The Abbott Government’s Damning Record

Posted by on May 31, 2014 in General, May 2014 no 76

The Abbott Government’s Damning Record

 Harold Levien

 

During the six months since the Coalition achieved government it has pursued an extraordinary mix of behaviours and policies.  Its inaction to major economic events has had disastrous impacts on the future of the economy. It has amended or attempted to remove legislation of the previous government, including the attempted emasculation of the Labor Government’s climate change policy. It has done a policy backflip with a double somersault over the Gonski education reforms.  It has performed a hypocritical reinterpretation of the deficit policy it regularly espoused prior to the elections. It has made continual attacks on our most respected media organisation, the ABC, while it cosies up to our least respected media group, the Murdoch empire. Meanwhile, foreign affairs blunders have trashed relations with both our largest neighbour, Indonesia, and our smallest neighbour, East Timor, with whom our morality and empathy with the less fortunate appear to ‘ have been buried and cremated’, to quote the Coalition leader on another matter.

The ‘inactions’ in chronological order started with the Coca-Cola Amatil threat to close SPC Ardmona, Australia’s last remaining fruit cannery. That business has been at least temporarily saved by the Victorian Government’s financial assistance, probably because it is facing elections this year on an electoral knife-edge. The announced closure of Ford, Holden, and Toyota - a complete wipe-out of our motor vehicle industry by 2017 - received no policy response. And when QANTAS announced a six months loss of $252 million and a plan to sack 5,000 workers the Government  simply sought the Senate’s approval (not granted) for the domestic (profitable) arm of the airline to become majority foreign owned. 

Then there have been repeated reports of the increasing difficulty of first home buyers to enter the housing market. The problem largely arises from the expanding proportion of houses being purchased for investment to achieve capital gain, both by increasing numbers of non-resident overseas buyers and by local buyers. The latter have been encouraged by negative gearing, costing the budget, and thus taxpayers, around $7 billion annually. But neither the Government nor Opposition have offered the obvious solutions to this ongoing housing crisis.

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The Abbott government’s changes to, or attempts to remove, legislation of the previous government have included amendments to Labor’s Future of Financial Advice legislation, originally designed to give greater protection to consumers paying for financial advice. Commissions were disallowed to help clients’ interests to be placed ahead of those of their advisers. The recently ‘stepped down’ Assistant Treasurer, Arthur Sinodinos, reinstated these commissions and, to use the words of Fairfax’s business columnist, Michael West, this was ‘a boon for the banks’. And it was a decision from a person who stood to make $20 million if he secured an Australian Water Holdings contract with Sydney Water and who received $200,000 a year from AWH for two hours a week’s work.

Similar corporate support has come from the Assistant Health Minister. She recently allowed her chief-of staff, who with his wife runs a lobby firm for the packaged food industry, to remove a website which lists packaged foods on a star rating according to their healthiness. The previous government developed this policy over two years.

The amendment to Labor’s legislation with perhaps the most profound impact has been the abolition of the Climate Change Commission, the Government’s climate advisory authority.  Subsequent attempts to abolish the Climate Change Authority and the Clean Energy Finance Corporation were blocked by the Senate but could succeed when a new Senate takes its place this July.

The attempt to repeal the mining tax was also blocked in the Senate. When, and if, the Abbott Government succeeds in getting this change through, it will prevent the government, and therefore the community, having access to a share of the super profits of the mining industry, which is 70% foreign owned. The Senate’s blocking of the Government’s attempt to abolish the carbon tax has also saved an annual loss to government revenue of $7.6 billion, but that too is likely to be only temporary until the new Senate is in place in July.

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The Government’s major turnabout on the budget deficit deserves particularly critical comment. Throughout the three years prior to the elections and during the six months since, the Coalition furiously attacked the size of Labor’s budget deficit, despite the fact it was one of the lowest among the developed economies. Yet since the elections it has taken action, it appears deliberately, to increase the deficit. The reason presumably is its ability to quote a figure of the ‘immensity’ of the deficit and then to attribute this to the previous government.  Since the elections it has done this on countless occasions in press and TV interviews.  Its $8 billion grant to the Reserve Bank was not requested; and it has reinstated the fringe benefits tax for motor vehicles, which the previous government cancelled as a tax rort, costing tax revenue nearly $2 billion over four years. The Senate’s defeat of the Government’s bill to abolish the carbon tax must have brought the Government mixed feelings since it ensured the deficit would be much less than it would otherwise have been.

