I always read newspapers to keep up with the latest policy debates.
But at a time when the world (including Australia) faces enormous challenges, I am amused at what is sometimes published.
Take Tim Soutphommasane’s article calling for Labor progressives to reaffirm the Hawke-Keating legacy given that “social democracy can be as much about the state designing markets as about the state being a provider”.
According to Soutphommasane, Australian “politics is now separated from conviction”; “government has become poll-driven”; and “policy has been relegated to a secondary concern, if a concern at all”.
But is Australian politics as poor as Soutphommasane suggests, or has freer trade and greater social demands exposed greater policy limitations in recent times despite greater awareness and technical possibilities for a better society? I argue the latter despite noting that rhetoric may continue to play a greater role in Australian politics, as again suggested by Gillard’s recent August 31 promise to “renovate the Labor tradition”.
First of all, it is simplistic for Soutphommasane to refer to past governments to denigrate the present. Sure the Hawke-Keating governments adopted extensive economic and social reforms. For instance, financial and industry deregulation and lower tariff protection was accompanied by the re-introduction of a universal health-care system (Medicare), compulsory superannuation from employers, and expanded rent assistance.
But Labor (1983-1996) also adopted significant privatisation during the 1990s (including the Commonwealth Bank), achieved just three budget surpluses (with Commonwealth debt increasing from 4.9 to 18.5 per cent of GDP in 1995-96), and struggled to get manufacturing going with Australia now increasingly commodity dependent.
Australian government efforts to balance compassion and competitiveness remains evident, but the ability to do so comprehensively to address old and new issues is getting harder.
It is not that recent governments have abandoned those in need. OECD data indicates that Australia’s public social expenditure has steadily increased: 10.6 per cent of GDP in 1980; 13.6 in 1990; 16.6 in 1995; 17.8 in 2000; and 17.1 in 2005. Public health spending alone rose from 3.9 per cent of GDP in 1980; 4.6 in 1990; 5.5 in 2000; and 6.0 in 2007.
But, with Australian governments seeking to keep outlays at a similar level of GDP, after increasing from about 18 to 36 per cent between 1960 and 1985, there is now greater competition for resources. In 1985, when public social expenditure was 12.5 per cent of GDP (OECD), social spending represented just over a third of total government outlays, yet the proportion has been about 50 per cent since 2000. Hence, a lower proportion of government outlays are available to fund infrastructure, defence, and the environment. No wonder governments have looked more to the private sector to meet infrastructure needs.
While Soutphommasane praises the Hawke-Keating policy mix, he downplays the reality that Labor’s reforms also relied more upon private consumption, although household debt exploded later when credit became even easier to obtain. This is evident by Australia’s rising household debt to income ratio: 33.5 per cent in June 1977; 36.0 March 1983; 67.7 March 1996, 155.9 (134.8) December 2007; and 157.3 (139.5) March 2010.
A greater reliance on household debt has only been offset by a higher value of assets, as illustrated by an increase in the household assets to income ratio: 387 per cent in June 1977, 409 June 1985, 519 June 1995, 617 June 2000, 795 December 2007, and 754 March 2010 after falling to 659 in March 2009 during the global financial crisis (GFC).
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