ANZ LitLovers LitBlog

Like everyone else, I’m trying to make sense of the Australian election results: there’s a bigger picture here, and it’s a real shame that the first act of the ABC’s new MD is to axe the online edition of The Drum, which provided a place for intelligent opinion from outside the usual ossified media sources.

Published in March 2016, this essay Balancing Act, Australia between Recession and Renewal was written before the election and it makes interesting reading now.  As we can see, our political commentators are scrambling to deal with what amounts to paralysis while we wait to see if we end up with a majority government emasculated in more ways than one, a minority government governing either with some sort of negotiated agreement or at the whim of the independents,  or *shudder* utter chaos.  But back in March Megalogenis was reminding us of the media’s role in the national conversation that Australia has to have, about how we manage the economy in the wake of the mining boom, the birth of the Asian century and out-of-control globalisation.  We weren’t having that conversation when Abbott’s Hockey budget was shredded; it was analysed by our media as a failure of marketing, a problem they thought would be solved by the delivery of a new salesman, i.e. Malcolm Turnbull.

And now in the election results we see the results of media and political failure to read the tea leaves…

The most consistent message sent by voters to the main parties over the past decade and a half has been the demand for security. Both sides have taken this to mean border protection and bribes at the ballot box; one fist clenched against the rest of the world, while the other hand offers cash to the most aggrieved. Yet each leader that tried this was bewildered when voters could not be appeased. The truth is that the demand for security is more sophisticated than politics has allowed. We want our leaders to think for the long term; to prepare us for life beyond the mining boom. Both sides have found this in their research since the earliest days of the boom, but both have been unable to see past the next Newspoll. Something deeper is happening here than the predictable incompetence of politics. The system knows what voters are really asking for: a return to some form of government intervention in the economy. Yet this is resisted because of a misguided faith in the open economic model. The only leader who seriously tried to find a way out of the impasse was Rudd, but he lost focus after the global financial crisis. Now a Liberal prime minister is being asked by the public to redraw the line between the market and the state.    (Chapter 1, italicising is mine).

Megalogenis may have got it wrong when he wrote that voters don’t just want a return to adult government; they crave new ideas, so that the future does not seem so intimidating.  The evidence seems to be that some in the electorate just want the 1950s back again.  He may also have got it wrong when he predicted that Turnbull could retain his popularity because the public is willing him to succeed.  But he wasn’t wrong when he warned that political celebrity could be a trap.  Get it wrong, as Rudd did, and people conclude that you’re just another politician.  Our cynicism about politics is going to cost us dearly.

What Megalogenis is quite clear about is that the debate we have to have is on the role of government in the economy. Looking now at the composition of the Senate and its new constituency of the disaffected, commentators like Margo Kingston are warning that the media needs to listen to their voices instead of mocking them.  Megalogenis argues that:

The political system cannot restore public confidence without a more responsive government. And the economy won’t stabilise without a more active government. The default setting of politics in the twenty-first century – to trust in the market – has proven to be bad economics, even for Australia, the only high-income nation to avoid the Great Recession. It has left us with gridlocked cities, growing inequality and a corporate sector that feels no obligation to pay tax.  (Chapter 1).

My eyes usually glaze over when I’m reading stuff about economics, but Megalogenis makes it reasonably palatable.  I’m not (obviously) well-read in economics, but I haven’t seen an analysis before that explores the differences in the male and female economy, nor one that cuts through the hoopla about penalty rates.

Yet the urge to blame the worker has not passed. Weekend penalty rates are a favourite target. Hotels and restaurants claim more of them would open for business on Sundays if they could pay their staff the weekday rate. Perhaps, but it does not follow that the economy would be better off, let alone the young waiter whose take-home pay is likely to be cut. Household consumption is the beating heart of any economy. It accounts for more than half of Australia’s GDP, and should not be restricted without good reason. Accommodation and food services employ more than 800,000 workers. Many would be worse off without penalty rates. Their loss of spending power would need to be at least matched by greater consumption by the rest of the population to leave the economy no worse off. I can’t see it happening in the present environment. What has been holding back households since the global financial crisis is not the lack of opportunities to spend, but the debts they are carrying. A seventh day of consumption might help cafés, but the money that flows there will be offset by cutbacks on other discretionary items.  (Chapter 2, italics mine)

Chapter 3 goes on to explain the lost opportunities of the Howard era revenue boom and how stupid we have been as a nation not to have invested in infrastructure instead of frittering our revenue away on tax cuts for plasma TVs.

