only does it project a false surplus for the 2012-13 year by bringing forward spending to produce a greater budget deficit this year, but it basically sought to buy support from lower and middle-income earners (notably families) at a time where the carbon tax is soon to be introduced.

Labor needs to change. It cannot seek to galvanise enough support by its current approach. It must strive to make appeal through a can-do strategy that informs Australians of the need to change direction, but in ways conducive to Labor values.

Labor needs to think hard during its time in Opposition about how best to balance its quest for both a productive and fair society.

First, the GFC has told Western nations that our reliance upon debt and consumption rather than production is limited.

Sure we cannot return to all-out protectionism, but we must shift some of our resources to aid our industries as best as we can in order to both compete with growing opposition and take advantage of growing markets. I don't think it will be enough to rely on international students, stamp duty, a live cattle trade, or even more revenue for state governments from gambling.

In other words, more of future budgets need to be utilised to help create wealth or other measures introduced to attract investment, along with further taxation and labour market reform. After all, around 44 per cent of employment (as of August 2011) relies on wealth creation given that health care and social assistance employ 12 per cent of Australians, retail trade 11 per cent and construction 9 per cent.

Weighing up the cost and benefits of certain industry or infrastructure needs is important. The need for better roads, railways, and public transport is always obvious. Similarly, measures to even maintain our current agricultural prowess will cost money. Policies to boost our manufacturing sector may be more contentious, but if Australia wants a significant one it will require substantial resources.

At the social level, addressing housing needs may require government spending or concessions to provide affordable housing, consistent with strategies of past decades. Just recently I was offered a 700 square metre block in Canberra for $280,000 a few days after I purchased a similar sized block for $100,000 in Wodonga.

Labor will likely have to reduce the proportion of the budget spent on social welfare to accommodate industry, infrastructure or even important social needs, unless of course the world changes and higher taxation levels are again become the norm. At present, the $376 billion of expenses set aside for the 2012-13 budget includes $131 billion for social security and welfare, $61 billion for health, and $29 billion for education.

Labor's future role must ensure that social welfare is fair and means-tested as much as possible in line with its historical belief that assistance should decline the more one earns.

At the same time, Labor must come up with new ideas of how best to adapt to a changing economic environment. For myself, I have long been interested in an income security scheme where a percentage of one's pay is paid to an independent body to be paid out when employment ceases. This would help address the loss of payouts to workers when companies fold. The cost of such a scheme could be offset by removing long service leave, a luxury that benefits fewer and fewer workers.

Just how a future Labor can get the balance right requires extensive research. It may require tougher laws on foreign products when it is proven that they were dumped here. It may require joint ventures with private national or foreign firms. It may even require a larger reliance on our own financial resources as more foreign capital gravitates to the Asian region.

It certainly requires Labor to stand for something. Given that Labor was always going to win the 2007 federal election, why did it seek to win support by promising not to alter the private insurance rebate or education funding.

In the end, Labor should stop trying to be all things to all people. It support base has always been everyday Australians which expect Labor to make a difference as we adapt to an ever-changing world. In other words, Labor, like its major centre-right political counterpart, must seize its time in the sun to make a difference as part of the ongoing struggle of ideas in a sophisticated liberal democracy.

For the time being we must put our faith in the Coalition and hope that it will provide both a clearer message and policies necessary to ensure that Australia can adapt successfully in this competitive world.

Labor had its chance but failed. We can only hope Labor does more homework and is better prepared next time.