Brexit is horrifying proof political chaos hurts the economy - and Australian MPs should take note

David Cameron in London this week. Photo: Leon Neal / AFP/Getty Images

One reason to be cheerful about Australia’s eight-week election campaign is that, such is the agreement on so many issues between the major parties, both sides resorted to making stuff up in order to attack each other.

Bill Shorten went hard on a scare campaign about non-existent Coalition plans to “privatise Medicare”. In response the Coalition scrambled back its core strength of border protection, warning of the full-blown restart of people smuggler operations under a Labor government – based on not much evidence at all.

That both sides had to trot out straw men – actually, bogeymen – to try and herd voters says a lot about how close the major parties are on major issues.

Australia really has forged a strong and broad political consensus on many issues where many other countries remain divided: the importance of the social safety net, a strong minimum wage, reducing budget deficits when they arise, a strong defence policy, and enthusiastic relations with the US as a strategic partner.

Australia can be proud of the civilised nature of its political debate when set against the ideological conflagrations that have engulfed other countries over the past decade. France has Marine le Pen, America has Donald Trump, Britain has Nigel Farage, The Netherlands has Geert Wilders, and Greece has Golden Dawn.

These are real and powerful political forces whose rising influence has been driven by broad disillusionment with the establishment. After Britain’s momentous decision last week, it can no longer be in doubt that this global trend has the potential to reshape the world.

Not that Australia hasn’t flirted with base populism, of course. The emergence of One Nation was arguably a foreshadowing of some of the problems that Europe is now grappling with. (And she hasn’t gone away, you know: Pauline Hanson is a real chance of gaining a Senate seat in Queensland when the country goes to the polls this Saturday.) In 2013 we had the emergence of Clive Palmer’s ill-fated PUP. And right now in South Australia, Nick Xenophon’s preparedness to call out the appalling social problems created by Australia’s gambling culture combined with his blatant populism – manifest in his mixture of apparent folksiness and outright protectionism – is dragging support away from the major parties.

In the main, though, the election this weekend is about a choice between two parties that agree on many different issues. What they don’t agree on is economic policy; Labor wants to invest in the health system and education, while the Coalition is focused on encouraging investment, particularly among small businesses.

This is not to suggest the choice facing Australian voters this weekend this weekend doesn’t matter. It does. But if there is anything you can take from the events of the past week, it is shocking evidence, writ large, of the capacity of political instability to inflict enormous amounts of economic damage.

With David Cameron having resigned and the future of Britain’s place in the global trade and investment landscape in complete limbo, “irreducible uncertainty” has become the talk of global markets. Just today HSBC has downgraded growth for the whole Eurozone for next year to 1.0% from 1.5% previously. Barclays says a recession is coming for the UK, and it is not alone in making that call. British banking stocks are getting destroyed and global bond yields are plunging. It is highly likely we may see a noticeable rise in unemployment in the UK and all the social problems that come with it.

Australian politicians as a group will likely never face up to the poisonous economic impact of creating wilful instability. But they have contributed to it. The era of seemingly never-ending leadership speculation and the inability of successive prime ministers to deliver on their promises is acting almost like a de facto tax, putting a drag on investment as businesses and consumers have been trained to be wary about believing anyone in particular will either be in charge, or able to get anything done.

You don’t need to take my word for it. Treasury secretary John Fraser and RBA governor Glenn Stevens explained it to the Abbott cabinet at the start of last year, explaining to ministers that the absence of confidence among consumers and business had been holding the economy back.

Australia’s economy needs growth of around 3% to create the amount of jobs needed to keep pace with the growth of the workforce. Global growth is about to take a bit of a hit from the uncertainty that is likely to persist for months in Europe. In this environment, every barnacle – to borrow a phrase from Abbott – needs to be cleared if we are to avoid seeing people out of jobs when they don’t need to be.

The priorities of our politicians, as we saw through the Rudd and Gillard years for Labor and then Malcolm Turnbull’s stalking of Tony Abbott, have been too-often side-tracked into tedious obsessions with factionalism and internal power. People have had a gutful of this and it is probably one of the reasons that this campaign has failed to really fire up the public.

While something like Brexit is clearly orders of magnitude greater in terms of its economic impact, there is a lesson in there for Australian MPs on both sides: destabilising and distracting side-shows are not in the nation’s interest. Policy uncertainty really does hurt the economy – and people feel that in the job market, their employers’ decisions, and the ability to pay the mortgage. Politicians need to learn to control their temptations to indulge in vanity projects, either in policy or in power plays.

Bob Hawke’s wise counsel that “if you can’t govern yourself, you can’t govern the country” is a maxim of common sense that needs to be back front and centre for Australia’s next government after voters pick it on Saturday.

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