Liberal and Liberal-lite: a Hobson’s choice for voters at next election? Part 1

Mar 1, 2021

Will Labor offer voters a real choice? Labor should grasp the nettle and focus on the key challenges facing Australia – climate change and inequality. Tomorrow, I will discuss the budget consequences of this policy agenda, as this is essential to Labor’s credibility.

It is early days, but the signs are there that we might not have much of a choice in policies between Labor and Liberal at the next election.

What will the Coalition offer

It seems pretty clear that the Coalition will go to the election claiming success in managing the health and the economic consequences of the Covid pandemic.

However, before Covid, the Coalition’s record was signally unimpressive over its previous seven years in government. As Labor MP Julian Hill has recently pointed out Australia has gone backwards under the Liberals, with:

  • Real wages 0.7% lower in 2019 compared to 2013
  • Productivity falling by 0.3% – the fifth worst performance in the OECD
  • Household debt now 119.4% of GDP – the second highest of 43 developed countries
  • Housing affordability has worsened with Australia having the third most unaffordable housing market and home ownership is falling
  • Australia’s rate of greenhouse gas emissions per capita has been the highest in the world
  • Australian children’s educational outcomes have slipped in national and international terms.

Even Scotty from marketing has admitted the road out of the Covid recession cannot be a return to business as usual. As he put it: “The policy framework we had prior to election will need to be reconsidered on the other side to ensure we can achieve the growth to get people back to work.”

Accordingly, last May Morrison announced his reform agenda – which included the  JobMaker Plan – all designed to enable businesses to grow faster. The main elements were:

  • improving the availability of skilled labour,
  • affordable and reliable energy,
  • research and access to technology,
  • investment capital and finance,
  • overseas market access,
  • economic infrastructure,
  • government regulation,
  • business taxation, and of course
  • industrial relations.

As I have previously discussed some of the elements were poorly chosen, and second, little has been or will be achieved.

Don’t scare the horses: Morrison’s business-friendly reforms change little

Thus, the evidence is that the Morrison Government has failed to meet the policy requirements that the PM himself set.

What will Labor offer

After Labor’s apparent failure to sell its policies at the last election, some have been counselling that Labor should avoid controversy and minimise the changes from the Government’s agenda in the run-up to the election.

Indeed, it is being reported that shadow ministers have been asked to find off-setting savings for all new proposals. That may be a useful starting point for policy development, but if adhered to will lock in minimal change.

Instead, given the Coalition’s abysmal track record over the past several years, Labor should grasp the nettle and pursue a more ambitious policy agenda than a continuation of Morrison’s policy vacuum. Right now Labor has everything to gain by offering to do better than simply promising to do more of the same.

As the Labor Party President, Wayne Swan, said in his contribution to Tanya Plibersek’s book, Upturn: “For Labor to win the next election, this is the time to be optimistic and idealistic.”

Labor should build a vision and narrative around the two most important issues for domestic policy:

1. climate change, and

2. inequality and low wage growth.

Climate change

Although both the Coalition and Labor parties seem riven by internal division over tackling climate change, it is now time to recognise that reducing carbon emissions is not a cost to the economy, but an opportunity for economic development and jobs creation. While the Coalition seems reluctant to act based on ideological grounds, this leaves the field wide open for Labor to take it up to the Coalition.

The cost of renewable energy is already less than the fossil-fuel driven energy, and the price of batteries is coming down sufficiently to ensure reliable energy supplies. As Ross Garnaut has demonstrated in his book Superpower, Australia has a comparative advantage in the production of renewable energy and we should be using it to develop new export industries, not just in energy, but also in making steel and aluminium.

Labor’s leaders should grasp this opportunity to show how new jobs can be created by redirecting infrastructure investment, and then how jobs for the displaced workers in coal mining and carbon-based electricity production can be created in the new fields.

Inequality and low wage growth

Low wage growth and the rise in inequality has been the main reason for the economic stagnation experienced since 2013. The shift in the distribution of income from workers to the rich has resulted in an increase in savings; demand has therefore stagnated, affecting investment and over time reducing the growth of productive capacity.

Furthermore, inequality has not only risen in incomes and wealth, but is also reflected in more spatial inequality, for example, more segregation in schooling and more unequal schooling.

The only two major policy initiatives announced so far by Labor – childcare and industrial relations – will help a little.

The childcare policies will assist more mothers to work more hours of paid employment. This will enhance family incomes and should help counteract the impact of low wage growth to some extent.

The changes to the industrial relations framework recently announced by Labor are principally directed to making insecure work a bit more secure. This is only fair and if it comes at a price to employers and/or customers it is a price we can and should be prepared to pay.

More generally, the proposed changes to the IR framework should also help the bargaining power of labour, and to that extent may help increase the rate of wage growth.

But I doubt that Labor’s proposed changes to childcare and the IR framework on their own will be sufficient to achieve the target rate of wage growth.

As Stephen Bell and I argued in our book, Fair Share, the principal reason for low wage growth and increasing inequality has been the impact of technological change. The reduction in inequality of earnings means people must be assisted so they can better adapt to such change. In short, increased funding for education and skills development should be a key feature of Labor’s policies.

However, these take time to bear fruit. Right now there is a very good case, almost universally acknowledged, for an increase in income support for the most disadvantaged members of our society, through a significant increase in unemployment and rental assistance, and substantially more than the pathetic increase of $25 per week in the JobSeeker allowance just announced by the Morrison Government.

Obviously, policies to improve equality and household incomes will involve an increase in government expenditures. Such policies will have to compete with demands for extra funding for so many other essential services.

A comprehensive Labor vision for social and economic development would add up all these legitimate demands and then tackle how to pay for them. This will be discussed tomorrow.

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