Howard changed the budget from being a document primarily concerned with the economy to one with a purpose that was overtly political. He taught people to expect a handout outside an election campaign, which created a permanent sense of entitlement.  (Chapter 3)

Labor under Rudd did the same, giving a pension increase even when the budget was in deficit. How could he not, given that sense of entitlement?  But what voters really want, according to Megalogenis, is for governments to stop throwing money at them and spend it instead on infrastructure.  Anyone trying to find a bed for an Aged Parent knows this is true. It’s equally true when we try to move around our cities in traffic gridlock.  And we want our regional cities and towns to have the infrastructure they need too, not just because it makes decentralisation more appealing but because it’s their right as citizens.  But sorting out our national financial problems has become such a political football that there was never any real attempt by either party to explain the problem to the electorate, and goodness only knows how it can be sorted out now, given the calibre of some of the new Senators.

Chapter 4 has the title ‘A recession we have to have?’  There are adult voters who have no experience of a recession and don’t know how debilitating it is for both individuals and the country.  But the risk is real.  Hooked on capital gain and reliant on the trade of one big country: this is the familiar face of Australian smugness, is now Megalogenis puts it.  At the time of writing the essay the ALP had just announced its policy to scale back negative gearing:

On top of the list of national regrets if we do fall into recession this year or next will be the role that politics played in fostering our property obsession. Every prime minister and treasurer since Hawke and Keating has indulged it with tax concessions. (Chapter 5)

Megalogenis says that the ideal time to rein things in was during the Global Financial Crisis, but Rudd didn’t do it.  Over time, that indulgence has apparently cost us dearly:

The landlord class in Australia – the number of people owning more than one property – numbered 600,000 in 1998–99. A decade later, their ranks had doubled to 1.275 million, or almost 13 per cent of individuals. John Howard gave the investor another leg up by halving the capital gains tax rate in 1999. That was the last year our landlord class declared a profit. Between 2000–01 and 2012–13, the most recent year for which statistics are available, our landlord class lost $66.3 billion, or $5.1 billion per year, more than they made in rental income. I’m pulling your leg. They didn’t lose this money. Their fellow taxpayers did, because the landlords wrote off the losses against other income, thereby reducing the total tax they paid.  (Chapter 5)

Just imagine what we could have done with that amount of money, and how spending it wisely could have reduced the ranks of the disaffected…

Chapter 6 unpacks the political reality that we have just seen in operation at the weekend.  It focusses on Turnbull; it’s a tad deferential to the messiah in the sense that it suggests he might have a vision even if he hasn’t revealed it to the electorate yet.  The essay acknowledges the political constraints within his party.  But with startling prescience, Megalogenis writes this:

Perhaps Turnbull is waiting for an election win before he reveals a new model. But events may overwhelm him. No post-war government has increased its majority in its second term, so Turnbull could conceivably be governing on a parliamentary knife-edge. And then there is the ever-present danger of another economic setback. (Chapter 6)

and this:

We don’t have the American problem of a white underclass. But we do have a prosperity gap between new Australians and the local-born. The post-war assumption that migrants to Australia will only do the work that the locals don’t want no longer applies. Now migrants are also being hired for work that the locals are not qualified for.  (Chapter 6)

and this:

On the other hand, the success of the migrant raises the risk of a local backlash, and the possibility that one of our main parties will take a detour down the American road of bigotry. If the political system couldn’t cope with the infrastructure demands of the past decade, how will it respond to a future in which a fraction of the local-born feel that they have been pushed to the margins of society? The logical answer is to dramatically increase public investment in education to ensure these local-born are not left behind. But this would require a change of mindset in the Coalition, which supports private systems over public, and the winners of deregulation over the losers. (Chapter 6)

The Quarterly Essay never fails to impress with the quality of its essays, and this one is one of the best.  Perhaps while our politicians are biting their nails to the quick they might read it, and learn something?

PS If you’re not totally over the election by now, you might enjoy this article ‘Election Myths in the Making’, by Tim Colebatch, at Inside Story, one of my favourite sources of intelligent discourse about politics.

PPS You might also want to read a politician’s response to this. #Disclosure: Clare O’Neil is my local MP and I’ve met her at an Australian Republican Movement fundraiser where she was a keynote speaker. She says:

The guiding principle for government intervention might therefore be this: governments should engage where the evidence shows they can make a difference.

And that there are five areas for action where there is consensus:

• education
• engagement with Asia
• climate change
• infrastructure
• concern about the prospect of another financial crisis.

Read what she has to say here.

Author: George Megalogenis
Title: Balancing Act, Australia between Recession and Renewal
Publisher: Black Inc, 2016
ISBN: 9781863958110
Source: Personal subscription.

Available from Fishpond: Balancing Act: Australia Between Recession and Renewal (Quarterly Essay), from Readings, or subscribe from the QE website.