How can Australian governments be held accountable for economic policy?

When Malcolm Turnbull was asked during the election campaign to explain why government deficits had continued to rise under the governments led by Tony Abbott and himself he made the point that they had done their best to address the “unsustainable spending” they had inherited, but had been blocked in the Senate. It was a reasonable excuse. The prime minister offered it when interviewed by Leigh Sales on ABC TV on June 8 and June 24, and probably gave it in other interviews as well.

I expect we will continue to hear prime ministers give that excuse in future as governments have important elements of their economic policies blocked in the Senate. Governments can sometimes negotiate with minor parties to secure passage of important legislation, but that is difficult because minor parties have an incentive to seek to increase their popularity through raucous opposition to any proposal by government which disadvantages any significant group of voters.

It seems likely that governments will continue to be unable to get unpopular spending cuts and/or tax increases through the Senate. Barring some unexpected boost to government revenue (e.g. from a terms of trade improvement) that means budget deficits are likely to increase in the years ahead. As government debt grows to truly mountainous proportions - many times higher than the modest “mountains” the Coalition inherited in 2013 – we can expect Australia’s credit rating to be downgraded with monotonous regularity. We know from the experience of other countries that there is potential for that process to end up with economic policy eventually being dictated by the International Monetary Fund.

Perhaps it would be wise to be consider introducing some reforms to Australia’s democratic institutions over the next few years, before economic policy is taken out of the hands of democratically elected governments. A good place to begin is to consider whether our current system of government provides the best balance between the conflicting democratic ideals of representative parliaments and accountable governments. What are those ideals?

In 1861 John Stuart Mill made a strong case for adopting proportional representation to ensure minority interests are represented in parliament:

In a really equal democracy, every or any section would be represented, not disproportionately, but proportionately. A majority of the electors would always have a majority of the representatives; but a minority of the electors would always have a minority of the representatives. Man for man they would be as fully represented as the majority. Unless they are, there is not equal government, but a government of inequality and privilege: one part of the people rule over the rest: there is a part whose fair and equal share of influence in the representation is withheld from them; contrary to all just government, but, above all, contrary to the principle of democracy, which professes equality as its very root and foundation. (Representative Government, Chapter 7).

In 1942, Joseph Schumpeter made an equally strong case for ensuring that democratic institutions produce governments that can be held to account for the policies adopted:

It is in fact obvious not only that proportional representation will offer opportunities for all sorts of idiosyncrasies to assert themselves but also that it may prevent democracy from producing efficient governments and thus prove a danger in times of stress. But before concluding that democracy becomes unworkable if its principle is carried out consistently, it is just as well to ask ourselves whether this principle really implies proportional representation. As a matter of fact it does not. If acceptance of leadership is the true function of the electorate's vote, the case for proportional representation collapses because its premises are no longer binding. The principle of democracy then merely means that the reins of government should be handed to those who command more support than do any of the competing individuals or teams. (Capitalism, Socialism and Democracy, Chapter XXII). 

Australia’s political system can be viewed as a compromise between those conflicting ideals. Under our bi-cameral system, the principle of proportional representation is applied in the Senate, while the system of single member electorates applied in the House of Representatives has usually produced a workable majority for a single party or a stable coalition. Government is formed from the party or coalition having the majority of seats in the House of Representatives.

That means we normally elect a governing party which can be held accountable for implementing the economic policies it takes to elections. Australian governments are more accountable to the electorate than those formed under proportional representation systems in which parties go to the polls to seek endorsement of their policies and then, after the election, enter into negotiations to decide what policies the temporary coalition of parties forming the government will actually seek to implement. Parties forming such temporary coalitions tend to blame each other for poor outcomes and electors find it hard to tell who is responsible for what.

Nevertheless, as already noted, it is difficult to hold governments accountable for implementing their economic policies when the Senate blocks the unpopular spending cuts and/or tax increases required for prudent economic management.

The Australian Constitution contains a sensible procedure to resolve a deadlock between the upper and lower houses of parliament – a joint meeting of both houses. There is no guarantee that joint sittings would be able to resolve deadlocks between the Representatives and the Senate when the government has only a small majority in the lower house, but over the longer term they could be expected to result in less Senate obstruction and better economic policy outcomes.

The problem is that the Constitution provides that joint sittings can occur only after a double-dissolution election, which is a hazardous path for governments to take. The most recent experience of a double dissolution election highlights the risk that governments can easily lose such elections, or be returned to power with more obstructive upper houses than they had before. Governments have been defeated on about half the occasions in which double dissolution elections have been held, and a joint sitting of both houses of parliament has so far occurred on only one occasion. 

Removal of the requirement for a double-dissolution election prior to a joint sitting would, of course, require an amendment to the Australian Constitution. There are easier ways to reduce the potential for Senate obstruction.  For example, the major parties could collude to change the electoral system in ways that would weaken the representation of minor parties. That would be a shame in my view because representation of the minor parties performs a useful pressure valve to enable minority interests to express their dissatisfaction with the major parties.  

An amendment to the Constitution to enable joint-sittings to resolve deadlocks without double dissolution elections seems to me to be the best option available. It will be difficult to obtain the support of the majority of the electors in a majority of states necessary to do this, so discussion of the issues involved should begin as soon as possible, rather than wait until the nation is confronted by an economic crisis.