For voters economics is queen

A recent opinion piece by a Monash University academic Paul Strangio, comparing Australian prime ministers, states

My hunch is that history will treat Gillard with more sympathy than her legion of contemporary detractors. The rankings indicate that policy footprints matter most to prime ministerial reputation, and on this criterion measures such as the first serious response to climate change, a national disability insurance scheme, national broadband infrastructure and a new education funding system have the makings of a substantial legacy that has been eked in the unfamiliar and inhospitable conditions of minority government. Posterity will better judge this reform program's significance and weight it against her incapacity to parlay the measures into electoral favour.

Despite some achievements, I criticise the Gillard government’s legacy on the basis of economic incompetence given the context of the day which demanded a more sensible approach in order to boost consumer and business confidence in these uncertain times.

Labor’s economic policy failure, not only allowed the Coalition to largely wait for Labor’s inevitable fall, despite Abbott promoting a consistent policy platform, but complicated Labor’s claim to be the political party which best balances Australia’s economic, social and environmental policy mix.

My assertion stands despite Labor’s cheer squad referring to Australia leading the OECD in a number of criteria, and Kevin Rudd (and others) suggesting that Australians were influenced by a biased Murdoch dominated media

Simple truth is that one needs to look beyond the flattering data. For instance, a recent Credit Suisse Global Wealth report indicates average adult wealth in Australia to be the second-highest in the world in 2012 ($US355,000), with median wealth the highest ($US194,000), yet this level was maintained by high levels of home ownership and a high dollar (boosted by the commodity export boom).

And, when I note Labor’s lack of economic prowess, I am not suggesting that Australians were looking for magical economic solutions.  Unlike my own concerns about trade and Rudd’s promise to prevent Australia from becoming a quarry for Asia, many Australians recognise that most of the developed world also relies more on economic growth by China. Most Australians also recognise that the ongoing demise of Australia manufacturing, down to 7.1 per cent of GDP in 2011-12 after being 11.2% in 2003-04, was not helped by a high Australian dollar.

Nor do I imply that government policy is easy as new evidence may force change. For example, the Gillard government during May 2012 gave approval for mining magnate Gina Rinehart to bring in 1700 skilled foreign workers to get her $9.5 billion Roy Hill iron ore mine underway in the Pilbara. Yet, during June 2013, the government introduced legislation to require subclass 457 visa sponsors to demonstrate that there are no qualified and experienced Australian workers readily available, unless an exemption applies. This followed a 68 per cent increase in 457 visas in the Information Technology sector since 2008 compared to 35 per cent across all sectors.  

Rather, with the public again placing its faith in Labor in 2010, albeit it served as a minority government, probably in recognition that Australia had fared relatively well from the global financial crisis, I believe that the public expected a more conservative type of Labor government.

After the chaos of Rudd with major policy reversals (abandoning the emissions trading scheme) and major policy embarrassments (the Home Insulation Program), it was no longer enough for Labor (and supporters) to rave on about past glories as if it was the progressive party for all ages. By 2010, most Western nations faced fiscal difficulty (including Australia).

Yet, under Gillard, Labor failed to create any perception of economic competency during a period of greater economic uncertainty. 

Under Gillard, there were three major policy blunders that hardly helped consumer or business confidence, the very engines that drive the economic viability of an advanced Western society seeking to balance economic, social and environmental issues.

First, the Gillard government was adamant that Labor would deliver a budget surplus by 2012-13, evident from her first press conference as Prime Minister (23 June 2010).  While a difficult international economic environment made it difficult for both public and private forecasts predicting economic growth, with the 2011-12 budget delivering a budget deficit of $43 billion (2.9% of GDP), it was only near the end of 2012 that the government finally admitted that a surplus would not be achieved. 

Second, while the Rudd government’s handling of the Resource Super Profits Tax was one of the main reasons why caucus support shifted to Gillard, the Minerals Resource Rent Tax compromise raisedjust $126 million during its first six months, despite the government previously predicting $3 billion for the 2012-13 financial year.

Third, the carbon tax was an economic failure, while doing nothing to prevent global CO2 emissions reaching a record31.6 gigatonnes in 2012. With the carbon tax initially set at $23 per tonne, higher than most similar schemes around the world, an April-May 2013 Australian Industry Group surveyof about 400 businesses in the manufacturing, services and construction found that most were unable either to pass on the costs of the carbon tax or afford to reduce their own exposure to it. Only the most emissions-intensive and trade-exposed industries received assistance to meet their carbon liabilities (Innes Willox, ‘Business pays too much for carbon’, The Australian, 26 June 2013).

With such policies hardly delivering benefit, common sense told most Australians that all was not well under Labor at a time of greater difficulty for many workers. For example, the ABS indicated that average hoursworked per Australian worker continued to decline: 35 in the 1980s, 34 in the 1990s and 33 since 2000, yet 32.9 in 2011.  Further, the real unemploymentrate was 13.1% when one included those who worked just one hour a week, discouraged jobseekers, the underemployed and those who wanted to start work within a month, but could not begin immediately.

