Australian liberalism: the rocky road ahead

By Chris Lewis

Forget silly arguments that Australia (and the world) should embrace complete free trade and/or open national borders to immigrants, as suggested by one of Australia's most read libertarians, Chris Berg.

While libertarians offer some useful points within their wishful thinking, common sense demands more sensible commentary that reflects the reality that we do live in a competitive world still struggling for resources and the influence of certain ideas.

As Merv Bundle indicated in Quadrant when reviewing the publication 100 Great Books of Liberty, the evolution of Western civilization cannot be explained by "people who insist on absolutist conceptions of freedom" and view the state as "a gigantic maternal figure over which we must all struggle for control and influence". After all, the state is "a necessary constitutional creation of free people that demands constant vigilance if it is not to destroy the very liberty it was meant to protect".

Frank Salter, in another Quadrant piece, also rightly urges Australia to adopt an immigration program that takes adequate account of concerns about ecological sustainability and national continuity to ensure that one sector of the population does not benefit at the expense of another.

To a large degree, Australia's recent liberal democratic experience has been governed by major political parties (Labor and the Coalition) who have both been committed to pragmatic policy reform that takes account of both national and international considerations, although each seeks to differentiate itself over the degree of government intervention and individual responsibility.

In 2007, the Finance Minister Nick Minchin rightfully refuted criticism by the Centre for Independent Studies for not doing enough by noting that both of Australia's major political parties have "an unavoidable obligation" to hold the middle ground. While the Howard government reduced Commonwealth government outlays and the percentage of the population relying mostly on government pensions and allowances, it also increased spending on health, education and social security. Minchin was just as proud of greater assistance to families with children through the Family Tax Benefit, especially for single-income families, as he was that Commonwealth public sector employees fell from 353,300 in February 1996 to 291,500 in 2007 with over 300 federal government entities (such as bureaus, agencies and similar bodies) being axed ('Prosperity is no accident', The Australian, 1 February 2007, 12).

Labor and Coalition governments, through their interaction with the public, have accepted the important role of government to address old and new issues, although they differ in regard to the extent of government intervention.

While better attitudes towards ethnicity have evolved further since the Menzies Government substantially modified the White Australia Policy in 1956, 1957 and 1964 and the Holt Government softened rules in 1966 for Asians to gain Australia citizenship, the Howard Government rightly addressed increasing public sentiment urging greater leadership towards cultural integration.

Greater adherence to freer trade has been widely accepted in the Western world in recent years, yet significant industry protection remains evident under both Labor and Coalition governments. While Australia now increasingly relies on mining exports, its high-tech manufacturing sector owes much of its existence to significant industry assistance. Further, Australia's relative strengths in mining and services are often maintained by protectionist measures against foreign acquisitions. Just recently, Treasurer Swan rejected the Singapore Exchange's $8 billion merger bid with the Australian Securities Exchange on grounds that jobs and capital would leave Australia.

But even so, as is the case with much of the Western world increasingly relying on debt (including private), Australia is hardly immune from difficulties in terms of government addressing existing policy needs. Just days ago, the Gillard government indicated that the May 2011 budget would have a $4.5 billion shortfall given that personal income tax collections are down by about $1 billion and business tax collections $3 billion, although it remained committed to returning the budget to surplus in 2012-13.

There is a strong possibility that even lucky Australia (minerals in the ground) will have much greater policy difficulties in coming years.

For now, our policy elites appear almost wishful that China's bubble does not falter with Australia's interest rates on hold and the Reserve Bank happy for Australia to save more while the rest of the economy stays sluggish.

As Greg Canavan notes, however, with the People's Bank of China recently raising interest rates for the fourth time since October, and the Chinese economy more dependent on fixed investment than just about any economy in history, China is getting much closer to its own tipping point as its own bubble is built on debt, just like the Australian housing market.

Sure, the answers are difficult and some painful reform may be needed. After all, we cannot simply abandon freer trade and become ultra-protectionist if one believes in a fairer world on behalf of Western leadership.

