Last week’s decision by Labor to oppose tighter assets testing of the age pension revived memories of Paul Keating paying me a visit as Bob Hawke’s microeconomic adviser back in 1989. “This is the worst decision the government has ever made,” Paul thundered, “and I hold you personally responsible.” Paul was referring to a government decision to offer a $36 million subsidy to keep Kodak’s Melbourne factory doors open. His argument was that this decision ran totally counter to the modern Labor philosophy of fashioning an open, economy. Last week, Labor relived its Kodak moment.
Labor flatly opposed a modest tightening of the assets test on pensions, controverting its time-honoured philosophy of targeting government support to the underprivileged. By refusing even to enter into negotiations with the government, Labor dealt itself out of any chance of improving the legislation to avoid the perverse incentives it creates against taking superannuation as annuities identified by Industry Super Australia as reported in the AFR yesterday. At the same time, the Liberals demonstrated their hypocrisy by ruling out ever curbing the unsustainably generous tax breaks for high-income superannuants.
Meanwhile, the Australian Greens saw merit in the philosophy of shifting the age pension towards the safety net it should always be and away from the almost-universal entitlement the Howard government had bestowed upon retirees when rivers of gold flowed from China. The Greens, however, could have allowed the present Senate inquiry to take its course, listening to suggested ways of improving the policy.
Labor has a proud history of paring back Liberal Party middle-class welfare. The Hawke government introduced the assets test on pensions in 1984 and three years later it income-tested the family allowance for the first time in its 45-year history. Those savings financed a new payment for Australia’s poorest families – the Family Allowance Supplement.
The Rudd and Gillard governments temporarily froze the upper income thresholds of eligibility for family tax benefit, reduced the Howard-Costello government’s baby bonus for second and subsequent children and later abolished it altogether.
Shadow treasurer Chris Bowen has publicly affirmed that for Labor to be economically credible it must specify where it would make budget savings. If his colleagues consider reversing the Howard-Costello relaxation of the pension assets test is too hard politically they are in for a shock when they are forced to contemplate the alternatives.
Private polling will reveal that no section of the community wants its benefits cut. But it will also confirm that voters require an alternative government to be economically credible. The lure of political opportunism might tempt any opposition leader to do what Abbott did: promise no cuts to health, education or pensions, no excuses and no surprises, knowing full well he has no intention of keeping his word. Depending on the success or failure of the Coalition’s tactic – supported by tabloids such as The Daily Telegraph – of smearing Labor as the terrorists’ friend, doing an Abbott might just work in winning the next election. But once in government, Prime Minister Shorten would be dogged by broken promises just as Abbott has been. Labor might last one term and then be ejected for a decade. An increasingly economically responsible Greens Party would pose an existential threat to the Australian Labor Party.
Ultimately, the public judges political leaders not by the words they say but by the values they convey. Labor is the party of opportunity for all, open competition, economic responsibility and social and environmental progress. Those values kept the Hawke and Keating governments in power for 13 years. They enabled Labor to implement such enduring reforms as universal health care, economic policies that laid the foundations for a quarter-century of sustained income growth and job creation, superannuation for all working Australians, support for poor families to keep their children at school and the world heritage listing of Tasmanian forests, Queensland’s wet tropical forests and Kakadu.
These are proud achievements from holding fast to enduring Labor values. Let Labor not be infected by the rank political opportunism of a prime minister who wilfully broke his pre-election promises and is now disgracefully busting his guts to break bipartisanship on Australia’s national security.
Craig Emerson, managing director of Craig Emerson Economics, is adjunct professor at Victoria University’s College of Business.