Cleaning up Labor’s mess

WHY should the Coalition have to clean up the mess each time Labor governs? It must be galling to come to power every turn of the electoral cycle and have to clean up the debt of the previous team.

The Kennett government in Victoria had to clean up the Cain-Kirner mess, as is the Newman government in Queensland cleaning up the Beattie-Bligh debt. The first recommendations of the Queensland Commission of Audit to the Newman government in February were to arrest the deterioration in the state’s financial position and to pay down debt to regain the Queensland government’s triple-A credit rating. Will an Abbott government have to do the same for Rudd-Gillard? Reluctantly, of course it will, but how quickly?

The Queensland audit provided a philosophical statement about the state government’s role in the economy. “The role of government should be directed towards the provision of core services that the private sector is unable or unwilling to provide.” The Abbott government should start with these sentiments. Then it should move slowly on repaying Labor’s debt. Not only does this strategy leave more room for better priorities but it also leaves a reminder to Labor that it doesn’t deserve another crack until its debts are cleared, which will take more than two terms.

As long as progress in paying down the debt is steady, the federal government is in no danger of losing its triple-A credit rating. Leaving a bit at the time of the next two elections is a good reminder to the electorate to not give Labor another chance just yet. Governments must be punished for the debt binge.

It needs to be appreciated that the level of debt (to gross domestic product) is not as large now as it was in 1996 when the previous federal Coalition government came to power – roughly 30 per cent then and 20 per cent now. And the Hawke-Keating governments had done a powerful lot of good in promoting a more productive economy. The productivity conversation was transformed from a rare national productivity case before the then Commonwealth Conciliation and Arbitration Commission to conversations in tearooms and boardrooms across Australia. Bob Hawke and Paul Keating overspent, but the productive economy they left did a great deal of the work for Howard-Costello in paying debts. The same could not be said for the Rudd-Gillard governments.

It would be tempting to consider laying charges against Labor ministers Kevin Rudd, Julia Gillard, Wayne Swan, Penny Wong and Stephen Conroy for wasting $250 billion of Australian taxpayers’ money. But, hey, Australia is a liberal democracy and we don’t like to be seen to exact revenge. Perhaps an apology would do it.

Having to pay off the previous government’s debt can slow mightily the work of establishing new directions and the “easy” options, selling government assets, have all but been exhausted – although some items come to mind. Making room for new ideas or just refreshing old ones, such as defending our borders, is more difficult when borrowing.

In his first speech as Productivity Commission chairman, Peter Harris said: “In making the case for change, government is not always part of the answer. We rely on firms to address the productivity task.”

The Abbott government’s big job is to make room for the productive sector of the economy. Harris asks whether Australia has the necessary structures that offer incentives in favour of productivity-oriented reform, and whether government, which has “all the tools that they find so useful in fiscal and monetary policy”, has all the tools that it needs “in micro-economic reform”.

Business groups need to create the demand for reform; that is the hard task and one they failed in recent years. Several industry groups were as weak as water over the carbon abatement response to climate change and selling Work Choices. Too many corporations are fiddling with the triple bottom line, spending superannuants’ and shareholders’ money appeasing green pressure groups. At the very least, the Coalition should stop subsidising those non-government organisations demanding more regulation and spending.

For example, when money is easy, governments can continue to ramp up foreign aid and restore the defence budget. When money is tight, something has to give. The government has opened the door to using the aid budget to stop the boats. After that has occurred, foreign aid should be rolled into foreign affairs and that aid that has no security element should be abandoned. If people want to donate to foreign-aid charities the tax incentives are there, but there is no need for government to toss in more. Better the money is used in defence and trade, the two really solid and sure means to a safer and more prosperous world.

The Coalition needs to stop subsidising the demand for regulation. Remove advocacy groups that undertake no charitable works from the charitable tax exemption system. These groups are free to do as they wish, but the taxpayer should never subsidise their regulatory demands.