Time for some real straight talk
3 May 2016
By Nyunggai Warren Mundine
Western democracies are experiencing unprecedented levels of political populism. Populist politics directly targets ordinary people, supposedly saying what the establishment won’t.
Australia hasn’t had the likes of Trump or Corbyn within a real shot of government. But we’ve seen political norms upended.
For example, historically most governments last at least 2 terms. Yet we’ve recently seen one term Coalition governments in Queensland and Victoria and Federal Labor reduced to minority second term government. The normal bipartisanship on sensible reforms is being replaced by opposing for opposing’s sake to damage governments, regardless of national interest, with populist crossbenchers getting undeserved prominence.
Populist trends have helped kill economic reform. Governments are running scared – scared of being tossed out and of the inevitable howls that accompany change. No Australian political party has delivered an economic plan which systemically addresses Australia’s big problem - a huge national debt getting larger daily and government spending more than it earns, borrowing money to do it.
Demographic changes will see this problem balloon. In 1967 there were 7 working age Australians for every 1 over 65; by 2047 there’ll be only 2.4. And the over 65s are living longer. More Australians spend more of their lives receiving benefits and the number entering the workforce to pay for them isn’t keeping up.
Already half of Australian households pay no net tax - the income taxes they pay less than the benefits they receive. Working-age people and couples with dependent children disproportionately bear the burden of paying the taxes that fund the net benefits received by others. And bracket creep means average earnings are taxed more and more every year.
Last year the Commonwealth government released a tax discussion paper, Re:think, to begin a formal process for considering the future of our tax system and start a national conversation. What conversation? Changes like increasing or broadening the GST were taken off the table without details being publicly canvassed and without any informed national discussion.
The few solutions discussed include things like removing tax concessions on negative gearing and capital gains tax. Let’s get real. Social services and welfare alone currently cost around $150bn p/a; in 2 years, nearly $190bn p/a. The Grattan Institute has said that removing negative gearing and CGT concessions would deliver $5bn p/a in extra revenue. That would cover less than a fortnight of social services and welfare; in 2 years, just over 1 week. And what about health and education? This isn’t tax reform, it’s fiddling while Rome burns.
Australia must rein in spending. And the way you reduce spending is to spend less. That’s the unpalatable truth.
There’s a lot of talk of innovation and agility. They’re only beneficial if you bank the efficiencies they produce. Efficiencies is another name for “cuts” - a dirty word in politics. Innovation and agility also bring change. Change requires courage.
A driverless train is an innovation producing efficiencies. Why? Because computers don’t get wages, overtime, superannuation, breaks or sick leave. Politically, it’s ripe for attack - drivers lose their jobs and government makes “cuts” to public spending. And don’t forget vested interests – computers don’t join unions. Other jobs are created, of course, in fields like science and technology but most drivers aren’t qualified for them.
The answer isn’t keeping human drivers; nor is it drivers retiring and living out their lives on a pension. Annual welfare spending is rising rapidly, mostly from increased spending on the aged. When the pension was introduced in 1909, average life expectancy was 55 years for men, 60 for women. By 2012, it was 80 and 84. And it keeps rising. More than half the children born in industrialised nations since 2000 will live past 100.
A sustainable economy requires more people working for longer; more people financially self-sufficient for more of their increasingly long lives; and people getting used to the idea of having several different jobs in their lifetime, some of which don’t yet exist.
The idea Australians should enjoy 20 or 40 years of retirement is nonsense. Few individuals can afford it and taxpayers certainly can’t. But people are accustomed to the current system and it’s not obvious to them why it’s under threat. Politicians must start explaining.
Some people say populism appeals because average voters are stupid. Wrong. Ordinary people aren’t stupid. They care about issues that affect them and their society, they’re smart enough to understand them and sensible enough to accept realistic solutions.
But politicians must lead them through this transition. Politics is the art of selling ideas. Great leaders articulate a vision and why it’s important. They say – here’s where I’m going to take you and here’s how I’m going to take you there.
Politicians should redefine populist messages – stop telling people what they want to hear and start telling people what they need to know. After all, perceived straight talk is part of populism’s appeal.
This article was first published in the Australian Financial Review on 2 May 2016.