Tony Abbott has grown to become an astute politician.

Tony Abbott has grown to become an astute politician. Photo: Alex Ellinghausen

 

More than a set of numbers, a government’s budget is a reflection of its values. The first budget of this government will be Prime Minister Tony Abbott’s first attempt to balance the disparate philosophical urgings that can be heard within his party room, and shape them into a coherent set of economic policies.

Abbott is no longer the man of "conviction" that many believed to be unelectable just a few years ago. He has grown to be an astute politician and will work hard to manage the philosophical tensions that exist within his party room. If he is not able to get this delicate balance right, the consequences for the nation may be significant and enduring. Overreaching to the right may also bequeath his party an unwanted legacy.

<i>Illustration:</i> Pat Campbell.

Illustration: Pat Campbell.

Abbott is ultra-conservative in terms of social policy but is perhaps uncomfortable with the extreme approach to workplace relations and fiscal austerity many of his colleagues advocate. If he is forced to make concessions to the free-market ideologues in his party in exchange for support for his own socially conservative vision for the country, Australia may be left with the worst of both worlds.

The strong conservative mandate coincides with a wounded Labor Party, and has come at a delicate moment in our nation’s history. Underneath the veneer of prosperity shared by a nation of relaxed and healthy people, a range of problems has developed to a dangerous level.

Evidence suggests that prosperous times have not enhanced our wellbeing - the level of depression and anxiety that exists in Australia today is deeply troubling. Our increasingly insular outlook further threatens the fabric of a society that has an incredible ethnic and cultural diversity. But perhaps the most alarming trend that exaggerates and strains all other threats to social cohesion is severe and growing income inequality.  

Acceptance that Australia has an essentially egalitarian nature transcends partisan politics and mainstream society. We have the opportunity to demonstrate to the world that modernity is not incompatible with equality; that growth can be achieved in circumstances that improve, not diminish, social cohesion. The experience of the past three decades suggests this change will not happen as a natural function of the free market.

Income disparity in Australia has not touched the conscience of mainstream Australia, but soon will. The gap between our richest and poorest continues to grow. Figures from the Organisation for Economic Co-operation and Development indicate that more than one-fifth of all growth in Australia’s household income between 1980 and 2008 went to the richest 1 per cent. For an egalitarian nation such as Australia, the ultimate form of surrender would be to accept soaring income inequality as an acceptable, even natural state.

The threat that this increasing chasm between high and low-income earners poses to society has not been lost on a range of eminent international thinkers. This year’s World Economic Forum also identified severe income disparity as ''the most likely'' risk to the global economy in 2014. The world is beginning to recognise that wealth disparity leads to serious social divisions posing a serious risk to both democratic systems and market economies.

Through his words and actions, Abbott appears determined to reach out to the free-market ideologues in his party room in order to strike the necessary balance. The extreme free-market approach favoured by many Liberals is thoroughly ill-equipped to address issues such as income inequality, mental health and other threats to social cohesion.

If the government’s mandate is viewed as a licence to give life to extreme expressions of modern conservatism, a range of social, economic and environmental problems may decay beyond repair, leaving the Coalition with a legacy that will take a generation to outlive. If the Coalition achieves two terms or more in office, Australia will be ill-prepared for the collective effort required to mend almost irreparable economic, social and environmental problems.

To present a credible antidote to income inequality in government, Labor will need to address the dichotomy between equality of opportunity and actual equality. The more equality of opportunity has been discussed, the more income inequality appears to grow. Increasing the funding and improving the quality of public school education, for example, is crucial - but it is not enough.

Addressing wealth disparity requires structural reforms so that wages reflect the social value of the work - not just its market value. A portion of the extraordinary levels of wealth created must be redistributed to people of the middle and lower classes, who are more likely to spend than invest. This would also stimulate retail and thus the economy.

The solid mandate that Prime Minister Abbott achieved at the last election may not, ironically, be a good thing for Australian conservatives. Overreach on issues that will exacerbate already soaring levels of inequality, such as award wages, Medicare and GST, will leave the nation an unwanted legacy. If Labor develops and proposes an attractive alternative, Abbott may well lead a one-term government. 

Andrew Hunter is chairman of the Australian Fabians.