27 April 2013

Essay: Fair go under fire

Published by the Chifley Research Centre

The fundamental objective of economic policy is the creation of greater prosperity to enable a better life for everyone. It is not an ideological exercise but a practical and moral one.

I know the Labor Party isn't exactly the flavour of the month at the moment and we haven't always pulled the right rein every single time over the last few years. Every Government gets things right and some wrong. But whatever people think about this Labor Government they know it gets the big economic calls right even when that comes at a political cost. No country in the world has made better decisions over the past five years than ours, and the dividends of that can be seen in low unemployment, contained inflation, and low interest rates.

There's an old saying I like that says you 'acquire the strength of that which you have overcome.' That's true of countries and governments too. Australia is stronger now having weathered the storm of the Global Financial Crisis – and so too is the Government for the obstacles we helped the country clear.

I believe we now stand at one of those decisive points in our national story. At stake is something essential to our national character: the idea of the fair go. I like talking about the fair go because for me it summarises everything we should be about as a country. It's not just a political cliché and it's not a slogan – it's a belief, and one the Labor Party holds with great conviction.

In my maiden speech to Parliament in 1993, I talked about a land characterised by the fair go, where "ordinary people would be able to fulfil their dreams, regardless of where they came from or the social group they were born into." The idea that whether you live or work in Woollahra or Wollongong, you deserve a fair day's pay for a fair day's work and your kids deserve the same opportunities. Without this defining principle of Australian life, championed for generations by the Labor Party, our nation would not be the tremendous society we live in today. Without it we're a poor chance for a decent future.

Education should, and will always, play a major role in building the type of society we want. That's why the Labor Party believes every child deserves a top-shelf education. That makes our school reforms that New South Wales signed up to this week so fundamentally critical, not just for our kids and grandkids, but for the economic strength it creates for the whole country. We will never accept that a child who lives in Western Sydney should have less of an education than a child from inner Melbourne, just because of their postcode.

We believe in Australians succeeding through hard work and by merit. We will never apologise for working to ensure everyone gets to share in our prosperity. And as conservatives argue for billions of dollars to be ripped out of the economy, risking recession and jobless queues kilometres long, we will never apologise for putting jobs and growth first. We reject the heartless philosophy of mindless austerity. This great ideal of protecting the living standards of all people is as much an enduring Australian value as it is a core Labor philosophy.

But the truth is that this national ideal is under threat. A dark cloud is gathering over it. And so I want you to think of this coming election not just as a contest between Julia Gillard and Tony Abbott, or between Labor and Liberal, but as a referendum on the fair go. When you look at the choice and policies on offer – school opportunity and disability insurance on one side versus harsher industrial relations and higher taxes on low income earners to pay for lower taxes on high income earners – it's obvious which side of the fairness debate each party is on. You'll see that Labor is advancing the fair go while the other side is tearing it down.

The future of the fair go is more important than the fortunes of one political party or another. It goes to the core of the election, but more important than that it goes to our future as a country. While we call it the fair go, others refuse to debate merits or values because they'd rather dismiss a worthy debate with a cheap label. 

You have to question the motives of some who define universal access to a world-class education as akin to some kind of class warfare as some have in recent weeks. It's a sad day for Australia when a political party chooses to frame a debate about better education like this. Or the Liberal Party's favourite think tank, the Centre for Independent Studies (CIS), implores that legislation for DisabilityCare Australia "highlights everything that has been wrong with Australia's welfare state for 100 or so years". Or the idea that 3.6 million people on low and middle incomes deserve to have taxes on their superannuation hiked up as Tony Abbott has committed to doing. We believe there is something very wrong at the heart of these charges.

Over recent weeks I have been reading and listening to some of the more extreme conservative critiques of our economic policies, and I have to say much of it fails to rise above the level of politically-driven ideology. Organs of the Liberal Party such as the Institute of Public Affairs (IPA) and CIS are frothing at the mouth at the prospect of an Abbott Government, and appear to be carrying an axe in each hand.

With Tony Abbott and his party too petrified to release policies, the only place to gauge their true intentions is to read the plans being drawn up by these think tanks, which seem to be doing most of their thinking for them. In the lead up to the September election, they have been compiling a list of policies for the Coalition to consider. It's a conservative wish list, or a memo for action for a potential Abbott Government. As the IPA's Alan Moran said himself: "Some items have been discussed with Coalition politicians, many of whom are in agreement with the principles against which the list has been developed." This is the list: Cut Medicare and Universal Health Care; Restrict access to subsidised medicines; Axe the SchoolKids Bonus; Abolish Fair Work and Safe Work Australia; Junk DisabilityCare.

They also want to cut the general research budget by 40 per cent; scrap all Commonwealth housing programs; abolish all foreign aid, excluding emergency aid; and predictably, privatise the ABC.

They think harsh austerity is simple common sense, but this simply ignores the hard reality of real world economics. When expenditure in an economy is savagely slashed, aggregate demand is supressed and unemployment rockets up, and ultimately savings in the economy (including the budget position) deteriorate, and in the long run we are all poorer. This is what economists often call the 'paradox of thrift'. It is exactly why governments need to approach the fiscal consolidation task in a balanced, responsible way.

So let's examine the real world for a moment. Economic policy has a number of competing and complementary objectives: pursuing economic growth, consistent with low unemployment and contained inflation, raising productivity, lifting living standards, balancing the competing community demands of lower taxation and better government services, running budget surpluses over the economic cycle, improving environmental sustainability, and so on. All these things have to be undertaken within a global economic climate that we simply can't control.

