The end of the end of certainty


With apologies to Paul Kelly, the era of economic reform in Australia is over. As is the era of a smaller, if not exactly small, government.

Twenty-four years ago, Kelly published his seminal book, “The End of Certainty: Power, politics & business in Australia”. In it, he argued that for most of its history since the Federation, “the Australian Settlement”, a bi-partisan consensus superstructure that held together Australia’s economy and society, as well as determined Australia’s place in the world, rested on five pillars: White Australia, industry protection, wage arbitration, state paternalism, and imperial benevolence.

Whatever their merits as policy prescriptions throughout the early and middle decades of the 20th century, by the beginning of the 1980s it was becoming increasingly clear the five pillars have outlived their usefulness. The world was moving on, Australia wasn’t, to her increasing detriment.

A generation of visionary leaders – Labor in government, the Coalition in opposition – understood this reality, Kelly argued. They launched and sustained a great era of reform that swept away the Settlement – the certainty, and the stability, of the past eight decades was over – and made Australia into an economic powerhouse and a confident middle power or the early 21st century.

This period of reform came to an end in 2007, with the demise of the Howard government and the ascension of Kevin Rudd. Truth be told, the Howard government was already running out of reformist steam in its last term. Whether a Costello government would have resurrected the reform agenda will always be one of the great unanswerable ifs of the Australian history. It didn’t necessarily seem certain in 2007 that the reform era was well and truly over; it took nine years and five Prime Ministers to give us the necessary hindsight. But it seems pretty clear now.

Australia today is an infinitely better, wealthier, stronger, more resilient, more open, more confident place as a result of the economic and social reforms of the Hawke, Keating, Howard and Costello eras. But it is nearly impossible to imagine any Labor government in the near future, which would initiate any significant reforms to further free up and grow Australia’s economy – as is nearly impossible to imagine any political and economic circumstances either locally or globally that could give Labor its guts back in this regard. The Global Financial Crisis certainly did not; quite the opposite. What is much sadder, at least for me personally, is that the same can be argued about the Coalition governments, present and future. As Judith Sloan wrote in “The Australian” a few days ago, “It is absolutely clear all our politicians have given up on delivering structural reform, although none of them is sufficiently honest to actually admit it.”

Should they experience any such flashes of honesty, some of our politicians would no doubt argue that it’s not them, it’s us – after a quarter of a century of the Hawke/Keating/Howard/Costello reforms the electorate has had enough of change and occasionally even an upheaval. The reform fatigue has set in and people want their certainty back, thank you very much. Only a courageously suicidal – or suicidally courageous – leader would disregard such strong public sentiment.

Be that as it may, the consequences for Australia will be dire. The rest of the world doesn’t stop even as we might want to get off the bus and take a break. The fact that most of the world’s major economies remain mired in a post-GFC economic malaise doesn’t give us an excuse to slack off. Quite the contrary; it has been the economic reforms of the 1980s onwards which created the prosperous and resilient Australia that coasted through the Asian meltdown, the dotcom bust and even the GFC (as argued by, among others, George Megalogenis in his 2012 book “The Australian Moment: How We Were Made for These Times”). It will be the reformist apathy of the last few years and today, which will bugger us up – to use a technical economic term – at the next global speedbump.

Unlike the economic reform, there has never been a bi-partisan commitment to a limited government that looks prudently after its finances. But the Howard/Costello-era Coalition at least tried. It was one of the key policy differences between the two sides of politics in Australia. But that too seems to be over.

The 2016-17 Federal Budget promised the government will stop running budget deficits – but only sometime beyond the forward estimates, inspired perhaps by St Augustine’s famous prayer, “Lord, grant me chastity and continence, but not yet”. Any promise or a plan made beyond the forward estimates – and therefore beyond two federal elections – is completely meaningless. But even if a miracle did indeed occur and Scott Morrison was right, the Australian government will not even stop accumulating debt – much less start paying it off – until sometime after 2020 at the very earliest.

When John Howard lost the 2007 Australia was virtually the only significant developed economy in the world with zero public debt, having spent a decade paying off what we then thought was Labor’s astronomic $96 billion liability. After six years of the Rudd/Gillard/Rudd government the debt stood at $257 billion. Today it’s $453 billion and counting. Does anyone seriously think it will ever be repaid?

Sometime over the past nine years first the Labor Party under the new-born Keynesian Rudd, and then the Liberal and the National Parties, tacitly accepted that government debt no longer matters and that there won’t be any problem if Australia becomes more like the rest of the developed world – laden with structural debt equal to anywhere from 40 to 100+ per cent of the GDP. Forget the Australian exceptionalism, now we can be more like all those vibrant European social democracies. Didn’t seem to do them any harm, did it?

This wasn’t a difficult decision for Labor to make. As my former boss, Senator Brett Mason, never tired of reminding his Labor colleagues on the other side of the Chamber, public debt is part of Labor’s DNA: every Labor government since the Federation has left Australia financially worse off.

That the Coalition has for all intents and purposes acquiesced and accepted that government debt is just too big a problem to realistically do anything about it was significantly more disappointing. Nay, it hurt. Again, Mason used to say that debt, and not climate change, is the greatest moral challenge of our time, because it represents intergenerational theft – getting those who cannot yet vote (and in many case aren’t yet born) to pay for our entitlement spending today. His farewell speech to the Joint Party Room before he left politics last year after 16 years of reminding his colleagues of these uncomfortable realities was a stark warning call not to give in to the Left on government debt. Sadly, it appears that we did. It is now too big, too intractable, too much part of political thinking and the economic landscape.

I’m not really sure why I care so much about it. I’m Catholic, not Calvinist, and certainly not old enough to have been shaped by the experience of the Great Depression, but I remain of a firm belief that people as well as their governments should live within their means. Maybe in 2016 it makes me naive and old-fashioned; it certainly makes me sad – and furious.