The next phase of Australian politics - the phase of consolidation

So, during Christmas 1983, the ALP commenced the process of floating the dollar - the market and not the government set the rate of exchange. Tariffs on imports were reduced. The Australian financial system was liberalised.

In 1990, a special premiers conference agreed to significant micro-economic reform. This laid the groundwork for the national competition policy agreements of 1995. As a general proposition, free trade between nations became common cause within the Australian political classes. Privatisation of institutions, such as the Commonwealth Bank and Telstra, commenced.

The Coalition also played its part. It reduced government debt to nearly zero (compared to the OECD average of 40 per cent). It also entered into an agreement with the Reserve Bank to maintain monetary policy so as to keep underlying inflation to 2-3 per cent, and kept the budget in surplus. Finally, while the tax code wasn’t simplified, the GST, and the various Ralph taxation (elements) were implemented.

The laws just passed by the Senate are the last gasps of this period of post-war politics.

The current situation

However, while there have been some changes to internal Australian market structure, many of the income redistribution mechanisms established during the era of Big Government remain. There has been some tinkering at the edges, such as the various welfare-to-work initiatives. However, some benefits are still being extended, and others have been created.

For example, various benefits, such as increasing access to the federal Senior's Health Card, have been directed towards self-funded retirees. A baby bonus is now payable on the birth of a child. And while the Federal Government has wound back some changes to Medicare offered during the election, other benefits have been extended.

To pay for this, Australians are paying more tax than ever before. Moreover, Australia has a disproportionate reliance on personal and corporate taxation relative to the two largest OECD countries - the US and Japan.

With globalisation, there are dangers in over-reliance on this highly mobile tax base. It is also the case that business is a cycle. The Federal Government is currently harvesting the benefit of booming company tax, based in large part from the large increase in sales to China. The economy won’t always be booming. Benefits levels must be sustainable.

As time, and the age of the community advances, the current level of support will become unsupportable, as the number of claimants for income support increases and the numbers of taxpayers diminish.

There is also an argument to say that people are working so hard, a sense of community is being lost as they lose time with their families, community groups, and so forth, as they work to live. The development of social capital - the value of the social networks that local people can draw on to solve problems - is prejudiced. It is impractical to believe that this state of affairs can continue forever.

The Treasury Inter-Generational Report suggests that by 2040, there will be twice as many people older than 65, and four times as many over 85. Spiralling social security and health care bills will result in a budget deficit of $87 billion if policy settings don’t change.

The Productivity Commission estimates expenditure on health will rise from 5.7 per cent of GDP to 10.3 per cent by 2045.