Reformers face election hurdles

Get ready for lots of elections in 2018 – several by-elections, two state elections and, in all likelihood, a federal election. In election years, politicians go crazy, exaggerating even more wildly than usual, accusing their opponents of all manner of crimes and misdemeanours. With a large number of political careers on the line, all government policy thinking will be directed towards one goal – re-election. 

It need not be this way. In the last 30 years, three elections stand out where prime ministers sought re-election on the basis of what they considered long-term reform essential to national wellbeing. In the 1987 election, Bob Hawke promised what would now derogatorily be branded ‘austerity’: the largest cuts in government spending in post-war history to help deal with a yawning current account deficit. Again, in 1990, Hawke and Keating resisted big-spending promises in favour of further economic reform, including more tariff reductions, to enmesh the Australian economy with Asia. And in 1998, John Howard championed the introduction of a goods and services tax. 

The class of 2018 might take note of the electoral successes of Hawke and Howard before deciding the electorate isn’t capable of understanding and backing the need for further reform at the ballot box. 

But before getting to that glorious hope, let’s go through the probable timing of the federal election. State elections in Victoria in November this year and in NSW in March 2019 will have a profound influence. A fixed-term NSW election on 23 March 2019 leaves only a window of less than two months thereafter for a federal election that must be held by 18 May. NSW voters, sick of state election campaigning, wouldn’t be amused if a federal election were held on its heels. And NSW deputy premier, John Barilaro, has made it clear his party wants the Turnbull government to go to an election before the state government faces the people, terrified that voters will take out their anger with the federal Coalition on its NSW counterpart.

That brings us forward to the Victorian fixed-term election scheduled for 24 November 2018.  Assuming the prime minister wouldn’t want a federal election sandwiched between Christmas and two state elections with overlapping campaigns, he will be under pressure to call the federal election before the Victorian election. But the earliest he can have an election, unless he wants to create the first separate half-senate election since 1970, is 4 August 2018. 

Barring a double-dissolution election – which only succeeded in breathing new life into One Nation last time – the prime minister is likely to call a federal election for some time after early August. The September football finals will push him further forward into August. This assumes the Victorian or NSW state elections will not be deferred by the calling of a federal election, which is a theoretical possibility under the respective state constitutions. 

These considerations point to the May 2018 budget being this parliament’s last opportunity for long-term economic reform. What can we expect? Already the government has foreshadowed personal income tax cuts for people earning less than $87,000 a year. But unless the government is willing to blow out the budget deficit further, these would not come into force until 2020-21, when a modest surplus is projected. Even then, the projected surplus, which has already failed to materialise 12 times since 2010, will be based on rosy assumptions of above-trend economic growth and strong wages growth. 

A trenchant critic of Tony Abbott’s three-word slogans, Malcolm Turnbull has come up with his own four-word slogan: ‘Let’s keep Australia working’. Hoping that jobs growth will continue to pick up and wages growth will soon follow, the government will deploy its slogan against Labor, arguing it is anti-growth and anti-jobs. The government will go to an election championing company tax rate cuts for multinational corporations on the back of Donald Trump’s pre-Christmas corporate tax rate cut. But while Trump did some repair work on the US corporate tax base, the Turnbull government has not signalled any intention to do so. 

Beyond that, the government will use the May budget to announce or re-announce several major infrastructure projects. Perhaps that will be enough to win. Labor will need will need its own economic growth strategy at to least match the Coalition’s fiscal repair profile if it is to win.

In the meantime, long-term economic reform will have to wait. And wait. And wait.