Five ways to follow Bob Hawke

Bob Hawke’s memorial service last week reminds us not only of what was achieved by Hawke, Keating and their cabinets in fashioning Australia’s open, competitive economy, but what could be achieved for the future by building upon their model. Speeches delivered by prime minister Scott Morrison and opposition leader Anthony Albanese signalled a level of bipartisan support for the Hawke-Keating model, but self-evidently the reforms of three decades ago cannot simply be repeated. Here I begin the process of outlining the reforms needed in the 2020s to sustain economic growth and prosperity while supporting the disadvantaged in our community.

In doing so, it is necessary to identify the defining features of the Hawke-Keating model. It is built on the foundational proposition that aspiration is not a dirty word; that people legitimately aspire to a better standard of living for themselves and their children. 

Similarly, owning an interest in a business, whether directly or through shares, including through superannuation savings, is a legitimate feature of the market-based system. Australia is not Scandinavia or China. Nor is it the United States. We continue to choose modest levels of taxation and government involvement in our lives, while believing firmly in a social safety net to support the underprivileged and provide opportunity for all.

Big business, like small business, plays a vital role in the Hawke-Keating model. Australians might not like the behaviour of some big businesses, but they know they employ lots of worker and generally pay higher wages. At the same time, Australians admire the risk taking and entrepreneurship demonstrated by small businesses. This admiration will only strengthen in the digital age as more and more young people choose to take their chances in the gig economy.

In the Hawke-Keating model, competition is good and more competition is better. While businesses will want to improve their bottom lines by lobbying for protection from competition, these pressures are to be resisted. 

Here are five proposed ways to modernise the Hawke-Keating open, competitive model.

First, end wasteful subsidies. Taxpayer-funded subsidies have proliferated, most provided through off-budget instrumentalities to conceal their true cost from the public. They are used to gain political support not just in particular electorates but in entire regions of Australia. We even pay businesses to reduce their carbon emissions, with the Liberal Party – ostensibly the party of free enterprise – choosing ineffectual taxpayer subsidies over market signals.

Second, the Hawke-Keating approach of broadening the tax base to lower the rates should be applied. Since the tax reforms of the 1980s, numerous shelters have been opened to enable high-wealth individuals to avoid paying the top marginal rate. That obligation falls on better off but not rich pay-as-you-go taxpayers. A top marginal personal tax rate of 47 or 49 per cent is too high. A lower rate should be funded by closing down some of the most egregious tax shelters, obliging those facing a reduced top marginal rate to actually pay it.

Third, Australia desperately needs a new wave of foreign investment embodying the latest productivity-raising technologies. Accelerating the statutory depreciation rates for both tangible and intangible depreciating assets for medium-sized and large businesses would provide a timely economic stimulus in a slowing economy while creating the preconditions for sustained wage rises. 

Fourth, the Keating government’s enterprise bargaining system needs updating. A number of court rulings have rendered it useless, causing the parties to fall back onto the less-flexible award system as enterprise agreements expire. A revamped enterprise bargaining system, based on consultation with the relevant parties, would be in the interests of employees and employers.

Fifth, the time spent in retirement will rise as life expectancies continue to climb. Paul Keating has pointed out that as very elderly retirees begin to run out of superannuation savings they will be forced onto the age pension. This problem needs attention now, not when it is staring governments in the face a decade ahead. Marching up the superannuation guarantee to 12 per cent would help, but a national insurance scheme for long-living Australian will likely be necessary.

Items on this agenda could be modified and augmented on the basis of deeper consideration, but a new wave of reform is needed to lock in the gains made over the last three decades, continue the record-breaking period of recession-free economic growth and provide the wherewithal for continued social and environmental progress. 

The Hawke memorial service reminded us what is achievable with vision, determination and attention to detail. As with the Hawke and Keating governments, the political party that commits to reform based on the open, competitive model will take its place in the history of refreshing and modernising Australia.