Federal budget: political leaders need to join the dots to ensure coherent policy

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Paul Barratt, Chair of Australia21Paul Barratt AO, Chair of Australia21:

Whatever the policy, it needs to be coherent.

 

The whole raison d’etre of Australia21, our core purpose, is to contribute to the development of evidence-based public policy.

So let us be clear in the lead up to the Federal Budget: whatever our nation’s policy frameworks – and the outcomes of our elections will shape those to a large degree – we should demand policy coherence from the Government of the day. We should insist its policy frameworks are not characterised by conflicting settings.

Yet regrettably, policy frameworks that contain inherent contradictions abound.

 

Energy security

In the wake of the major blackout in South Australia last year, Environment and Energy Minister Josh Frydenberg stated on ABC News 24 in October 2016 the COAG Energy Ministers had agreed their primary responsibility was energy stability, reliability and affordability.

electricity transmissions linesThe problem is, there are trade-offs in that set:

  • between reliability and price (for example electricity transmission would be more reliable in underground cables but at higher cost),
  • between stability and price,
  • between reliability and stability.

They can’t all be ‘the primary responsibility’.

 

Free trade

Another example is the simultaneous advocacy of free trade and small government, an important component of the latter being to reduce the welfare spend.

shipping containersNo doubt trade liberalisation benefits most of society most of the time, but it doesn’t benefit all of the people all of the time: it hurts the many people who lose their jobs. Many of the workers in the 40+ age group who lost their jobs in ‘the recession we had to have’ or in the GFC never worked again.

Basic welfare economics says that if a change is good for society as a whole, those who benefit from the changes can afford to pay taxes to support those who have been hurt by the changes. If they can’t, what is the evidence that the change is beneficial overall?

Therefore, policy coherence would demand a recognition that liberalising trade has implications for our tax and welfare frameworks, and would indicate a requirement for a short to medium term increase in the welfare spend.

 

Housing market

In his Capital in the Twenty-First Century, Thomas Piketty says that capitalism tends, by definition, to favour the owners of capital – which indicates a requirement for countervailing measures to prevent growing inequality.

child's legs and toy on loungeThis would argue against policy settings such as the capital gains tax discount on property investment and sale, and unlimited negative gearing. Both actually involve taxing those who depend upon labour income to assist others to ‘get ahead’ through accumulating (more) capital in the form of residential and commercial property.

Now there is talk of a first home buyers’ package in the forthcoming Federal Budget. The intent of this would be to compensate, to some extent, for the advantages which subsidised investors have in the residential property market.

 


The public interest

Closely related to the development of evidence-based policy is the question of who looks after the public interest.

 
Parliament House Canberra by jjron

 
On occasion, Australia21 has addressed that directly. See, for example, Who speaks for and protects the public interest in Australia?

Sometimes we have addressed the issue indirectly, as in our Elephants in the Polling Booth essays published before the 2016 election and our pre-2013 election publication Placing global change on the Australian election agenda.

There is ample scope, in the complex issues with which Australia21 deals, for passionate disagreement about what the nation’s policy settings should be. One thing upon which we all ought to insist, however, is that the policy frameworks be coherent.

Our political leaders must ‘join the dots’ to ensure, on a whole-of-government basis, that there are not elements of policy that are at war with each other.

With Australia’s 2017 Federal Budget being prepared in an era of global instability, coherent evidence-based policy decisions are more important than ever.



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