Policy crunch, early election?

Australia looks set for an early Federal election as the country faces pressing policy issues

John Hewson

Economics and finance, Government and governance | Australia

20 December 2015

With the Budget and emissions targets breathing down his neck, Malcolm Turnbull could call for a poll in early 2016, John Hewson writes.

The likelihood of an early Federal election in Australia is growing by the day.

Despite Prime Minister Malcolm Turnbull’s blunt assurances that he intends to run full term, with an election in September/October next year, and despite his laid-back-let’s-be-positive-and-visionary-with-everything-on-the-table-attitude, challenges are mounting which require significant, and urgent, policy responses.

Just in the last week or so there have been two – the Paris agreement on emissions reductions, and the release of MYEFO, the Mid-Year Economic and Fiscal Outlook. Both carry the imperative for creativity and transformation. Old values, behaviours and policies must change.

And just talk, or attempts to “spin” the issue, rather than respond, will not only fail, but will make the ultimate task of responding ever greater.

In Paris, the Australian Government got away with sticking to the inadequate Abbott reduction target of about 26-28 per cent by 2030, roughly half what was recommended by the Climate Change Authority.

Turnbull did this simply to meet the commitment he made to the so-called conservative wing of his Party room, to gain enough support to defeat Abbott.

The world is now telling him that this is a woefully inadequate response, especially for one of the globe’s highest per capita polluters, with a very heavy dependence on fossil fuels for power generation.

But, as things now stand, Turnbull doesn’t have the policies to achieve even that modest target. Indeed, they are still struggling to demonstrate how they will achieve the mere 5 per cent target set for 2020. Direct Action won’t do it!

Yes, innovation and technology will be fundamental to an effective response. Yes, there should be a technological revolution in the development of renewables, energy efficiency and alternative technologies, and, yes, Australia is well placed to exploit, indeed lead, that, but it will take much more than the recent, well-intentioned, Innovation Statement to do so.

The MYEFO Statement clearly revealed just how fast Australia’s Budget position has slid, and will continue to slide. We have a significant, medium-term, structural weakness, even on the numbers released this week.

More on this: Framing the next Australian budget

But, when you set it more broadly and completely in the context of the very significant spending commitments, made by both sides, that carry well beyond the Budget forecasting period – in school reform and education more broadly, in health, the National Broadband Network, the National Disability Scheme, a host of infrastructure projects, etc – and yet both sides are still promising no increase in the tax burden, you start to understand the magnitude and the urgency of the fiscal task.

This was not acknowledged by Treasurer Scott Morrison’s farcical homily about the holiday car trip. We are not only “not there yet”, but heading backwards. We will probably never reach a Budget surplus while Morrison is driving, with this kind of response.

Morrison identified a few cuts in spending to suggest that he can control the situation, but not generate too much of a hostile response from the Opposition or from the Senate cross benches. Claims, such as yet another attack on welfare fraud, sound good at the time, but rarely actually deliver a cost-effective result.

At the same time he maintains the fiction that he will repair the Budget by further spending cuts in the years to come, without an increase in the overall burden of tax. Yet, his figuring relies on keeping bracket creep, that to the average taxpayer is an increase in tax.

In both climate and the Budget, the Government has adopted a minimalist strategy, just doing enough to create the impression that they are on the job, not risking rocking the boat, either with the electorate or his colleagues, before an election.

However, given the magnitude and urgency of the challenges in these two policy areas, not to mention in a host of others, and given Turnbull’s imperative of achieving an electoral mandate in his own right, it is hard to see why he won’t go to an early election, sometime in March or April of next year.

This article was also published by the Southern Highland News.

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