Lack of ideas breaking leaders

This week saw the sixth anniversary of Julia Gillard’s successful challenge to first term sitting Prime Minister Kevin Rudd. Though Gillard held on in the following election, Rudd would soon have his revenge and return. In 2013 Tony Abbott swept to a Rudd-style election victory, yet just two years later he suffered a Rudd-style fall to Malcolm Turnbull, the fifth Prime Minister in just over five years.

While this volatility at the top has been well documented, less well known is that Australia has also had four treasurers during this period. Six years ago in May saw the Wayne Swan deliver the first budget to promise a return to surplus post Global Financial Crisis. While Labor infamously never delivered a surplus, for this May’s Budget, Liberal Treasurer Scott Morrison stopped even promising one.

Next Saturday, the voters will decide whether Turnbull and Morrison’s economic leadership is an irredeemable failure. Even if they judge it too soon to take such a drastic step, it is hard to argue Turnbull and Morrison have been a success thus far.

This central feature of this election campaign, as with so many others, has been politicians identifying problems and promising to fix them with more intervention and spending. Both parties promise to spend more and raise more from taxes, all the while bickering about whether each other’s plans are ‘fully funded’.

With a $37 billion budget deficit, neither plan is funded at all. It’s all a total sham.

While Australia’s economy faces significant challenges, the data doesn’t suggest there is an emergency yet: unemployment has fallen, inflation is low, and while growth is anaemic and uneven it remains positive. Yet the federal government budget remains mired in the red, with the deficit averaging nearly $40 billion a year since Swan’s 2010/11 budget.

Worse still, the budget is actually in the calm before the demographic storm. As the population ages, the pressures on both the health and welfare systems will significantly increase, while the proportion of the population working and paying taxes will fall.

The internal power struggles of the major parties, near constant media driven campaigns, and the ruthless changes of Prime Minister, suggest the parties believe the budget problem is one of leadership and narrative. But the theory seems nonsensical: changing the messenger without changing the message will never solve the problem.

The continued failure of this approach, and the subsequent disappointment with each new Treasurer and Prime Minister, makes clear that the problem is actually a lack of ideas.

There cannot be a convincing narrative without coherent and connected ideas — and the central idea around which fiscal sustainability can be built is simple: government must step back.

Taxation is already too high, with revenue set to soar far above its historical average over coming years. Moreover, the only taxes on the table are income tax and company tax — the most inefficient and harmful — both of which are already above international averages. These taxes need to be lower not higher; particularly through indexation of tax thresholds to finally end bracket creep.

Instead, the government should set a binding rule that real spending must be cut by $15 billion a year until the deficit disappears. No more phony projections of future revenue increases delivering budget balance way out in the never-never; get serious with real, concrete, measurable progress on the deficit year by year.

This may involve tackling sacred cows, such as including the family home in the pension means test or stronger means testing for family benefits, but such are the challenges of genuine leadership.

For some groups, government assistance has become the norm not the exception. Pensioners, families and others should not get a handout as a matter of course. People who can support themselves should do so, regardless of their age, marital status or background. Support should be refocused only on those who can’t help themselves.

While this is a budget narrative, reducing the size of government is not limited to finances. It is an economic and social agenda that puts power back in the hands of the voters and money back in the pockets of the taxpayer.

Too often, government spending is evaluated primarily on its good intentions. If spending is targeted at low income groups, or for a worthy cause like health or education, it is considered a valuable investment regardless of outcomes.

In particular, this approach has led to $5.6 billion a year in Indigenous advancement programs largely failing to close the gap on Indigenous disadvantage. The government must defund feel-good, do-nothing programs. The only projects worthy of funding are those with tangible and quantifiable benefits — and government must demand results.

It is not about how much money is spent, it is about what that money achieves.

In education, we have seen a doubling of spending in real terms over the past two decades with little progress in terms of educational outcomes. Instead money is funnelled into pet projects and political pork barrelling, ignoring evidence and best practice. Without getting the evidence base right, how can we get the education funding model right?

Another example of this approach is the ongoing debacle in childcare, where Labor and Liberal attempt to outbid each other with new subsidies and spiralling costs. The system is already complex and becoming more so, yet parents continue to feel substantial cost pressures and face a lack of places.

There is a connected and reoccurring theme: more government is not the solution.

This does not need to be a negative narrative focused on cuts either. It is about restoring choice to individuals so they can make their own decisions about what is important. At every level, removing control from the central government and returning it to the local level (and ultimately the people) will lead to better outcomes.

For example, giving patients greater control in health will lead to innovation and efficiency. The current system is driven too much by the needs of the providers and wishes of populists. Healthcare is badly in need of reform to deliver better outcomes. Sustainability of the system to meet future health care absolutely demands this.

Unfortunately, meaningful debate on all these issues is largely absent. During an election — the one time we should be able to discuss ideas to improve Australia — at every turn, voters instead demand that politicians rule out challenging reform as a pre-condition of taking office.

The lack of ideas stem partly from failures in our political system and partly from Australia’s exceptional economic success over the past twenty years. Politicians buy power by telling voters they can have more handouts, better services and new programs, and someone else will pay for it.

For a time, the dividend from previous economic reforms combined with the revenue from an enormous mining boom hid the falsity of this claim. Neither side of politics has adapted to the revelation that the fiscal emperor had no clothes.

Until voters and politicians face this reality, they will continue to churn through Prime Ministers, Treasurers, and governments.

Simon Cowan is Research Manager at the Centre for Independent Studies. This week the CIS released Big Issues, Clear Solutions: a To Do list for the next government, outlining 30 policy proposals for the incoming government.