Economic Undertakings

Seven tired old politicians trot in place of a vision for Australia’s future | Satyajit Das

AAustralian voters who chose their preferred candidate before the election was called won time. The campaign’s political vacuum did little to inform electoral choices, with both major parties shying away from what former US President George Bush Sr called the “vision thing”.

Whether politicians of all ideological colors feel like it or not, significant and urgent economic challenges lie ahead.

Household living standards are threatened by rising costs, low wage growth, poor job quality, job insecurity, rising mortgage repayments and inaccessible housing.

Downward revisions to global growth from 4.4% to 3.6% in 2022 and China’s slowdown and reduced focus on infrastructure spending, material supplier diversification raw materials and the adversarial Sino-Australian relationship, pose risks for an uneven post-pandemic recovery. With China being the factory of the world, its Covid-19 policy could continue to disrupt supply for some time.

In the longer term, the pandemic and geopolitical realignments could reshape the global economic order. Australia, an open economy dependent on trade and the free flow of capital, is at risk.

There will be rising costs for retirement income, care for the elderly, and health and disability services. With climate change accelerating, even modest restrictions on carbon emissions will impact Australia’s fossil fuel exports. Adapting to regular extreme weather events and resource scarcity will be expensive. The increase in public and private debt has reduced the room for maneuver to deal with these problems.

Major changes in the economic structure are needed. This requires coherent policies to manage volatile commodity revenues, demographics, labor market, workforce and skills planning, productivity, and regulatory and fiscal frameworks. Welfare systems need to be redesigned to ensure they help the disadvantaged.

Yet instead of addressing these issues, the 2022 election campaign deployed familiar tropes.

1. Boosterism

Both major parties threw away fistfuls of dollars in an effort to effectively buy votes. The cost-benefit analysis of many initiatives is questionable. Although individually small, a few million here and there quickly add up to some serious money.

2. Proposals that do not survive contact with reality

Both parties are in favor of impressive announcements that they cannot or do not want to implement. During the pandemic and natural disasters, many government programs were difficult to access. The intentional complexity and lack of resources allocated to processing requests means that support often goes unused. Improvements in the federal budget result from money allocated to programs but not spent. Announcing a scheme that grabs headlines is a substitute for taking action.

3. Think big

Population growth to support economic activity and high house prices is popular with the two-thirds of the population who own real estate. This ignores resource constraints and the limits of available land, which is protected from the effects of climate change.

Initiatives, particularly in defense, amount to tens of billions. Voters are said to be impressed by the sums, which are incomprehensible to most, even if the merits of the project are unclear.

4. Boast and Blame

Credit is claimed for positive items, regardless of the claimant’s contribution. Australia’s recovery is being spurred by factors beyond the influence of policymakers – for example, Chinese demand for iron ore and coal, high commodity prices and supply disruptions elsewhere. The only direct contribution has been substantial government spending with other people’s money. At the same time, external factors such as the conflict in Ukraine – outside Australia’s control – are blamed for having negative effects, including rising fuel, energy, food and housing prices.

5.Lowball

The numbers are manipulated to present favorable results. Budget forecasts have consistently understated revenues, overstated expenses, and understated commodity prices to enhance the actual outcome and demonstrate competence.

6. Deviation

For difficult questions, inquiries or royal commissions are proposed even if the problems and solutions are already known.

If all else fails, there is the belief that something, probably new technology, will appear, as it always has. Donald Horne’s phrase “the lucky country” is resurrected, ignoring its irony and criticism of a nation lacking in imagination and mired in philistinism, provincialism, complacency and its past.

Although grain to grind for the actors, this political drift has consequences. Problems become larger and solutions more expensive, or they become less effective. Future generations must take care of the mess.

The process encourages societal “cakeism”: keeping your sweets and eating them. This fosters unrealistic expectations that there are no costs to choice and that everyone can have it all when they want it simply because they demand it. A “looting” mentality sets in. Voters auction off their allegiances to the highest bidder in the form of a “what do I get for me?” ethos, ignoring broader costs.

Elections should be serious undertakings, when alternative plans and visions on important issues are presented and debated. The 2022 election campaign is, to date, well below this standard. This exacerbates a lack of voter engagement, a fragmented political process and, ultimately, a loss of faith in democracy itself.

Satyajit Das is the author of Fortune’s Fool: Australia’s Choices and A Banquet of Consequences – Reloaded