Australia’s next treasurer emerges from the shadows

Something of the philosophy of the man who would be Australia’s next Treasurer was revealed last Thursday. A business conference run by the Committee for Economic Development of Australia heard Joe Hockey explain the Coalition’s future plans.

“I am often told by business people how tough it has become to do business in Australia.

They tell me that input costs are high, labour costs are high, regulation is high, the Australian dollar is high, international competition is fierce, and profits are low.”

Evidence offered was the cost of the carbon tax, electricity, gas and labour in Australia – compared with the United States.

So does the Shadow Treasurer want Australia to follow the U.S?

After successfully negotiating the global financial crisis, Australia now outperforms the U.S. on economic growth, income per capita, employment participation, savings, foreign exchange reserves and value of the dollar against other currencies.

Australia has lower levels of unemployment, bankruptcies, deficits as a percentage of GDP and debt to GDP.

Australia has better superannuation, health care, pension levels, interest rates, home ownership, balance of trade, international credit ratings and overall quality of life.

Several of these advances on the U.S. occurred during 2008 and 2009 as Australia, virtually alone in the world, headed off the ravages of recession with bold stimulus packages.

Mr Hockey continues: “I find it hard to believe that other built-in costs such as regulatory costs in the form of red tape and green tape are more onerous in the United States than in Australia.”

Fortunately the Heritage Foundation in Washington DC is here to help. Motto: “Conservative policy research since 1973”.

Its annual survey of economic freedom measures precisely this – how easy it is for capitalists to invest and produce without government interference.

In January, Heritage ranked Australia first in the OECD and third in the world, just behind Singapore and Hong Kong. The U.S. lags at 10th.

Heritage said this: “Australia’s economic freedom score is 82.6, making its economy the 3rd freest in the 2013 Index…Australia’s strong commitment to economic freedom has resulted in a policy framework that encourages impressive economic resilience…Openness to global trade and investment is firmly institutionalized, and the economy has rebounded relatively quickly from the global recession.”

Their assessment of the U.S, in contrast: “The United States, with an economic freedom score of 76, has lost ground again in the 2013 Index…More than three years after the end of recession in June 2009, the U.S. continues to suffer from policy choices that have led to the slowest recovery in 70 years. Businesses remain in a holding pattern, and unemployment is close to eight per cent. Prospects for greater fiscal freedom are uncertain…”

So which government will the Coalition emulate when it next gains power?

Mr Hockey again: “This competitive disadvantage is compounded by a government which has declared war on the business community with new and increased taxes and capricious policy decisions.”

Is this true? Heritage offers this: “The financial system has remained stable, and prudent regulations have allowed banks to withstand the global financial turmoil with little disruption. Public finances are soundly managed, and sovereign debt levels are under control. A transparent and stable business climate makes Australia one of the world’s most reliable and attractive environments for entrepreneurs.”

Mr Hockey continues: “What we do need to do is to ensure that our workers have the skills and knowledge that our industry needs. Education, training and retraining is a key step to unlock labour productivity gains.”

Correct. The Rudd/Gillard program. No?

Mr Hockey: “More broadly, the way to accommodate and indeed thrive with high wage costs is to focus on lifting productivity so that the per unit labour cost is competitive.”

Correct again. Wayne Swan’s program precisely. Australia’s productivity has surged in the last six consecutive quarters to an all-time high of 164.82 points.

Mr Hockey continues: “Business has been damaged by the sheer capriciousness of tax policy. This government has announced 27 new or increased taxes since coming to office in November 2007.”

Maybe. But how many has it abolished and reduced? The key issues are the weight of the tax burden, equitable load-sharing and administration costs.

The evidence suggests all three have improved significantly under Australia’s current administration. According to the OECD, overall taxation has dropped significantly since 2007. For the entire Rudd/Gillard period taxes have been lower than the lowest point during the Mr Howard years.

The most serious problem with Mr Hockey’s speech, however, is his focus on energy costs and the carbon tax: “The most direct step the Federal government can take to lower electricity and gas prices is to abolish the carbon tax.”

Yes, energy costs have risen. But why? Mr Hockey seems unaware of the global consensus regarding emissions reduction, the reality that emissions are now reducing in Australia and emerging green energy alternatives.

None of those three concepts gets a mention.

Questions arising from Mr Hockey’s presentation include: Does the Shadow Treasurer really understand the factors that propelled Australia to the top of the world’s economies during the GFC? If not, is Australia at risk of slipping back down the rankings again?

Why no mention of values such as fairness, sharing the proceeds of Australia’s natural wealth, and protecting the environment?

And why so little analysis in Australia’s media of the philosophy and policies – or lack thereof – of the people who hope soon to control the levers?