Abbott versus Rudd: a real contest?

There is a view by many that Tony Abbott’s leadership of the Coalition will fully test the Rudd Labor government prior to the next federal election, although opinion polls (and bookmakers) presently suggest that Labor will win easily. One would hope that Abbott makes a difference given the unprecedented rhetoric offered by Labor in 2007: a promise to influence rising petrol or grocery prices, lessen Australia’s reliance upon mineral exports to prevent Australia from being a mere quarry for the world, and even end Japanese whaling.

But only the naïve would rely on one political leader, political party or policy elite given recent policy trends under both Labor and Coalition governments, although Abbott is indeed one of Australia’s most honest politicians capable of encouraging extensive debate (and controversy) about a variety of important issues.

The major problem for Australia (and most Western nations) is that balancing a variety of economic, social and environmental policy needs has become harder.

Sure, difficult policy issues have always been evident. During 1950 Australia needed to build 90,000 houses a year, but only had the domestic capacity to build 60,000, thus leading to the importation of prefabricated houses. Concern was expressed in 1952 that the basic pension had fallen to 28 per cent of the basic wage compared to 36 per cent in 1948. And during 1953 the Australian Workers Union called for a halt to high immigration levels to achieve full employment, while Labor supported the government’s promotion of uranium mining. The early 1950s also witnessed considerable concern about inflation and the balance of payments.

So why do I express more concern about recent policy trends? Well the rules have changed, the policy options for governments appear fewer, and the major political parties are reluctant to tell the truth about either.

While a major policy divide still remains between Labor and the Coalition over the degree of government intervention and labour market regulation (albeit much less today than in the past), policy trends have been largely one-way since the early 1980s. This has been illustrated by lower rates of income taxation for companies and high wage earners, less industry assistance, labour market deregulation, and much greater reliance upon debt (public or private) while the importance of services and consumption has absorbed the lower production of goods (manufacturing).

To now, the decline of manufacturing and promotion of freer trade has not prevented Australia from maintaining one of the world’s higher standard of livings. Even if we allow for the considerable private debt that has been accumulated since 1983, most Australians have enjoyed some benefit through easier access to credit lending and the purchase of cheaper cars and consumers goods.

But no matter how efficient Australia has become in recent decades, the push for greater economic reform continues. We see this with business groups continuously calling for lower tax rates and labour costs in order to compete.

The days when Australia’s political leaders looked to protectionism to uphold the perceived national interest or our standard of living appear long gone. As Abbott has indicated with his past consideration of a lower minimum wage, policy choices are indeed much more limited today as all nations have to compete to a greater extent in terms of taxation and labour costs.

Therefore, you are unlikely to hear Prime Minsiter Kevin Rudd or opposition leader Tony Abbott mirror the political speeches of the 1950s. For example, in 1954, Australia’s Commerce Minister John McEwen argued that tariff reductions were more applicable to highly industrialised countries whereas Australia is “a great exporter of raw materials”. Similarly, in line with wage and taxation policy then being tied to the cost of living, Prime Minister Robert Menzies stated in 1952 that “you cannot have great social responsibility or great social benefit unless you have heavy taxation”. And price control was evident in 1954 when the New South Wales Prices Minister, Mr A Landa, stated that the price of beef and mutton would not be increased and any wholesaler or retailer who charged more would be prosecuted.

But life is getting harder for a growing minority given recent trends, despite the efforts of Labor and the Coalition to maximise economic gain for Australia from its ongoing interaction with the international economy. We see this through greater housing unaffordability, higher food and utility prices, rising public costs for education and health, and an ongoing reliance upon household debt to pay for a variety of goods and services (Australia’s household debt to disposable income ratio reached 159 per cent by March 2008 before some decline, while Australia’s credit debt was estimated at $74,000 per adult by the end of 2009).

I will not pretend to have the answers given the need to balance national and international needs and aspirations through freer and fairer trade which means that all nations should adhere to similar rules. After all, if we are to encourage a world capable of diminishing barriers between nations in terms of both resources and ideas, it is essential that freer trade allows mobility of wealth between those nations seeking to benefit from their interaction with the international economy.