Policy File: Five years of policy problems

To celebrate five years of Policy Forum, our special InFocus section is hearing back from the authors of some of our most popular articles on some crucial policy questions. Patrick Cooney reflects on what has and hasn’t changed since 2014, and on where policy needs to be headed in the five years to come.

Only by learning from the mistakes of the past five years can policymakers spend the next five steering the region in the right direction. If decision-makers can reorient their priorities, the countries of Asia and the Pacific could position themselves to take advantage of the enormous opportunities at hand.

Arguably, the biggest policy story of the last five years has been painful inertia.

Australia’s current position, for instance, does not seem significantly better than it was in 2014, whether it be in terms of the climate, the economy, or its place in the world. The country faces many of the same policy problems now that it did then, and two elections and three prime ministers later, it doesn’t seem much closer to achieving serious long-term solutions.

The first issue at hand for the region is the most pressing and the largest in scale. No discussion of the last five years of policy, and surely the next five, is complete without mentioning climate change.

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Five years ago this month, then United Nations Secretary-General Ban Ki-Moon urgently called for climate action, warning its impacts would “become irreversible very soon.” Today’s demands for climate action echo pleas from years gone by, with conditions only worsening.

This time in 2014, Australia was experiencing its hottest spring on record for the second year running, and 2015 would see Australia achieve second hottest again, making 2013 the third. The year 2017 was the sixth hottest, and 2018 the ninth. These trends have been reflected across the region and the world.

While Australia is experiencing the worst yet of this imminent threat right now, it is not alone.

Countries across Asia are feeling the pain caused by climate change and discussions about whether to declare a global climate emergency are only gaining momentum. A lack of serious policy designed to combat climate change is undoubtedly one of the most glaring policy failures of the last five years.

In terms of economic direction since 2014, Australia’s story again reflects the problems of the region, and it’d be remiss in this case not to mention the influence of the nation’s two federal elections.

Twice, former Labor leader Bill Shorten failed to overcome an incumbent Coalition government led by a new prime minister in the aftermath of a leadership spill, once in 2016 and then again in 2019.

In each contest, the primary policy debate was on the economy. The Australian Labor Party took significant policy proposals designed to raise more government money from wealthy Australians and to increase spending on public services. The Coalition, in contrast, ran campaigns centred on tax relief and their past economic credentials, emphasising small business and lower spending in the process.

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This political paradigm is not new nor unique to Australia, and debate about how to structure the economy is raging across the world. Many economies in the region are facing sluggish growth prospects, unable or unwilling to address structural problems and dangerous trends.

Despite contrasting political rhetoric, there is one clear pattern across developed economies to which policymakers must commit their attention.

Incomes are stagnating, and those who need help the most are not getting the support they need. Addressing this must be the focus of economic policy, regardless of what approach it may demand. This was true in 2014, and it is true now.

Not all things are bad, though, including that there has been no serious economic downturn since 2014. In fact, in some terms, things are going well. In Australia for instance, unemployment has fallen slightly from six per cent to 5.3 per cent without a significant increase in underemployment. Nevertheless, wages have remained stagnant.

In the last five years, relative poverty has fallen from 14.4 per cent to 13 per cent, but those most at risk have not seen an improvement in their living conditions. More than half of Australians above 75 years of age live in relative poverty, and the percentage of children living in relative poverty hasn’t moved either.

Unfortunately, many of the drivers of economic growth in the region have failed to translate their success into wage growth for ordinary workers – a fact as true now as it was in 2014. Still, it has remained largely absent from policy agendas in recent years.

This is especially true for Australia, a country whose economy has benefited from a strong resources sector crucial to many communities. It has suffered from the sector’s ecological costs and struggled to harness its success to grow wages.

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A similar story can be told about its neighbours too. Indonesia, for instance, has struggled to grow its economy in the wake of increased regulation on the production of palm oil, laws designed to preserve its environment have come at a high cost.

A just transition to new, sustainable economic opportunities for these economies and a focus on wage growth must be the goal of their policy-making if there is promise for a fair, sustainable, and prosperous economic future of the region.

Finally, Asia’s strategic future feels as uncertain now as it did then. In what will be a crucial theatre of competition for the world’s major powers over the coming decades, many nations are scrambling to figure out a plan.

As China rises, the Belt and Road Initiative is bringing smaller countries in Asia into its sphere of influence. Japan and India are increasing their co-operation and collaboration, and the US is making its presence known in the region even more assertively, in the South China Sea and elsewhere.

In the meantime, Australia doesn’t seem to be responding in the same way. Its economy is becoming more reliant on China, not less, even as tensions flare between its largest export market and principal ally. It must work to diversify its trade options while fostering meaningful partnerships with other countries in the region.

Whatever happens in the next five years, the policymakers of the region should not succumb to the inertia of the last five. Action on climate change and on stagnant wages, as well as the need for a vision for Asia’s future, have remained crucial issues, but they remain that way because serious policy action has been thin on the ground.

Despite some change, in many respects, policy outcomes remain now where they were then. Only a renewed policy vision in the region, designed to tackle these issues, will set it up for the bright future it has the potential to achieve by 2024.