Australian liberalism: the rocky road ahead

As Greg Canavan notes, however, with the People's Bank of China recently raising interest rates for the fourth time since October, and the Chinese economy more dependent on fixed investment than just about any economy in history, China is getting much closer to its own tipping point as its own bubble is built on debt, just like the Australian housing market.

Sure, the answers are difficult and some painful reform may be needed. After all, we cannot simply abandon freer trade and become ultra-protectionist if one believes in a fairer world on behalf of Western leadership.

But libertarians are being simplistic when they claim that things will be better if only government got out of the way. After decades of reform that have favoured the private sector, more people are struggling despite greater social welfare assistance. One has only to note record home unaffordability, an aspect perhaps worsened by the extent of foreign purchases of domestic property and immigration, although one cannot obtain government data about the extent. Earlier in 2011, the Annual Demographic Housing Affordability Survey suggested that the average price of houses in Australia's major cities was 7.1 times gross average household income, and 6.1 times for the 32 major centres analysed.

Despite Labor and Coalition governments adopting significant tax and labour market reform, there are calls for further reform with many supporting attempts to remove penalty rates, although the majority of Australians still resist such sentiment.

User-pay principles for education and medical services continue to expand since Labor introduced fees in the 1980s through the Higher Education Contribution Scheme. Recent information reveals that many Australians are struggling with some of the highest co-payments for health care within the OECD given they have risen "faster in Australia than in any comparator countries in the past ten years".

Many battlers also face problems in regard to everyday bills, such as food and utilities. Recent ABS data indicates that employee households faced extra costs of 4.5 per cent for the year to December 2010, seniors a 3.1 per cent rise, and people on welfare 4.5 per cent, although the official consumer price index grew by 2.7 per cent. Further, a recent Australian Debt Study Report suggested that 21 per cent of those surveyed were struggling with repayments, up from 19 per cent six months earlier.

From a government policy point of view, one can note how our increasing reliance upon services allowed a dodgy international student sector through the promotion of cooking and hairdressing courses, seen by many migrants as a route to permanent citizenship.

And there is hardly going to be an effective economic-environmental balance in the near future. While the carbon tax will supposedly show our environmental leadership qualities to the world, carbon emissions will rise and Australia will seek to sell much coal to the developing world. Sort of reminds me how Labor once intended to address woodchip exports by 2000 (Alan Ramsey, 'A question of where the weight falls', SMH, 24 December 1994, 15), yet the UN Food and Agriculture Organization indicates that Australia in 2008 was the world's largest woodchip exporter (21 percent) and the fourth-largest producer (7.7 per cent).

It remains to be seen what the Australian liberal democratic experience will next deliver. Will it meet the challenges and make the necessary reforms in a fair way? Will Australian society turn in on itself and adopt policies that mean that a growing minority suffer as many already struggling more from higher housing, food and utility costs?

Not sure, but tougher measures are ahead as the wealth creation sector is hardly going to be penalised in terms of a much higher tax burden in a world where even the rich nations face much greater competition to attract vital investment, including from authoritarian China. Any reform towards much greater taxation will need to rely on the policy lead from much more powerful and influential nations.

More measures will emerge to encourage work from our increasingly older labour force, as evident since the Department of Employment, Education and Training reported in 1994 that more than 40 per cent of about 150,000 long-term unemployed would not accept a subsidised training job, even if it was offered to them (Max Walsh, 'Wanted: Program to revive work ethic', SMH, 5 April 1994, 35). Such a policy may even make sense if we are to reduce our reliance upon immigration, although substantial resources may be needed in terms of training.

And with governments struggling to meet old and new economic, social and environmental needs, we can expect more public-private infrastructure deals, despite some criticism. Sure the NSW Auditor-General, Tony Harris, savagely criticised the secrecy and complexity of financial arrangements between the State Government and companies in 1994 over the Sydney Harbour Tunnel project when he estimated $3.6 billion in payments and forgone interest over the 30-year contract due to end in 2022 (Paola Totaro, 'Auditor criticises secrecy on public works contracts', SMH, 18 October 1994, 1). Yet, a recent article notes that the Sydney Harbour Tunnel will deliver a further 70 years of estimated use after it reverts to state ownership.

Whatever the outcomes, I am betting that any new policy trends that emerge will have more to do with pragmatic responses by government and society rather than any dreamland libertarian solution that adheres to pure free trade or open borders for immigrants.