Tony Abbott’s 'Battlelines' and future directions for the Coalition

“… power is given only to those who dare to lower themselves and pick it up. Only one thing matters, one thing: to be able to dare!”

And so, like Dostoyevsky’s tormented anti-hero Raskolnikov, Tony Abbott has proven himself able to dare. He has picked up the Liberal leadership in what can openly be described as an improbable fashion. In so doing, he has asked the Australian public to judge him on his future actions, rather than his colourful past. So what are “we the people” to make of the future direction of Tony Abbott’s policy thinking?

Fortunately enough Mr Abbott’s book Battlelines released in mid-2009 provides an invaluable insight into the direction Liberal policy might take under his leadership. In this regard Abbott should be commended for his willingness to offer his views on public policy issues in writing, a rare achievement for a sitting Liberal member of parliament. He should also be commended for his lucid and engaging writing style. Battlelines is a genuinely enjoyable read and offers a great insight into life in government and opposition, and the trials and tribulations of public life.

One of the startling features of Battlelines, however, is the scant regard paid to economic policy at a time when the world is struggling to emerge from the worst banking crisis since the Great Depression. Abbott pays lip service to microeconomic reform, but sets forth no actual economic reform agenda. Economics is clearly not an avenue of great interest, understanding or vision in the Abbott political mindset. Perhaps the keenest indication of this fact is the incessant quotation of arguably Australia’s worst State Treasurer from its most dysfunctional state, Michael Costa. This is deliciously ironic given Abbott’s criticism of what he sees as widespread state failure in the delivery of education and health services.

Abbott derides stimulus as a “fiscal sugar hit” and “magic pudding economics” that is propping up uncompetitive businesses despite the broadly acknowledged fact that fiscal stimulus has made all the difference between a technical recession and anaemic economic growth over the past 12 months. In the words of Treasury Secretary Ken Henry: “We estimate that were it not for the fiscal stimulus measures, the economy would have contracted in each of the December [2008], March and June [2009] quarters, with GDP falling by 1.3 per cent over the year”. (Speech to the Australian Institute of Company Directors, September 23, 2009, “The Global Financial Crisis and the Road to Recovery”.)

Added to this are Abbott’s claims that WorkChoices was not all that bad, but let’s look at the recent history in more detail. Neo-liberal economists claim that flexible work arrangements have kept Australia’s unemployment rate low during the current downturn. To a certain extent this has been true as hours worked per worker have declined during the crisis. However, the recent national accounts showed that private sector employment fell by 0.24 per cent in the 12 months to June 2009, whereas public sector employment increased by 3.2 per cent. Again it was stimulus and public spending that have made all the difference on the employment front.

There is also a suggestion to end superannuation tax concessions, this coming despite the important role compulsory superannuation has played in increasing national savings, and economic growth. Superannuation savings added 1.8 per cent to Australia’s growth rate during the GFC, and also helped the corporate sector restructure its balance sheets more effectively than in any other country (Allen Consulting Group “Better living standards and a stronger economy: the role of superannuation in Australia” October 2009). Abbott seems completely unaware that super tax concessions have been an effective policy tool to boost national savings and enhance economic growth - the only proviso being that they should be extended to low and middle income Australians.

In no more important area is Abbott’s economic illiteracy revealed than in his response to the ETS. On the one hand Abbott decries propping up uncompetitive businesses with subsidies, however, his solution to climate change is to provide direct subsidies to encourage green technologies, sustainable land use and carbon capture and storage technology. He is also in favour of propping up businesses that will be unsustainable in a carbon-constrained future economy.

There are broadly speaking three options open to governments to cut greenhouse emissions. They can be referred to as regulation, carbon-pricing and subsidies. In a recent paper by Carolyn Fischer of Resources for the Future, and Richard Newell, head of America’s Energy Information Administration, they found that a carbon price, whether by tax or ETS, is about twice as efficient as a mandated renewable energy target (regulation), and approximately two-and-a-half times as efficient as a renewable-energy subsidy. (The Economist, December 5-11, 2009.)

What we can gather from this paper is that from all the credible options, Abbott is in favour of the most costly, least efficient method of mitigating climate change. One would therefore also question whether Abbott is serious about doing anything about climate change. In this context, floating another “debate about nuclear energy” looks like a handy smokescreen for business as usual on climate change. Abbott doesn’t have a climate change mitigation policy, but rather a cover up for a do nothing approach to climate change.

In terms of social policy Abbott is in favour of income management for the undeserving poor, and non-means tested, universal family benefits for the deserving middle classes. Abbott maintains the later is an important measure to ensure “justice for women” and to minimise welfare to work disincentives, however, there is little evidence to suggest that this measure is the ideal way to achieve either outcome.

There is also a proposal for a new form of marital contract that makes dissolution more difficult. Admirably, if somewhat reluctantly, Abbott supports a paid maternity leave scheme for working mothers. As part of his fatwa against means testing, he also indicates his preference to remove means testing for the baby bonus.