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Liberals - whither goest thou?

By Des Moore - posted Thursday, 24 September 2009

One of my favourite ditties opens with “I know where I’m going, I know who’s going with me” (the young Scottish lass is singing the virtues of her “handsome winsome Johnnie” who she is longing to marry). While it’s pleasurable to hear such verses from time to time, many are increasingly asking whether the current leader of the Liberal Party knows where he is going and who he can take with him - particularly any with a capacity to develop and promulgate worthwhile policies.

The essence of the problem is the lack of any coherent set of policies that might convey what kind of society the Party considers Australians should have and how that might be achieved. To an outsider there is excessive focus on day to day issues, for which Malcolm Turnbull’s financial market expertise should be suited (although his capacity to handle day to day political trading is open to question). One wonders whether this approach is a reflection of a recent political thesis implying that political leaders are now focusing more on establishing power positions than pursuing philosophies (more on this below).

The policy problem was highlighted recently when, out of the blue, Turnbull took the plunge on the workplace relations policy devil that has plagued the Opposition since the election loss widely attributed to the Howard government’s WorkChoices policy. So what was the Turnbull plunge? In a show of bravado the Opposition leader suddenly expounded the view that he neither ruled in nor out of Liberal workplace relations policies a role for individual contracts! This opened the worst of all possible worlds, making the party vulnerable to attack and reportedly forcing Turnbull to immediately back track. He should have either continued to reject any such approach or have committed to it on a basis different to WorkChoices.


It is little wonder that such indecisiveness and focus on the short term has produced restlessness in Opposition ranks about what the party stands for, highlighted in Brendan Nelson’s farewell address. And concern that it allows the Government to use Question time in the House largely to promote its own policies.

Interpreting the present policy line is the more difficult when there is only limited availability of written material on policy issues. This suggests either inadequate professional staff or a reluctance to address substantive issues - or both. And one wonders what role the Liberal Party secretariat is playing. Is it too much to expect that after a year in office Turnbull should have issued at least the outline of a policy approach?

Looking at the situation from the perspective of an outsider there are some key issues deserving of attention.

I start on the basis of my belief that the Liberal Party should not only continue to have a platform of small(er) government but should actually identify measures to achieve it. I was encouraged to hear Shadow Treasurer Hockey confirm very recently (in a TV interview) that Liberals “are strongly opposed to the government being the centre of everyone’s lives” and he even nominated an objective of reducing government spending to around 24 per cent of GDP (with the recession and stimuli it is currently over 28 per cent). But 24 per cent was the level the Howard Government finished with and that was only fractionally lower than at the end of Whitlam. And Howard actually increased the burden of taxation by about 2.5 percentage points of GDP.

As yet the current smaller government Opposition has done little to explain to the electorate how that might be achieved and the tax reform paper it commissioned remains unpublished. But achieving smaller government requires a lot of (advance) explaining to the electorate. Little sign of that has emerged.

True, the Opposition has invested considerable political capital in attacking the additional government spending designed to stimulate the economy. Some would describe that as courageous in circumstances where every other country was (is) doing it and every international institution supporting it. From a political perspective that demanded a carefully calibrated in-depth attack that the Opposition’s ministry seems unable to produce. True, the ministry did correctly highlight the poor quality of much spending, and the failure to publish promised cost-benefit analyses of infrastructure approvals. But more questions could have been raised about why such large fiscal measures (at 5.4 per cent of GDP the third largest amongst OECD countries) were needed, if indeed they were needed at all, and about the importance of minimising deterrents to the revival of the private sector (more on this below).


For a start, the fiscal and monetary inheritance passed to Labor by the Howard government (which left no net government debt and levels of private debt relative to income lower than overseas) argued for (at least) much smaller fiscal action than in overseas countries where the recession originated. That conclusion finds support from the “emergency” below-neutral interest rates established by the Reserve Bank, the relatively strong balance sheets of Australian banks (thanks again to Howard/Costello), and from the holding up of exports to China (and fiscal stimulus cannot produce exports anyhow).

In addition, more questioning could have been directed at claims that government spending “saved” many thousands of jobs that would otherwise have been lost. Similar claims in overseas countries have been negated by higher than modelled unemployment i.e. the stimuli there have not effected the modelled reductions in unemployment (does anyone now give credibility to outputs of economic modelling in recessionary situations?). Yet last week the published modelling of Australia in the OECD’s Employment Outlook (doubtless “cleared” by the Treasury representative in Paris) was acclaimed by the Government. This purports to show the “saving” of 150-200,000 jobs - equivalent to a lower than otherwise unemployment rate of around 1.5 per cent. But even if the modelling were accepted, is it fiscally responsible to incur such a high cost per job saved ($320,000 to $450,000)? Additional temporary assistance could possibly have been provided at a lower cost through the existing social welfare system whose object includes the provision of assistance to those who become unemployed due to a slow down or fall in economic growth.

Moreover, in existing economic circumstances the argument could have been much more strongly put by the Opposition that the less that wages and conditions are regulated the more employees the private sector will absorb and the less unemployment will rise. The increased “flexibility” espoused by the Coalition is one thing but why not propose some specifics, such as (at a minimum) the deferral of the introduction of the modernised (sic) award system until the economy is back to trend growth. References could also have been made to situations overseas in which some workers have accepted reductions in wages in order to retain their jobs (in Australia the reduced hours worked by some have the same effect). The consistent acknowledgement by the Government that unemployment will continue to rise (and its refusal to make any downward revision to the official forecast of an average 8.25 per cent for 2009-10 and 8.5 per cent for 2009-10) arguably provided an opportunity the Opposition missed badly.

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First published in Quadrant Online on September 20, 2009.

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About the Author

Des Moore is Director, Institute for Private Enterprise and a former Deputy Secretary, Treasury. He authored Schooling Victorians, 1992, Institute of Public Affairs as part of the Project Victoria series which contributed to the educational and other reforms instituted by the Kennett Government. The views are his own.

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