But libertarians are being simplistic when they claim that things will be better if only government got out of the way. After decades of reform that have favoured the private sector, more people are struggling despite greater social welfare assistance. One has only to note record home unaffordability, an aspect perhaps worsened by the extent of foreign purchases of domestic property and immigration, although one cannot obtain government data about the extent. Earlier in 2011, the Annual Demographic Housing Affordability Survey suggested that the average price of houses in Australia's major cities was 7.1 times gross average household income, and 6.1 times for the 32 major centres analysed.

Despite Labor and Coalition governments adopting significant tax and labour market reform, there are calls for further reform with many supporting attempts to remove penalty rates, although the majority of Australians still resist such sentiment.

User-pay principles for education and medical services continue to expand since Labor introduced fees in the 1980s through the Higher Education Contribution Scheme. Recent information reveals that many Australians are struggling with some of the highest co-payments for health care within the OECD given they have risen "faster in Australia than in any comparator countries in the past ten years".

Many battlers also face problems in regard to everyday bills, such as food and utilities. Recent ABS data indicates that employee households faced extra costs of 4.5 per cent for the year to December 2010, seniors a 3.1 per cent rise, and people on welfare 4.5 per cent, although the official consumer price index grew by 2.7 per cent. Further, a recent Australian Debt Study Report suggested that 21 per cent of those surveyed were struggling with repayments, up from 19 per cent six months earlier.

From a government policy point of view, one can note how our increasing reliance upon services allowed a dodgy international student sector through the promotion of cooking and hairdressing courses, seen by many migrants as a route to permanent citizenship.

And there is hardly going to be an effective economic-environmental balance in the near future. While the carbon tax will supposedly show our environmental leadership qualities to the world, carbon emissions will rise and Australia will seek to sell much coal to the developing world. Sort of reminds me how Labor once intended to address woodchip exports by 2000 (Alan Ramsey, 'A question of where the weight falls', SMH, 24 December 1994, 15), yet the UN Food and Agriculture Organization indicates that Australia in 2008 was the world's largest woodchip exporter (21 percent) and the fourth-largest producer (7.7 per cent).

It remains to be seen what the Australian liberal democratic experience will next deliver. Will it meet the challenges and make the necessary reforms in a fair way? Will Australian society turn in on itself and adopt policies that mean that a growing minority suffer as many already struggling more from higher housing, food and utility costs?

Not sure, but tougher measures are ahead as the wealth creation sector is hardly going to be penalised in terms of a much higher tax burden in a world where even the rich nations face much greater competition to attract vital investment, including from authoritarian China. Any reform towards much greater taxation will need to rely on the policy lead from much more powerful and influential nations.

More measures will emerge to encourage work from our increasingly older labour force, as evident since the Department of Employment, Education and Training reported in 1994 that more than 40 per cent of about 150,000 long-term unemployed would not accept a subsidised training job, even if it was offered to them (Max Walsh, 'Wanted: Program to revive work ethic', SMH, 5 April 1994, 35). Such a policy may even make sense if we are to reduce our reliance upon immigration, although substantial resources may be needed in terms of training.

And with governments struggling to meet old and new economic, social and environmental needs, we can expect more public-private infrastructure deals, despite some criticism. Sure the NSW Auditor-General, Tony Harris, savagely criticised the secrecy and complexity of financial arrangements between the State Government and companies in 1994 over the Sydney Harbour Tunnel project when he estimated $3.6 billion in payments and forgone interest over the 30-year contract due to end in 2022 (Paola Totaro, 'Auditor criticises secrecy on public works contracts', SMH, 18 October 1994, 1). Yet, a recent article notes that the Sydney Harbour Tunnel will deliver a further 70 years of estimated use after it reverts to state ownership.

Whatever the outcomes, I am betting that any new policy trends that emerge will have more to do with pragmatic responses by government and society rather than any dreamland libertarian solution that adheres to pure free trade or open borders for immigrants.