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The truth about recent policy trends: an alternative opinion

By Chris Lewis - posted Monday, 11 August 2008


To what extent Australia can meet a variety of economic, social and economic considerations is a key question facing all Western nations, an aspect which is inadequately addressed by Australia’s academia or media.

For instance, on July 3, 2008, Dr Peter van Onselen, the co-author of John Winston Howard: The Biography and Howard’s End provided a simplistic answer when he responded to a Q&A question on ABC television, that a lack of resources for Australia’s health industry was caused by both Labor and Coalition governments having moved to the Right, a statement that drew substantial applause from the audience.

Any half decent Australian political commentator should know that all Western governments are under immense pressure to ensure competitive taxation rates and labour costs in order to enhance investment, a reality that complicates spending possibilities. Even Sweden, arguably the most generous of all democracies, has reduced its level of government outlays from 72 per cent of GDP in 1993 to 56 per cent in 2006, and is seeking to further tighten the generosity of its social security system.

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This is not because governments are obsessed with ideas put forward by right-wing think tanks advocating free markets and minimal government. After all, between 1990 and 2003, even the supposedly mean spirited liberal democracies increased the proportion of government outlays spent on social expenditure to assist the vulnerable from about 14 to 18 per cent of GDP in Australia; from 17 to 21 per cent in the UK; and from 13 to 16 per cent in the US.

Rather, with Western nations generally supporting freer trade from the late 1940s to help avoid the disastrous protectionist policies of the 1930s, Australian governments from the early 1970s gradually accepted the view that it was economically unviable for Australia to maintain such high levels of industry protection against cheaper and high-quality products from other nations. Therefore, Australian governments sought to maintain Australia’s high standard of living by relying more on industries where Australia did have some comparative advantage, such as agriculture and mining, with services providing a greater proportion of employment.

Even allowing for the reality that Australia has benefited from an expanding international economy, with its per capita GDP increasing from the bottom third to top third of the OECD during the 15 years prior to 2007, interest groups in Western nations have been forced to compete that much harder for resources to meet a variety of old and new policy needs, while governments have utilised the private sector to a greater degree to meet various services and infrastructure needs.

And contrary to Kevin Rudd telling Australians and the world since 2006 what polices are best, and ongoing debate between the Left and Right over what the appropriate level of government intervention should be, Australia may increasingly struggle to meet its many economic, social and environmental needs. After all, with both 2008 US presidential candidates indicating further cuts to taxation rates, and both Labor and the Coalition promising to maintain government outlays at a similar proportion of GDP, it remains to be seen just how far governments will act to meet a variety of policy needs given the current credit crisis which is likely to temper any further reliance on private debt to fuel domestic economic activity.

Therefore, Australia’s political commentary needs to reflect the difficulties ahead rather than merely supporting the status quo. For instance, Paul Kelly continues his call for Labor to promote lower government spending and taxation rates, despite many Australians now facing record home unaffordability, and much higher prices for food, petrol and utilities.

Further, Janet Albrechtsen (The Australian May 23, 2008) defended the wages of the corporate elite on the basis that such criticism was merely class envy, although the Howard government’s promotion of AWAs from 2006 to help employers came at a time when just 13 executives of Australian companies shared more than $200 million in wages during the 2006-07 financial year.

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Recent policy trends, given that there are few other viable concepts besides freer trade to promote peace and prosperity between competing nations, favour the rich and corporations at the expense of an expanding minority, so let us not kid ourselves that this is all OK.

Even individuals with a centre-right perspective from overseas are now urging greater intervention. For instance, Mathew Parris (a former Tory parliamentarian) argued in The Times (March 29, 2008) that governments should be doing more to help address problems now associated with the environment, income disparity, the regulation of banking, fair trade, diseases, and immigration.

There was always going to be enormous problems from any reliance upon freer trade. For instance, even with greater labour market flexibility, lower corporate taxation rates, and greater productivity, this could not prevent the proportion of domestic made cars within total automobile sales falling from 61 per cent in 1990 to 21 per cent by 2006, a decline that would be worse if businesses and government fleets did not purchase mostly Australian-made cars.

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About the Author

Chris Lewis has an interest in all economic, social and environmental issues, but believes that the struggle for the ‘right’ policy mix remains an elusive goal in such a complex and competitive world.

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All articles by Chris Lewis

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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