Saturday, 30 July 2011

Why Gillard needs a new mandate from the people

This is an edited version of a speech given to the CIS yesterday.
The genius of Western civilisation is its constant self-questioning. Self-questioning, though, is not the same as self-doubt. It's a determination to build on acknowledged strengths. This enthusiasm to improve on success is an aspect of our culture's capacity to be liberal and conservative at the same time.

 The difference between one side of our politics and the other is not that one supports change and the other does not but the different sorts of changesand range of values that each side promotes. Politicians differ in the extent to which they prefer opportunity over equality, diversity over unity or innovation over conservation, but there's considerable common ground and acceptance of the rule that you should treat others as you would have them treat you.

The shift from feudalism to capitalism, from autocracy to democracy, hasn't been smooth, but a tradition of give and take and a preference for practical solutions has minimised upheaval. Change has been less traumatic where government has been by consent. The requirement to negotiate change has made it more sustainable.

First under Bob Hawke and Paul Keating, then under John Howard and Peter Costello, we deregulated financial markets, floated the dollar, reduced tariffs, privatised government assets, gave workers more freedom of contract, established Reserve Bank independence and began reforming the welfare system. Under Howard, real wages rose by more than 20 per cent, there were more than two million new jobs, and real net wealth per person more than doubled.

Even so, many of these reforms were endured rather than embraced. Although privatisation and close-to-zero tariffs have been uncontentious for almost a generation, the airwaves are still filled with angst against foreign products and greedy business people. The lesson is few philosophical arguments are ever finally won. Keating once said good policy is good politics, but leaders who can't make a case for their reforms don't win elections.

The GST was a sustainable reform because the public came to understand the old indirect tax system was inefficient. The GST was never popular but was at least a replacement tax and was accompanied by overall tax cuts.

Howard promised there would "never, ever" be a GST before the 1996 election but changed his mind. As a consequence, he sought a new mandate at the 1998 election. He didn't say one thing before an election and do the opposite afterwards. Howard's subsequent win confirmed people's readiness to accept tough but necessary reforms provided they hadn't been treated like mugs.

By contrast, Work Choices turned out to be unsustainable because it passed through a parliament that had no mandate for it.

Work Choices didn't fail because it was bad policy. It failed because it had never been put properly to the people so that it could form part of an election mandate. In our eagerness not to waste control of the Senate, the former government forgot consent of the people matters as much as the support of parliament.

Julia Gillard is likening her carbon tax to the reforms of the Hawke-Keating government but, in economic terms, it's not reform. To count as economic reform, change should increase freedom and reduce costs. Gillard portrays her carbon tax cum emissions trading scheme as a market mechanism even though it is a money tree for government. It is, after all, an odd kind of market that depends on the non-delivery of an invisible product to no one.

In the past 15 years, without a carbon tax, Australia has reduced its emissions intensity by almost 50 per cent as enterprises take steps to cut their power and fuel bills. Trucking company Linfox has reduced its emissions by 35 per cent since 2007 through educating its drivers to go easy on the accelerator and putting more skylights in its depots. Waste business Visy has developed negative emissions power generation by burning non-recyclable waste that would otherwise give off greater emissions in landfills. Farmers are storing carbon in soil.

None of this required an additional price signal. The Coalition's direct action plan should boost the conservation and innovation that's already taking place.

When change is needed, it's a good principle to change only as much as is necessary to bring about the required improvement. The fact a decision is unpopular doesn't make it brave; it may just mean it's stupid.

Governments don't need to take every significant change to the people at an election. Even so, if the case can't be made, the change can't be justified. Governments shouldn't dissemble before an election on the grounds the people can't be trusted. Even when both sides of politics agree changes are needed, leaders must take the public with them.

If the PM thinks the carbon tax is good for Australia, she should have taken it to the last election. If she's only come to that conclusion after listening to the Greens , she should seek a mandate for it at the next election. Governments can change their mind but on a tax to transform the way everyone lives and works, they can't reverse their position without a mandate.

The reforms of the previous two governments addressed the problems of those times. Today's reforms need to address the problems of these times. Then, we needed a stronger economy. Now, we still need a stronger economy but we need a stronger society too. Bodies such as the CIS and the Institute of Public Affairs have acknowledged this through the priority they give to social and cultural issues, as much as economic ones. It would be a mistake, though, for people committed to economic reform to assume the argument is self-evident.

A cohesive society needs a strong economy to sustain it. More than ever, though, would-be reformers have to show how proposed changes will strengthen the social fabric rather than simply conform to economic theory.

The Coalition will go to the next election as the party of reform -- reform that can appeal to voters as well as policy experts.

Tony Abbott is federal Leader of the Opposition.

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