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Two areas of economic risk for Bill Shorten's Australia

By David Alexander - posted Thursday, 16 May 2019

Could Bill Shorten manage the economy? Paul Keating and Bob Hawke wrote a curious piece in the Herald this week arguing that Shorten could handle the task, suggesting that a Shorten government should be regarded as part of "a continuum" of earlier Labor governments like their own.

Leaving aside some amnesia about Australia's particularly poor performance with regard to recession, unemployment, deficits and debt during their own time, the major logical flaw in the piece stemmed from its provincial viewpoint.

In the 1980s and 1990s Hawke and Keating followed and were part of the global economic zeitgeist of countries liberalising practically all sectors of the economy, including labour markets, financial markets, currencies, trade, industries, and consumer areas.


The liberalising agenda has had issues, but in the broad it unlocked enormous economic energy across the world. Hawke, Keating and numerous others deserve credit for their role in this global phenomenon.

Things are different in 2019. The liberalising agenda around the world has all but petered out, while on the left there is a resurgence of belief and confidence in government intervention.

In Britain, the Labour Party's shadow Chancellor of the Exchequer, a self-described Marxist, is unabashedly proposing higher taxes, public ownership of utilities like rail, water, power and post, price regulation, and workers' part ownership of large companies. On the US left, higher taxes are now de rigeur, while radical ideas such as a universal basic income and modern monetary theory – essentially creating ''free'' money by fiat – are getting a sympathetic hearing.

These broader currents of increased intervention are undoubtedly affecting Australian Labor.

There are two areas of particular concern when it come to thinking about the economy under Labor – budget management and industrial relations.

Labor has shifted from its long-established practice of promising not to have higher overall levels of tax in the economy from current levels, and is clearly quite comfortable about moving to a higher lecel of spending and tax. What could go wrong?


The chief risk is that the appetite for greater spending will be unstoppable, leaving Labor with the same deficit problem that they had, repeatedly, during their last term in government. Beyond existing costed promises, Labor is already opening up major new areas of spending exposure.

Newstart will be increased to an indeterminate amount, the promise to boost private sector wages in childcare will be followed by strong demands from other sectors, the aged care royal commission is likely to induce significant spending commitments, and the promise to expand parental immigration will open up significant fiscal risk in the future.

Labor may also find revenue falling short if – as currently indicated by critical senators – they are unable to legislate in full key measures like franking credits and negative gearing.

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This article was first published by the Sydney Morning Herald.

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About the Author

David Alexander is managing director of Barton Deakin Government Relations.

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