Forget the past, Australian governments face a tough road ahead

A recent article by the political studies scholar James Walter suggests that Prime Minister Albanese should learn from the example of past Australian prime ministers who utilised communication and management skills to deliver success, yet the simple truth is that luck and context goes a long way to explaining any government success.

If a government has good economic fortune, say like the Howard government (1996 to 2007) enjoyed for the most part, then it is more likely that a popular policy mix can emerge and leadership tensions will be minimal.

A favourable economic environment for the Howard government was despite a number of adverse economic events which included

• the Asian financial crisis of 1997-98, which led Asian economies to invest capital from large current account surpluses into US dotcom stocks driving up equity prices;
• the bursting of the dotcom bubble in 2001 which led the US Federal Reserve to ease monetary policy in a series of steps to 2004 but resulted on a booming housing market fuelled by credit and leveraged loans;
• investors chasing yields in an environment of lax regulatory oversight;
• and rising demand from China in a growing world economy which saw commodity prices rise across oil, minerals and food from late 2004 to late 2007 which resulted in rising prices and inflation which caused monetary authorities to tighten policy from 2004 to 2006 (Warwick J. McKibbin and Andrew Stoeckel, The Global Financial Crisis: Causes and Consequences, Revised September 2009).

With the Howard government utilising large high budget surpluses (and the sale of assets) to eliminate Commonwealth debt by 2007-8, after net Commonwealth debt had risen to 18.5 per cent of GDP by 1995-96 after also being in surplus in the early 1970s, such a context is way more important than Walter's line that Howard benefited from having an experienced public servant (Arthur Sinodinos) or having an immense interest in policy as indicated by Howard's department secretary Peter Shergold (2002 to 2007).

So, while Walter states that "none of Howard's successors has been as effective in commanding the prime ministerial machine", the reality is that recent Australian governments (under Rudd, Gillard, Abbott, Turnbull and Morrison) have experienced division over key policy areas since the global financial crisis (GFC) of 2007-2008.

In such a climate with the electorate expecting more and more from government in terms of Australia's economic, social and environmental policy mix, clashes over policy have been evident.

Take the policy struggle to uphold Australia's commitment to reduce greenhouse gas emissions, which enabled Abbott to exploit divisions in the Coalition and the electorate and also forced the Liberal moderate Turnbull to make concessions to appease tensions within the Coalition once he became prime minister.

Walter, by focusing on past prime ministerial strengths, downplays the difficult task ahead for the Albanese government even though Walter cites "the need for rapid transitions to slow climate change; the deterioration of the US polity and the West's declining investment in the rule of law; the rise of China; the backsliding of some democracies towards autocracy; a war in Europe threatening energy supply, resources, supply lines, trade and international relations; and galloping inflation, exacerbating cost-of-living pressures".

Rather, Walter offers an optimistic look to the past by stating "it's heartening to recall that Labor governments have taken the helm before in times of crisis", which includes "two world wars, its initiative to implement programs that transformed Australia's postwar development, and its response to the GFC which was more successful than most of its international counterparts".

Yet, notwithstanding Australia's war efforts, this is not the late 1940s and early 1950s when there was political consensus that Australia would have a high wage and highly protected economy before considerable tariff reductions since the late 1970s.

While major recent policy difficulties (such as the GFC and Covid) were offset by deficit spending at a time of relatively low interest rates, it is all too easy to keep using debt to fuel economic activity through consumption.