OPINION

A campaign conducted on the basis of delusion

History has never really been on the side of the federal Labor party. On the six previous occasions that Labor came to power, it found itself in the eye of a global storm. The entry dates to office underline both the burden, and the bad luck: 1914, 1929, 1940, 1972, 1983 and 2007. That covers both world wars and the four biggest crises of modern capitalism - the great depression, the oil shock, stagflation and the global financial crisis. It is one of the most striking things about our political system. The Australian people shift to Labor in times of national peril, and in most cases quickly come to regret that choice.

Opposition Leader Bill Shorten and Chloe Shorten cast their vote at Moonee Ponds. Picture: Alex Ellinghausen

Opposition Leader Bill Shorten and Chloe Shorten cast their vote at Moonee Ponds. Picture: Alex Ellinghausen

Three of those economic crises erupted within the opening year of the new government, cruelling the prime ministerships of James Scullin, Gough Whitlam, and Kevin Rudd. All three lost their jobs within three years of a barnstorming election victory. Scullin's government split, and was forced to an early election which it lost in a landslide. Whitlam's government was dismissed by the governor-general, while Rudd was sacked by his own party.

Only Bob Hawke's government in 1983 had the benefit of knowing the enemy on arrival. The economy was already in deep recession, and his ministry had witnessed the chaos of the Whitlam era and were determined not to repeat that history.

So, if Bill Shorten does lead Labor back into government the question of what could go wrong will occur soon enough. It is the follow-up question that will decide whether his government rises to the challenge like Hawke's: What did Shorten and his frontbench learn from the Rudd experience?

The answer, sadly, might be not enough. If Labor people are honest with themselves, this election has been conducted along similar lines of delusion as 2007. Both campaigns operated on the assumption of a benign international order, even though the global economy was already at a tipping point.

In 2007, the US housing bubble had already burst and the first of the big financial houses, the British bank Northern Rock, had suffered a run on deposits and required a government bailout. It was not the best time to be promising generous, unfunded tax cuts as Kevin07 did.

Take your pick this year. The United States and China are engaged in a trade war, there is the threat of a hot war between the US and Iran, and North Korea is testing missiles again. Even if none of the above triggers a meltdown, the risk of a US-led global recession disrupting the first term of a Shorten government is nonetheless real. It is a simple matter of arithmetic.

The US economy has been growing for 10 years. At no point in American economic history has the growth cycle extended to an 11th year. This danger applies equally to the Coalition should Scott Morrison pull off the great escape and secure a third term for our least effective, and most divided government since Scullin's. A Morrison government re-elected on the basis of a fear campaign, the absence of a reform agenda, and an unprecedented third party advertising blitz from Clive Palmer, would not have the authority to unite the nation in a crisis.

The problem starts with the federal budget. It isn't fit for purpose anymore and the blame lies squarely with the Coalition. The strongest claim the conservatives had to kicking out the Rudd-Gillard government in 2013 was to "end the waste". Although Tony Abbott did complicate matters somewhat by ruling out spending cuts on the eve of that election, there was surely scope for an intelligent budget repair program.

Meaningful, nation-binding reform would have targeted Howard-era concessions as well Labor's excess spending. Abbott and his ministers had been eye-witnesses to the profligacy of Howard's final term, when the temporary windfall of the mining boom was given to voters, without offsetting savings, as a permanent tax cut or increase in welfare. Whatever they said publicly about Labor's debt and deficit, they should have known that the times were calling on them to atone for the Coalition's own reckless spending.

Tony Abbott.

Tony Abbott.

Abbott was not up to the challenge. He destroyed his prime ministership, and closed the window for reform, with a partisan first budget that targeted the vulnerable on the foolhardy theory that hitting Labor voters carried no electoral cost. The most savage cuts were blocked by the Senate, and the Coalition basically gave up after that. It would return the budget to surplus through bracket creep, but even then, it could not close the deficit before its second term was complete.

The measure of Abbott's miscalculation is the Coalition wound up spending more than Labor, even though Rudd and Gillard had been saddled with the global financial crisis. Government expenditure as share of the economy averaged 24.8 per cent under Labor between 2008-9 and 2012-13 and 25.1 per cent under the Coalition between 2013-14 and 2018-19. Government debt is larger today as a share of the economy than it was at the end of the last recession. It has more than doubled in dollar terms on the Coalition's watch.

This has left Australia without a buffer to deploy in the next global recession. With interest rates already at historic lows, the only recourse to stimulus would be more government borrowing.

History will not be kind to the Coalition for ducking the challenge of climate change. The failure to manage the budget is in some respects more damning because the paralysis cannot be explained by the civil war between Abbott and Malcolm Turnbull. The budget was supposed to be the issue that united the moderates and the hard right of the Liberal Party. Yet there was a failure of will and imagination that will handicap future governments on both sides.

The past six years of divided Coalition government has coincided with Australia's weakest economic performance in a generation. The simplest way to see this is by comparing our unemployment rate with the United States. At the 2013 election, Australia's unemployment rate was 5.7 per cent. 1.5 points below the US figure of 7.2 per cent. Last month, ours was 1.6 point higher - 5.2 per cent versus 3.6 per cent. The US recovery has largely passed us by, leaving Australia in the slow lane of global growth. The lines crossed on Abbott's watch, and his successors Malcolm Turnbull and Morrison were unable to close to gap.

Kevin Rudd.

Kevin Rudd.

Labor could be forgiven for not anticipating the GFC a decade ago - the Treasury and the Reserve Bank missed the warning signs before the election. And the Rudd government still deserves credit for the part it played in helping Australia avoid a deep recession once the crisis struck. But the avoidable mistake that Labor made in 2007, and which it has repeated this year, was to load too many promises onto a compromised budget. Back then Labor's attack lines against the Coalition's fiscal indolence did not match its actions.

Shorten has been careful to offset his spending promises with savings. But the transactions required in a downturn are epic in scale, and carry huge political risk. Election promises have to be set aside, or dumped to allow the government to focus its attention on the crisis at hand. The Whitlam and Rudd-Gillard governments failed this test of temperament. They insisted on implementing their respective programs, written before the world changed.

If Shorten wants to be the next Hawke, he has to educate his party, and the nation on a new economic model. That model will have to be informed by the failures of the previous Labor and Coalition governments.

  • George Megalogenis is a journalist, political commentator and author.
  • SMH/The Age
This story A campaign conducted on the basis of delusion first appeared on The Sydney Morning Herald.

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