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Industry policy, or its absence, is a particularly contentious area. This is highlighted by the two major economic issues the since the change of government – announced car plant closures and the failing policies of QANTAS. In both cases it is worthwhile examining possible alternative responses.

The pending demise of the motor vehicle industry.

 

Following the announced demise of Toyota, which is set to be our last motor vehicle manufacturer in Australia, neither the Prime Minister nor the Opposition Leader offered a solution. Yet Australia is a rich sophisticated economy.  During World War 2, when Australia’s economy was a small fraction of our current economy, the government quickly organised the efficient production of a great deal of sophisticated defence equipment, from planes to tanks. This was an example of what necessity and political vision could achieve.

 

We now have the skilled work force to design and produce motor vehicles. We have the equipment which presumably could be purchased from Toyota and from the other car companies closing down. We have a new annual car market exceeding 1.1 million sales, leaving aside potential exports, more than enough to sustain one competent manufacturer producing a high-tech electric or hybrid vehicle which could save consumers from $50 to well over $100 a week on escalating petrol costs. At the same time it could lead to a huge reduction in carbon pollution. We have three years to organise it. Perhaps this could be achieved, at the outset, through partnership with Toyota producing a Koala, say, lower-cost version of its Prius. On the other hand, to do nothing will cost the Australian economy dearly:  increased unemployment, including the multiplier effects on other parts of the economy, possibly exceeding 100,000 people whose jobs are at risk, and probably over $1 billion in annual unemployment and other social service payments for several years. There are also the enormous human costs.

QANTAS

 The QANTAS bombshell showed there is now only one way of ensuring QANTAS continues as an Australian airline with both its domestic and foreign arms: returning it to public ownership as existed before Keating’s 1993 privatisation. QANTAS is an integral part of the Australian economy, directly employing 32,000 and indirectly responsible for the employment of many thousands more servicing its operations. QANTAS has been part of the Australian ethos for generations and an Australian icon throughout the world. Its current and previous board and CEOs have driven the company into its present quagmire through outsourcing much critical maintenance, abandoning key overseas destinations thus narrowing its clientele, diverting international passengers flying to a European destination other than London to a foreign airline in Dubai, closing down the airline in 2011 ‘to stand up to the unions’ and stranding scores of thousands of passengers,  establishing several Asian Jetstar airlines which have incurred substantial losses, loading QANTAS with much of the cost of servicing Jetstar, and entering into cut-throat competition with Virgin causing substantial excess capacity on competing routes.

 

Should the Government stand aside while QANTAS now sacks 5,000 workers? To return it to public ownership, as is the norm in many developed economies, would not cost taxpayers a dollar. Yet the taxpayer cost of its current downsizing, let alone its possible demise, will be huge through the inevitable unemployment and social service payments. The Government could readily borrow to purchase QANTAS’ current $2 billion share capital—close to its lowest ever price. With interest rates also at an all-time low, the annual interest cost would be under $80 million and become part of QANTAS’ cost structure as a public corporation.  A new competent Board and CEO, combined with a less accommodating government policy to foreign subsidised airlines, could soon return QANTAS to profitability. This occurred in New Zealand after their national carrier was renationalised. It would then be appropriate to spell out the important role of our national airline. 

It is difficult to understand why a Government prepared to spend $36 billion of taxpayers money on building 12 new submarines (for what purpose?) is unprepared to borrow $2 billion to buy a long established enterprise iconic in Australia and throughout the world.  To put it in perspective, it should be noted that superannuation funds are increasing by over $130 billion annually! Public ownership of QANTAS could actually be at no cost to the budget since, as explained above, the borrowing and interest payments would become part of QANTAS’ balance sheet.  By contrast, the proposed taxpayer funded submarine program was described by Fairfax’s conservative columnist, Paul Sheehan, as ‘one of… the most dysfunctional, most wasteful and most misguided programs’.

 

The current priority of a privately owned QANTAS is to make profits for shareholders. Under Government ownership the priority was, and should be, to run a quality, safe airline. Even if it were only to ‘break even’, it could once again become an airline of which all Australians could be proud and which would serve as a symbol to the world of Australia as a modern, well-run nation. Simply in expanded trade and tourism this could annually be worth several billions to the economy and therefore more than pay for itself. Facing such an obvious solution, where is the Labor Opposition leadership?

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With such a damning record, the Government’s support ought to have shrunk considerably - certainly by much more than its minimal diminution so far. The explanation cannot be only the ignorance of the electorate and the fawning support of the Murdoch Press. It must partly lie with the lack of Opposition leadership in strongly presenting appealing alternative policies.

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