In this real world, what is needed is a balanced approach involving policy trade-offs that in an ideal situation would not have to be made. No matter what our critics may say, in the face of some of the worst global economic turbulence since the Great Depression, under Labor the right balance has been struck. All arguments aside, the proof is in the result.

While other countries have succumbed to recession and social divisions widen – and I don't just mean Spain and Greece, but Britain and the United States too – Australia has prospered. Our economy has actually grown strongly and is more than 13 per cent larger than in 2007. Around 900,000 jobs have been added while Labor has been in office. Over this period, around 28 million people have been added to global unemployment queues.  We are starting to see an upswing in labour productivity – ­up 3.5 per cent in the last year. We have shielded our people from the worst consequences of the global downturn. Unemployment here is 5.6 per cent. In the US it is 7.6 per cent. In Spain it is 27 per cent, and 57 per cent for young people.

We have achieved this while spreading the opportunities to more and more Australian people. In recent decades the poorest 10 per cent of Australian households have seen their incomes grow by a healthy 3 per cent a year – six times the growth that was seen in the United States where the most vulnerable were simply left behind as the economy modernised.  And it's not just the poorest Americans who missed out on the boom years preceding the GFC – median household incomes have also stagnated, leading to a hollowing out of the middle class that has worried politicians and economists alike. Longer unemployment queues and less inclusive economic growth in the US is a failure that will continue to echo through generations to come. Far from being the land of opportunity, how much your father earns is much more important in determining your fate in the US than it is in most other developed countries.

All the while, we have spread the opportunities in our resilient economy to more Australian people, particularly over the past five years. Australia is not only more socially mobile than the US and the UK; the same is true when we are compared to China, Singapore and Japan. These countries are often held up as models for us to emulate, but the truth is that on most measures of social mobility and opportunity, Australia performs better.

To the right-wing commentariat, this agenda of promoting opportunity in the midst of global uncertainty will be dismissed as ideology. But it is not. It is not just a fundamental Australian value – it is a crucial piece of economic reform. In fact, it's the partisan critics themselves who are now wildly out of step with mainstream international economic opinion.

In recent years mainstream market economists and economic bodies have begun to recognise the role that policies to reduce social inequality and spread opportunity play in the creation of national prosperity. Last year, for instance, both the Financial Times and The Economist magazine devoted sustained attention to the economic problem of widening inequality and the limitations it is imposing on economic growth. The International Monetary Fund, the OECD, the World Economic Forum and other pro-market organisations have similarly called for urgent measures to tackle inequality in developed and developing nations alike. As Joseph Stiglitz wrote in his important 2012 book The Price of Inequality, until recently economists would typically ask what degree of additional inequality we should accept to create more wealth – but now we understand that creating prosperity and reducing inequality go hand in hand.

All of these pro-market bodies and economists are correct: the best way to grow an economy is to do it in a way that benefits the greatest number of its citizens. This isn't some archaic idea of income redistribution, it's about wealth creation. As I said in my essay in The Monthly last year, rewards should naturally be proportionate to effort, recognising the hard work and entrepreneurship that create wealth and employment. That's why providing more people with a good education and a decent job with fair rights and conditions should be an economic as well as a moral goal. It's why despite the tough international climate, the Labor Government has been right to continue its pursuit of opportunity-enhancing educational reforms and infrastructure investments.

Our economic reforms have been built in the rich legacy of the Hawke-Keating era, applied to modern times. In the contemporary world, building human capabilities and constructing critical infrastructure – the things Labor is doing so well – are the very stuff of economic reform. I believe the way to be a reformer is not to re-live the 1980s and 1990s but to be inspired by that era's example of a Government that adapted its reforming energies to the needs of the times. The Gonski review which inspired the National Plan for School Improvement, the National Broadband Network, putting a price on carbon, the Asian Century White Paper – these are all the types of policies and reforms that will be looked back on in years to come as major changes that set Australia up for the future, just as the big reforms of the '80s and '90s set us up for today.

I am certain that when future generations of economists account for the continuation of Australian economic resilience, they will say it happened because, in the face of global economic challenges, we got the big calls right to support the economy, and we built on Australia's proud reform legacy. We invested to create a more highly-skilled workforce, a more modern infrastructure base, and a more environmentally-sustainable economy. We moved with the times and didn't look backwards.

Time and again it has been shown that only Labor is philosophically equipped for this economic task to spread opportunity to ensure all Australians are able to share in our prosperity.

At this defining moment the Australian people have a choice to make. It comes down to this: to whom does Australia and its future prosperity really belong? Does it belong to people who work hard and live pay cheque to pay cheque, working to give their children something better? Or does it belong to those who always seem to be talking Australia down, complaining about their own interests because they don't quite understand that this country is powered by the many not the few. I firmly believe that only the fair go will get Australia where it needs to be at this time of opportunity.

The Government has not been perfect, and I have not been perfect, but we've learned equally from all of the successes and the times we've fallen short of expectations. But we're not as bad as the vested interests would have you believe – and Tony Abbott is nowhere near as good as the same vested interests tell you, as they try and install their man in the Lodge.

So if you take one thing from what I'm writing today take this: we'll keep governing for the millions of Australians, looking to communicate directly rather than always relying on traditional mediums, where some in the media and business seek to misrepresent policies and ideas.

It's not surprising that Australians are thoroughly sick of the combative politics of recent times. I think they want a proper discussion of how we can continue to build the strongest economy and the fairest society in the world. Protecting the fair go from Tony Abbott and advancing it in our schools and workplaces, and in the homes of people with a profound disability, is the best place to start that conversation – and the best principle to apply to your choice on 14 September.