To gamble on our future with more debt would be suicidal

Australia is hurtling towards a critical moment. Like a gambler who has just lost another big punt, the Senate is soon to decide whether to make another plunge on borrowed money. The odd thing is that there is a near-carnival spirit in some parts of society that think that the good days will continue to roll, regardless. Some even deny that gambling is a problem.

In the 1980s and 1990s there was a tacit understanding that Australia needed to change course. From 1996 to 1999 the Democrats at least accepted that the Howard government had a mandate on workplace reform and the Goods and Services Tax. Since then the idea of a mandate has been trashed by the more radical Greens and is likely to be trashed by Clive Palmer.

If Labor wins the argument in the Senate that Australia is just fine on the current economic settings, then one day – probably sooner rather than later – Australians will be in for a nasty shock. That shock will be driven home by much bigger and tougher cuts than the very moderate changes in this year’s budget.

The current budget is a start. But if the Coalition thinks that tax cuts are just round the corner and that this budget is the high point of tough budgets under Abbott then they should think again.

Prime Minister Tony Abbott. Picture: ALEX ELLINGHAUSEN

Prime Minister Tony Abbott. Picture: ALEX ELLINGHAUSEN

This week’s parliamentary sittings bring us closer to the stage where we face two choices. We could undertake more reform now or do nothing and wait until things are so bad that only then will reform be politically possible. We would be mad to accept the latter option. The worry is that we have taken the latter option before.

The fiscal debate could end up like the labour market debate where policy is paralysed, and already signs of damage can be seen in rising youth unemployment, poor productivity and absurd wage claims by the Maritime Union of Australia in the resource sector. WorkChoices was grossly exaggerated, but the political fallout was that the Coalition went to water and Abbott announced WorkChoices was "dead buried and cremated".  By 2009 there was hardly a voice in the country for labour market reform even though flaws in the Gillard legislation were more obvious day by day. And the impact of WorkChoices is obvious on Labor as well. Even if, in the privacy of its own policy making, Labor could see the need for some sensible reforms of the sort proposed by Paul Keating in the 1980s, Labor could not contemplate any reform because it can’t walk away from the mythical success of its WorkChoices campaign.

What a mess!

Bill Shorten is already saying there is no real need to confront Australia’s debt. If Shorten wins the 2016 or 2019 election with a platform that denies the need to fix the budget, then he will be tied to his policy regardless of the fiscal reality.  He would have no choice but to keep the spending going. In that scenario, the Coalition having lost an election for being "courageous", is likely to lose enthusiasm for even the moderate measures knocked back by Shorten. We could end up with virtually no advocates for fiscal reform in the same way the labour market has been paralysed since the Coalition let the Gillard legislation through with barely a whimper.

It would mean that two key drivers of economic reform would be at a standstill. That outcome will eventually leave Australia at the mercy of our creditors when the next economic recession hits our shores.

Clive Palmer wants a double dissolution on the budget. Last year Abbott raised the spectre of a double dissolution on the carbon tax. I don’t think either will happen. Ministers who have just been voted into office do not normally want to suddenly put their new jobs at risk. But despite my expectation, a double dissolution can’t be totally ruled out of consideration.

So maybe Abbott should be thinking of how he would handle that situation. It could be a good idea to have a few dissolution bills ready to throw into the mix if needed.  Abbott could be leading public discussion on the problems of youth unemployment by introducing legislation to overturn recent Fair Work Commission decisions that have worsened job prospects for young people. This sort of bill could buttress budget measures which cut youth benefits.  Abbott could do the same thing for older workers.  He could also take on the MUA in WA. Deckhands earning $200,000 per annum should be prevented from holding multimillion dollar exports to ransom so that they can enjoy 40 per cent wage increases. As well as being good policy this sort of bill might also help to curtail Labor enthusiasm for a double dissolution.

PS: Credit to Bill Shorten for rebuking Tim Mathieson for his attack on Margie Abbott. A little civility can go a long way in politics.

Peter Reith is a former Howard government minister and a Fairfax columnist.


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