Inside Story

Out of the campaign’s shadows, a hidden reality

The second week on the hustings revealed false conflicts and unspoken truths, says Tim Colebatch

Tim Colebatch 20 May 2016 2379 words

Hostage to fortune? Opposition leader Bill Shorten campaigning in Mt Druitt this week. Mick Tsikas/AAP Image

A quarter of the way through the election campaign, the result looks to be on a knife-edge. The Essential poll this week had voting leaning 51–49 in Labor’s favour, which confirms that it’s too close to call.

But the polls still say that most of us expect the Coalition to win. In the past, that’s sometimes proved a good measure of our real voting intention, and sometimes not: last year Queenslanders thought Campbell Newman would be re-elected too. And it’s worth remembering that Australians have voted to eject nine of the last thirteen governments facing re-election (although one, the Weatherill government in South Australia, clung on with the support of independents).

For a close campaign, so far it’s been remarkably well-mannered. Sure, there are elbows flying, false claims made, and newspapers campaigning themselves while pretending to be reporting the campaign, but there’s been nothing yet to cause the referee to stop play – partly because there’s no evidence that we’re taking much notice.

On polling day, who will remember that six weeks earlier the Australian Federal Police raided the offices of Labor’s shadow communications minister, Stephen Conroy, and a staffer, in a quest to find out who leaked incriminating documents about the cost blowouts and delays in the rollout of the NBN? Will all those headlines change anyone’s vote?

Some real issues intruded on the campaign. Treasury and the Department of Finance released their eagerly awaited independent assessment of the true budget position, which delivered a sharp warning of the need for more spending cuts and tax rises if Australia is to get the budget back under control and start paying back the money we have borrowed since 2008.

Environment minister Greg Hunt and his shadow Mark Butler held a civilised, indirectly enlightening debate on climate change policy at the National Press Club. And the Financial Review published a JWS Research poll confirming that, with few exceptions, the public opposed almost every savings measures in the budget, and supported every spending measure.

All of these dragged from the shadows of the campaign the hidden reality that after the election, whoever wins, we need a different style of government. During a campaign, the parties pretend they don’t agree even on the things they do agree on. When it’s all over, we need them to find common ground: on tax reform, on budget savings and on climate change policy in particular. We need to leave these years of ultra-partisanship behind us and restore a political culture in which Liberals and Labor can make common cause in the national interest.

More of that later. Meanwhile, this week’s campaign headlines suggest that Labor had better get its act together quickly on penalty rates, and the Coalition on refugees – and, perhaps, on migration generally.

On penalty rates, let’s be clear about the issue: the Fair Work Commission has been asked whether Sunday should have a different penalty rate from Saturday, for workers in the food, hotel and retail industries. That’s all. The issue is not whether they should receive penalty rates, but which penalty rate they should receive. And understandably, their unions are under pressure to explain why working on Sundays is so much worse than working on Saturdays.

Labor’s official line is that it is in favour of keeping penalty rates as they are, but it is the Commission’s decision. It has already made a submission in the case along these lines, and if it wins the election it would make a second submission, this time as the government. But in the end, this is not its decision to make – and Labor knows that if it did try to override the Commission it would be opening the way for a future Coalition government to do the same, with serious consequences for Labor’s clientele.

The policy would be plausible, if not for two things. First, from Bill Shorten down, Labor has gone out of its way to tell us it will “protect” penalty rates, when its real policy is to ask an independent commission to please do so. Second, while Shorten held to this “hands-off” policy under pressure, some of his frontbenchers, including shadow industrial relations minister Brendan O’Connor in an interview with 3AW’s Neil Mitchell, have tried to have it both ways, pledging that Labor would protect existing rates, yet confirming that the Commission would make the call. The result is legitimate doubts about what Labor would really do in office.

But Labor’s problems were blown out of the ring by immigration minister Peter Dutton’s tirade against refugees, in an interview on Sky with Paul Murray. Here is the minister, after Murray had attacked the Greens’ plan to take 50,000 refugees a year, and claimed that 90 per cent of Afghan refugees “don’t have a damn job”:

For many people, they won’t be numerate or literate in their own language, let alone English, and this is a difficulty because the Greens are very close to the CFMEU, as obviously the Labor Party is, and their affiliations with the union movement obviously are well known.

Now, these people would be taking Australian jobs, there’s no question about that, and for many of them that would be unemployed, they would languish in unemployment queues and on Medicare and the rest of it.

So, there would be a huge cost, and there’s no sense in sugar-coating that, that’s the scenario.

Leaving aside the bizarre reference to the CFMEU, it seems that the minister thinks refugees cost us whatever they do. If they succeed here, they will be “taking Australian jobs.” If they don’t, they will languish on welfare at “a huge cost.” Yep, Pete, that pretty well covers the field, apart from a few who have independent means of support.

But to the extent that that is true, it is true for all migrants. If you think successful refugees “take Australian jobs” then that necessarily implies that you think migrants, too, “take Australian jobs” when they do well.

The reality, as study after study has found, is that migrants generate demand for goods and services – and hence, jobs – as well as supplying labour. Years ago Judith Sloan did a fine report at the Productivity Commission on the economics of immigration, which concluded that for all the passionate arguments from both sides, immigration generally makes little economic difference to the rest of us. As Financial Times columnist Martin Wolf, himself the son of refugees, put it recently, the main benefits of immigration go to the migrants themselves.

What makes refugees different from other migrants, according to a major study by the late Professor Graeme Hugo, is that they are less likely than skilled migrants to arrive with workable English, or with work skills that can be readily translated into Australian jobs. And that means they can spend long periods in unemployment before eventually finding a niche.

