The broad church accepts high debt

THE broad church, as John Howard has put it, that is the Liberal Party has accommodated many views, but it always has had one article of faith – fiscal rectitude.

The Liberal Party’s pews could accommodate republicans and monarchists, free traders and protectionists; libertarians and social conservatives, but the one thing they all agreed upon was sound economic management and fiscal rectitude.

They may not have always practised it to the full, but nonetheless they always expounded it and have said constantly that the Liberal Party would always manage the economy better than Labor.

Remember John Howard saying interest rates would always be lower under a Coalition Government than under Labor.

It did not matter if some pews emptied and there were fewer bums on seats, or whether there were differences over social policy, the Liberal Party always staked its electoral success on being better economic managers. It was the foundation of the broad church.

Now even this is looking wobbly. Within just one of those long weeks in politics, the Coalition Government has shifted position. In the lead up to the 2013 election and in its first year in office it portrayed itself as saviour — as fixer of a “budgetary crisis”. A week or so ago, with its first attempt at a budgetary fix in shattered pieces on the Senate floor, the Prime Minister described a debt level of 60 per cent of GDP as “a pretty good result”.

In fact it would be an appalling result, because the debt, as forecast by the Intergenerational Report, would not have been built up through constructive spending on productive infrastructure. Rather, it would have been built up through year-by-year rises in government spending and slower or no rise in government revenue.

In short it would be credit-card debt not mortgage debt.

The major parties either do not understand or are unwilling to be honest with the electorate about Australia’s position.

There is no immediate Budget crisis. Rather, the medium term projections show government revenues are too low to sustain the projected spending. So we must either cut spending or raise more revenue or both. And it must be done intelligently. It is no use doing what Hockey is doing – selling prime Canberra real estate and then renting it back. That just makes the position worse in the future.

Nor should spending be cut on things that will make us more productive (education) or help prevent later costs (primary heath care).

People, among them cross-bench senators, did not like the last Budget not only because it was unfair, but also because it was stupid.

And the next one will be even more stupid if it ignores the problem altogether, or worse, gives even more hand-outs and tax breaks for small business. That would leave a poor legacy. And let’s face it, leaving an economy in better shape than it got it is about the only legacy the Abbott Government can hope for. Just as there are leaners and lifters, there are also builders and wreckers. To date the Abbott Government is more a wrecker than a builder.

In the week or so of discussion about political philosophy and legacy since Malcolm Fraser’s death, you would have thought legacy might have been at least a thought bubble in Abbott’s mind. But no, he thought that Fraser’s single most important legacy was getting rid of the Whitlam Government.

But, of course, getting the economy right is not of itself what matters, rather it is what you do with that economy.

Some of Fraser’s most important legacies, as Jack Waterford pointed out during the week, were in indigenous affairs, environment and administrative law reform.

Without sustainable government finances you can do very little. But does this government really want to do anything else (or, given the acceptable of high debt, even this)? Does it have any ambition? Does it want a legacy? Or is it satisfied with just the negative – abolish the mining and carbon tax, stop the boats, beat Labor, repeal racial vilification law (now abandoned), erode Medicare, and so on.

Has the broad church developed to the stage where it can no longer stand for anything but beating Labor or winding back things Labor has done?

And looking at the history, beating Labor has been the raison d’etre of this broad church.

At Federation, Australia had partially inherited the two party system from Britain of Conservatives vs Liberals. In Australia they were the Protectionists (conservative-traditional) and the Free Traders (liberal-individualist). But by 1901 the Labor Party in Australia had gained more strength than it had in Britain. Labor sided with the Protectionists in 1901, but slowly became strong enough to form minority government itself.

By the end of the first decade of federation, the interests of the wealthy and capitalists in both the Protectionist and Free Trade Parties saw the two, in effect, merge to form the broad church that has since been the anti-Labor forces in Australia.

It was always an uncomfortable conglomeration. Moreover, the constituent philosophies have changed from protectionist and free traders. There have been wets vs dries and social conservatives v small-l liberals.

Holding them together has been two aims: keeping Labor out of office and keeping the reallocation of resources from the big end of town to those less well off as small as possible. And where possible to have the allocation even go the other way with tax breaks and subsidies for business.

Also, holding them together (like the Labor Party) has been the need to do the bidding of their funding sources: business (and in Labor’s case the unions).

But now the broad church sees that it is going to be hard to achieve both – serving the big end of town and keeping Labor out of office — because Abbott and Hockey have concentrated so much on the former as to make it too obvious for ordinary voters.

So it may be the broad church moves to less negativism and to more small-l liberalism and more idealism. But if so, it will not be because of a change of heart. It will only because they will see it as absolutely necessary to keep Labor out.

Meanwhile, the country’s finances will go slowly down the gurgler.
CRISPIN HULL
This article first appeared in The Canberra Times and Fairfax Media on 28 March 2015.

One thought on “The broad church accepts high debt”

  1. Crispin,

    What a good synopsis of some of the major currents in Australian Federal history since 1901. Such essays such as this should form a basis for an Australian history curriculum that would give present-day voters in Australia a much firmer base upon which to make their election choices ….

    I imagine that you are following at least some of the work of Richard Denniss and the Australia Institute? Combining your work with a lot of his (and theirs) provides a nuanced and indepth understanding of where and why Australia is where it is …..

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