Sweeping economic reform is essential yet almost impossible. That’s the tragic but inescapable verdict from the last few years of political and public discourse. But a narrow path to reform remains open.
Earlier this month, Treasurer Jim Chalmers released a landmark Productivity Commission report, Advancing Prosperity. It sounds a dismal warning: Australia is experiencing its worst productivity performance in six decades, yet productivity growth is responsible for all the improvement in Australian living standards since Federation.
Without a sustained lift in productivity growth, Australians will be left squabbling over the distribution of stagnant national income. And our economy will become ever more vulnerable to global economic shocks such as financial crises, pandemics and curbs on our exports arising from geopolitical hostilities.
Following the golden run of productivity growth emanating from the economic reforms of the Hawke-Keating era, it fell away from 2.2 per cent in the 1990s to 1.4 per cent in the 2000s and down again to 1.1 per cent in the 2010s.
During John Howard’s prime ministership, he repeatedly claimed the Coalition lent bipartisan support to that program and extended it when in government.
Frankly, it didn’t feel like bipartisan support most of the time, especially for Keating’s reforms to the tax system that cut high rates of personal and company tax while broadening the tax base.
But by modern standards it was a love-in – Woodstock, the Age of Aquarius and Good Vibrations all rolled into one.
Any sense of bipartisanship ended when the Abbott-led Opposition opposed just about every reform of the Rudd-Gillard era, including carbon pricing and the Henry tax reforms. It earned the name the Noalition.
In government, Abbott broke his every pre-election core promise in his first budget, precipitating his early removal.
Malcolm Turnbull reduced the concessionary tax treatment of superannuation for those on the highest income levels, costing him support within the Liberal Party. His effort to end the climate wars with his National Energy Guarantee then cost him the prime ministership.
Prime Minister Morrison, with his hands full dealing with the COVID-19 pandemic, described economic reform proposals as vanities. Nevertheless, his assistant minister, Ben Morton, did good work on reducing unnecessary regulation.
But economic reform needs some level of bipartisanship. That looks entirely absent, judging from the response of Liberal leader Peter Dutton to a modest proposal of treasurer Jim Chalmers to reduce – not eliminate – the tax concession on earnings in superannuation funds with balances greater than $3 million.
Within nanoseconds, Dutton promised that if elected to government he would repeal the measure. And he would reignite the climate wars by abolishing the Safeguard Mechanism that puts a price on carbon for Australia’s biggest emitters.
The federal budget is in heavy structural deficit and productivity growth is in the doldrums.
Yet there is a glimmer of hope.
Dating back to the National Reform Summit of 2015 supported by the Financial Review, the Business Council of Australia and the ACTU have maintained a constructive dialogue through the Jobs and Skills Summit of 2022 and to this day.
They have worked together to revitalise the enterprise bargaining system and have found common ground on policy issues such as training, immigration and climate change. They have the maturity to put aside matters on which they cannot agree while working on those on which agreement might be possible.
The Business Council of Australia did not chuck a hissy fit when Chalmers announced the changes to the superannuation tax concession and urged the opposition to support the government’s Safeguard Mechanism to end the climate wars.
An insight into the Parliamentary Liberal Party’s behaviour can be gleaned from an analysis of its voting constituency. The only age groups in which the Liberal Party enjoys a voting majority are the Baby Boomers (born before 1964) and those born in the inter-war period.
As Malcolm Turnbull learned, if a Liberal parliamentarian upsets these constituents their days are numbered.
In these circumstances, for the foreseeable future the Liberal Party will remain the party of the home-owning seniors’ establishment, not the party of the young and certainly not the party of reform.
Saturday’s NSW election-night speeches by Dominic Perrottet and Chris Minns also suggested all might not be lost, as they agreed they had travelled the high road together before and during the campaign.
It in the national interest that the Albanese government works with the BCA, other interested business and community organisations, the ACTU and in the parliament, minor parties and independents, to achieve economic reforms. At this stage, the Dutton-led opposition looks a lost cause.
Craig Emerson is managing director of Emerson Economics. He is director of the APEC Study Centre at RMIT University, visiting fellow at the ANU and adjunct professor at Victoria University’s College of Business. He was co-convenor of the National Reform Summit supported by the Financial Review.