Photo: The main themes of the Abbott Government promise a return to deregulation. (Dave Hunt: AAP)
The previous Labor government staked its legacy on big-spending social programs, but Tony Abbott is instead looking to increase Australia's prosperity, writes Parnell Palme McGuinness.
Will dismantling unions be the Abbott Government's "dollar float" moment?
There are two main competing political legacies in Australia. But they are not ideological so much as methodological.
One is the deregulatory legacy of the Keating and Hawke government. In floating the dollar, moving to deregulate the financial system, and dismantling Australia's protectionist tariff system, this government is credited by all parties with positioning Australia for a "golden age".
Liberal prime minister John Howard saw himself as expanding on that legacy when he privatised Telstra and tackled the power of the Industrial Relations Commission, lifting the burden of unfair dismissal laws from small business. In addition to the introduction of the GST, his big contribution to future prosperity was to be WorkChoices.
The other legacy is the creation of big social programs. In this tradition, the Whitlam government introduced Medicare and Gillard, between Rudd prime ministership, introduced the National Disability Insurance Scheme and Gonski-cum-Better Schools.
The second legacy, though as brave and visionary as the Hawke-Keating-Howard moves, were built around spending money rather than creating it. Medicare, while happily increasing the health and longevity of Australians, is a spending initiative that costs twice over: once in healthcare, then in pensions.
Introduced in times of prosperity, these programs are a multi-generational mortgage which assumes our national income will grow or remain steady, never fall.
But a bank would have wanted income insurance. The Australian nation has none.
Increasingly economists, such as Robert J Gordon and HSBC-chief economist Stephen D King, are warning that the level of growth we have become accustomed to is coming to an end. They argue that the double-digit percentage trend we have experienced over the last 200 years is slowing to the low single figures.
Furthermore, they argue that low growth will be the new normal. They believe that all of the quantum growth potential has been realised by mass lifesavers, like flushable toilets, and demographic shifts, such as bringing women into the workforce, which cannot be invented or tapped again. They argue that the "big" breakthroughs of recent times, like tablets, smart phones, etc, have been incremental at best; just improvements on prior inventions such as telecommunications.
If these gentlemen are right, we have committed ourselves to unsustainable expenses.
Of course, not all economists agree that it's the end of the big growth in the Western world. Many believe that pessimism is premature. There are plenty of economists willing to lay their reputations on continued growth. They just can't yet tell us whence it is coming.
When we look for policies with a good chance of creating future prosperity in Australia - that is, increasing the pie as opposed to slicing the same one up more finely - we will need to look to the Hawke-Keating-Howard type more than the Whitlam-Gillard model.
And that, by the looks of it, is just what Abbott plans to do.
Disregarding the peculiar programmatic discord of paid parental leave, the main themes of the Abbott Government promise a return to deregulation. Specifically, he is currently eying off union obstructionism. By introducing an appeals body with the power to amend Fair Work Commission decisions, Abbott hopes to restore some bargaining power to business.
Despite record low union membership and the reputational damage caused by the HSU scandal, this is a dangerous move for Abbott. The union groups still have an enormous amount of power and deep pockets. In addition to member dues, their cut of the default industry super funds gives them the funding to conduct noisy protest campaigns.
Another bold move that Abbott looks like tackling is the withdrawal of government subsidies from the Australian automotive industry. Though possibly inevitable for some time now, the consequences, which business commentator Robert Gottliebsen suggests will alienate 300,000+ voters "at a conservative estimate", could bring the government down.
Just as Hawke and Keating's reforms could have.
History shows that we are grateful to historical figures in proportion to the magnitude of the risks they take to do the right thing.
How to know what the right thing is at the time - that is trickier. History may repeat itself in broad themes but every era faces its own complexity. How did the reforms of the 1980s look to contemporaries and are there parallels to the situation today? It is now widely known that Treasury objected violently to the float of the currency. In 2013, the question may be not what we can do to create another golden age, but is another "golden age" even possible in Australia?
Parnell Palme McGuinness is director of Thought Broker which will present the debate "Can Australia Have Another Golden Age" featuring Max Walsh, John Hyde, John Quiggin and Judith Sloan on November 21. View her full profile here.
A return to reforms of the money-making kind - The Drum (Australian Broadcasting Corporation)
