Column in The Australian - ALP Must Stand By Its Reforms

Published in The Weekend Australian on 16.11.13

AUSTRALIA has been better at economic reform than most developed countries. It's no coincidence that Australia is one of only a handful of developed countries to have enjoyed more than two decades of recession-free economic growth. Across the political spectrum there is general acceptance that this growth would not have been possible if not for the economic reforms of the Hawke-Keating era. But growth, and the better opportunities for the underprivileged it enables, won't keep coming unless we keep reforming.

Yet Australia is about to shirk a significant economic reform, an emissions trading scheme. As a party of reform, Labor must have no part in its repeal.

Consider the record of the major parties in implementing the big post-war economic and social reforms. For the Coalition side, chalk up the 1957 Australia-Japan commerce agreement, gun laws, the GST, formalising the independence of the Reserve Bank, labour market deregulation (that went too far) and the now abandoned Charter of Budget Honesty.

Labor has been in power for just 40 per cent of the time since World War II. On its side of the reform ledger are: Ben Chifley's nation-building infrastructure investment; Gough Whitlam's early engagement with China; universal health insurance through Medicare; the floating of the dollar; financial market liberalisation; removal of most industry protection; the 1985 tax reforms; school funding reforms that led to a doubling of the proportion of young people finishing high school; establishment of an education export industry through immigration and education policy reforms; energy market reform; a national superannuation scheme; national competition policy; a strategic partnership with China; a demand-driven university system; legislation for a national disability insurance scheme and school funding reforms; and an ETS.

Of those reforms the Coalition has opposed or sought to abolish: Medibank and Medicare; the fringe benefits tax and capital gains tax that funded reductions in higher marginal income tax rates; compulsory superannuation; the needs-based school funding system; and the ETS.

If this account of the reform record of the two parties and the proclivity for wanting to reverse them seems biased, any proposed modifications would be graciously acknowledged. Both parties can take credit for the great post-war immigration program. The Coalition would lay claim to superior fiscal management, but the budget papers confirm it as the highest taxing government in Australia's history.

Many on the conservative side will object to the proposition that an ETS is an economic reform. Some claim it is socialism masquerading as environmentalism.

But the climate change science is becoming more certain across time, not less. It is accepted by the world's meteorological organisations, the International Monetary Fund, the World Bank, the OECD and, at home, by the Bureau of Meteorology, the CSIRO, the Productivity Commission and the federal Treasury.

If the Coalition government truly believed human-induced climate change was not happening, it would abandon its bipartisan commitment to reduce carbon emissions by

5 per cent from 2000 levels by 2020.

Instead, the government brazenly asserts that its vague direct action plan will achieve the 5 per cent reduction target and, in an astonishing coincidence, that it will hit the target by spending the $3.2 billion its budget committee has allocated to the plan, not a cent more.

Most Liberal MPs argue that markets are far better at allocating resources than governments. Yet on climate change they are choosing central planning over markets.

Labor is playing word games when it claims it now opposes a carbon tax but supports an ETS. If the Rudd government's carbon pollution reduction scheme with a one-year fixed price was an ETS, then the Gillard government's clean energy scheme with a three-year fixed price is an ETS.

By allowing the market to seek out the lowest cost emissions abatement possibilities, an ETS can achieve the agreed cap on emissions at least cost.

Before John Howard revealed last week that he developed an ETS only to insulate his government against a voter backlash, he argued there were big benefits for Australia being a first mover in our region. Now we are seeking to become first remover, as China implements emissions trading in seven cities and provinces and South Korea implements an ETS.

An ETS is an essential economic reform. As with many post-war economic reforms, the Coalition is seeking to repeal it. Labor successfully saw off Coalition pledges to repeal universal superannuation, Medicare, the fringe benefits tax, the capital gains tax and the needs-based school funding reforms.

As a party of reform, Labor must resist again.