A Bureau of Statistics study in 2013 found that only 20 per cent of refugees who had arrived in the previous ten years had a job, and 59 per cent were living on welfare benefits. By contrast, 55 per cent of migrants on student visas had a job, as did 73 per cent of skilled migrants and 64 per cent of the Australian-born.

But the decision to become a refugee, Hugo argued, is “selective of risk takers, people who question the status quo, recognise and take up opportunities… humanitarian migrants have made, and continue to make, a distinct contribution through their role as entrepreneurs.” Other studies agree that refugees do find work, even if it takes time.

Getting the budget back into shape will not only take time, it will take more hard decisions than either side of politics has so far been prepared to make. Treasury secretary John Fraser and Finance secretary Jane Halton put it bluntly on Friday in their Pre-Election Economic and Fiscal Outlook, or PEFO:

The medium-term projections show that, without considerable effort to reduce spending growth, it will not be possible to run underlying cash surpluses, say in the order of 1 per cent of GDP, without tax receipts rising above 23.9 per cent of GDP. Even if payments were reduced from the levels projected at the 2016–17 Budget to the long-term average of 24.9 per cent of GDP by the end of the medium term, tax receipts would still need to rise to around 24.2 per cent of GDP by 2026–27, well above the average of the past 30 years, to achieve a surplus of one per cent of GDP.

Reducing spending growth has proved difficult in practice… The indicative net impact of all unlegislated policy decisions included in forward estimates in the PEFO is around $18 billion in underlying cash terms and updated for parameter changes, over the five years to 2019–20.

Australia has a relatively strong fiscal position by international standards. However, Commonwealth Government debt levels are projected to reach recent historical highs, both on a gross and net basis. These debt levels are not an immediate concern given historically low interest rates and a growing economy. But should Australia experience a significant negative economic shock or increased interest rates or debt levels rise above current projections over the medium term, the debt burden will impose an increasingly significant cost on the fiscal and economic outlook. It is crucial for Australia to maintain its top credit rating to ensure the Commonwealth’s borrowing costs, and those across the economy more generally, are kept as low as possible.

More generally, the medium term outlook also shows the crucial importance of increasing productivity. This will require renewed vigour in encouraging and delivering structural reform across all parts of the economy.

Sensibly, PEFO makes virtually no change to the budget’s underlying assumptions and forecasts. It notes that many parts of the jigsaw could shift in one direction or other, and adds a warning that “the business cycle is unlikely to have been consigned to history… relying on a rebound in world growth in the medium term could be a dangerous strategy.”

It puts the focus instead on those medium-term projections. Even if spending were to be reduced significantly as a share of GDP, despite our ageing population forcing it higher, they argue, we would still need to embrace higher taxes – back to roughly the same levels as the Howard government had from 2000 to 2006 – to generate the kind of surpluses we ran up in that time.

Yet post-budget polling by Fairfax/Ipsos and Essential Research shows virtually no public support for either spending cuts or higher taxes. The Fairfax polling found the public supported every new spending initiative in the budget but only one savings initiative: hiring more tax investigators to tackle tax avoidance. The Essential poll found support also for higher cigarette taxes and the crackdown on tax breaks for superannuation, but the message of the two polls is that while the public wants the deficit to be closed, they want it to be done only by taxing the rich and the tax dodgers.

To get us out of this stalemate will require a new approach to politics, which looks to bipartisanship, not conflict. After the election, setting up a very high-level parliamentary committee on tax reform, with a directive to come up with unanimous solutions, could provide a start.

A second area where we desperately need conflict to make way for bipartisanship is climate change. In debate, the two sides present themselves as polar opposites, yet Tony Wood and David Blowers of the Grattan Institute and other analysts point out that the alternative frameworks are potentially compatible. If the political will is there, they could become the basis for a bipartisan policy that would give investors the certainty they need to put their money behind solutions.

Of course, there was little bipartisanship on display at the National Press Club this week when Hunt and Butler debated climate policy. They couldn’t even agree in public on past facts, let alone future trajectories. And yet I came away with the sense that they were really much closer than they pretended to be.

The key to potential agreement is the “safeguards” mechanism in the government’s Emissions Reduction Fund, which in theory would make polluters pay if they increase emissions above their baseline. In the sketchy framework the Coalition has announced to meet its 2030 target to reduce Australia’s emissions by 26 to 28 per cent (from 2005 levels), this mechanism would be ramped up to make industries meet increasingly tight reduction targets. The details are as yet undecided, but one way to make this work would be to allow them to buy credits from those who have reduced emissions with room to spare.

That would be a close cousin of what Labor is now proposing for the electricity sector: not another carbon tax, but a scheme that would force generators with excessive emissions to buy credits from those with low or zero emissions. Note that such a policy would not impose any new costs on the electricity sector overall.

The extra costs would come from Labor’s related policy of requiring 50 per cent of electricity generation to come from renewable sources by 2030. That would require the industry to invest heavily in renewables in the 2020s. The International Energy Agency reports that the cost gap between renewables and fossil fuels has shrunk markedly, and further development of storage technology could see it close completely. But Labor’s policy risks forcing generators to choose technologies before they are commercially viable, with higher power prices as a result.

It is futile to expect bipartisanship in an election campaign. We can just hope that both sides somehow hold back from any campaign commitments that would block the way to future bipartisan agreements to do the things that really matter: fixing the budget, repairing the tax system, and reducing our impact on the atmosphere. •