And, despite a 2013 reportby the National Centre for Social and Economic Modelling finding that average disposable income increased by 65 per cent since 1988 (15 per cent since 2008), thus leaving households $15,861 per year ($5,324 per year since 2008) ahead after accounting for cost of living increases, benefits was far less for low-income people. During the 2012-13 financial year, high income households were assisted most by low mortgage rates (down 14.5 per cent), yet low income households and government beneficiaries faced higher living costs with utilities rising by 14 per cent, health 6.2 per cent and education 5.5 per cent. Low income houses were much less able to cope with double-digitgrowth in electricity prices after 2007, including 14% in 2012-13.

Labor’s poor economic policy prowess did not help boost consumer or business confidence. It merely cemented its electoral demise at time when workers observed the end of Ford’s domestic operations and recent departures from the Australian food manufacturing sector, including by Heinz.

Economic mediocrity also hindered Labor’s ability to adopt a more progressive or balanced economic, social and environmental policy mix.

For example, a flawed mining tax alone, although increasing the tax free income threshold to $18,200, jeopardised other Labor policy promises: family payments increases; a bonus for school-aged children; small business tax breaks; and compulsory superannuation increases.

With Australia’s total social welfare expenditure at a record 19 per cent of GDP in 2012, boosted by government fiscal deficits, Labor was forced to make other cuts elsewhere to pay for new policy programs, thus angering some Labor voters. This included cutting $2.5 billion from universities over four years; around 84,000 sole parents being moved off parenting payments to Newstart once their youngest child turns eight, which meant 60,000 single parents from January 2013 could lose $60-100 a week; and no increase in the Newstart allowance, despite the base rate not increasing in real terms since 1994 and the Business Council of Australia President Tony Shepherd calling for an increase at a National Press Club address.

By not adopting a more conservative economic platform, and rushing to implement flawed mining and carbon taxes, Labor’s fracturing (begun under Rudd) continued, as did policy desperation.  

First, Labor’s policy towards asylum seekers arriving by boat moved further towards the Coalition’s hardline stance, as further evident under Rudd during the election campaign.

Second, Labor conducted a whinge campaign looking for someone to blame for its own policy woes. Treasurer Wayne Swan accused mining magnates Clive Palmer, Andrew Forrest and Gina Rinehart of trying to assert too much influence over policy given their strident opposition to the carbon tax and the mining tax. Gillard, responding to an education debate, also suggested that people who lived on Sydney's North Shore were not ‘real people’ (Mitchell Nadin; Imre Salusinszky, ‘Julia Gillard takes on Tony Abbott in a reality showdown’, The Australian, 10 May 2012.).

Third, the Gillard government also sought to counter perceived media bias, but failed to win parliamentary support for its media law reform bill.

Fourth, Gillard described Abbott as ‘sexist and misogynist’, which, at best, only temporary boosted her approval ratings (Essential Report, Essential Research 15 October 2012).

In the end, Australians were fed up with Labor: it won just 33.9 per cent of the primary vote at the 2013 federal election (its lowest level since 1903).

The Coalition was judged by the Australian electorate to be more capable of future economic management. As indicated by Newspoll, whereas Labor during August 2010 trailed the Coalition slightly (43% to 44%) as the party most capable of addressing Australia’s economic needs, by late February 2013 Labor was behind 28% to 50%.  

It did not matter that most Australians still preferred Labor as the best party to handle health, education, industrial relations or even climate change, as indicated by another Newspoll (9-11 August 2013). 

And contrary to those who suggest spend, spend and spend is the way to go, the Australian Election Report prepared by the Australian Development Strategies company, provides interesting evidence within Labor’s loss. Labor voters living on transfer payments did not remain loyal; self-drive suburban commuters moved back to the Coalition, perhaps influenced by the carbon tax; Labor lost votes in the manufacturing seats of Melbourne and Adelaide, despite promising to spend more; Labor lost support from typical families in three-bedroom houses, albeit it picked up ‘some support from the wealthier family homes with four or more bedrooms’; and there was little proof that big spending towards the NBN, DisabilityCare, education and health made that much difference.

To conclude, if Labor is to win back support to compete effectively with the Coalition, then it needs to carefully implement policies that actually deliver and/or create confidence, thus improving its opportunity to deliver its social welfare and environmental credentials.

If a future Labor party is to return to the carbon and mining taxes, assuming that the Coalition now removes them, then Labor should not rush policy in the future just to been seen as innovative. Labor needs to work closely with business, the public and other relevant players, yet build consensus for necessary reform that actually delivers results.  

Labor must now rise to the occasion within an electorate that has little time for rhetoric and poor economic management.