Articles – The Centre for Independent Studies

There's real choice in this election

Simon Cowan

10 May 2016 | ABC The Drum

red blue chess coalition labor parties governmentIn recent elections, opposition and government candidates alike tried to make themselves as small a target as possible in the hope of avoiding alienating anyone. But in this election campaign there are already fundamental differences between the policies of the major parties.

The central divergence, and a key battleground on which this election will be fought, is simple: how can we kickstart the Australian economy and generate much needed employment growth?

The Coalition laid out its position in the budget: jobs and growth come from cutting Australia’s uncompetitive corporate tax rate, through lowering the burden of income tax on the top two income tax brackets, and by reducing the dead-weight of government stifling business.

The government has signed a number of free trade agreements. It has ended industry assistance for the inefficient automotive manufacturing industry. It has undertaken de-regulation, albeit not always with complete success.

While at times they have backslid over industry assistance and foreign investment — notably in the defence and agricultural industries — there has been a relatively coherent narrative on the Coalition side for the past three years that the private sector is responsible for generating jobs and growth.

Most of Turnbull’s recent rhetoric, including his initial campaign speeches, has focused on private sector innovation and growth and the need for competitiveness on company tax to attract investment. It is easy to see the Liberal party going further and campaigning on the basis of supply-side, free-market economics.

On Sunday, Labor’s shadow parliamentary secretary Terri Butler made it clear that Labor views the path to growth and jobs fundamentally differently. Indeed, Bill Shorten rubbished Turnbull’s approach as ‘trickle-down economics’ — although this position is at odds with Shadow Treasurer Chris Bowen’s statements just last year, who accepted that the burden of company tax fell hardest on workers and said that ‘the nation should be aiming for a 25 per cent corporate tax rate’.

Instead, Labor argues that the best way to generate growth is through more government outlays on education and training. This is combined with a program of significant infrastructure investment and industry assistance, particularly in manufacturing and the clean energy sectors, with union concerns driving additional compliance obligations and spending on oversight.

Labor does not see government as an unnecessary impediment to private sector growth but a check on its growing excesses. They have committed to a royal commission into the banking sector, will not pass on tax cuts for multinationals and aim to introduce additional regulation for the sharing economy, particularly around wages and conditions.

This goes far beyond an agenda for redistribution of the fruits of growth from the rich to the poor. Labor is proposing tens of billions of dollars of additional spending and will go to the people arguing that government must play a much more active role in the economy to generate growth. This is not a mere cosmetic difference between the parties.

In the wake of the Global Financial Crisis and the increased focus on inequality, the left globally has shifted towards policies that involve much greater government intervention in the economy.

The current Labor agenda is undoubtedly Keynesian and is probably closer to the platforms supported by British Labour and Jeremy Corbyn or Bernie Sanders in the United States, than the deregulation and tax relief platform of Hawke and Keating or Tony Blair’s New Labour.

There is a risk this debate will be cast nonsensically as the old dispute between socialists and capitalists. Labor is not proposing nationalising the banks, nor is the Coalition scrapping public health care. However, there has been a notable gulf growing between the left and right on the role of government in the economy.

Nothing in politics is clean-cut and both sides of this debate still face serious questions. Too often on the right, the interests of specific businesses has been conflated with the economic interest of the country, leading to the growth of crony capitalism. For the left, the economic position of Europe stands as a troubling example of the end point of tax and spend policies.

Yet, as Malcolm Turnbull says, the voters will have to make a choice as to who they trust to transition the economy after the end of the mining boom. And this is not just a choice between Bill Shorten and Malcolm Turnbull or Labor and Liberal; it is also a choice between government and private enterprise.

Simon Cowan is Research Manager at the Centre for Independent Studies

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