One of the key problems of the tight election result and the splintered Senate taking shape is that it looks like the budget deficits of recent years now risk becoming entrenched.
Whoever forms government is going to find it difficult to push ambitious spending reduction programmes through the Senate.
Former Treasury secretary and now NAB chairman Ken Henry says politicians have “proved incapable” of dealing with the economic reform challenges Australia is currently facing, even though voters are aware of the problems. And he suggests today in a column for The Australian that the election result, which showed a continued trend in primary votes leaking away from the major parties, is in part a judgement on that failure.
He notes the list of challenges which the proposals in his suite of tax reforms that made up the so-called “Henry Review” were designed to tackle:
The review… developed a set of pathways to guide a complete overhaul of Australia’s fiscal arrangements to address substantial challenges arising from demographic trends (a fast growing and rapidly ageing population); continuing globalisation and especially the growing commercial importance of Asian giants; digital disruption and opportunities for paradigm-changing digital innovation; climate change and other instances of environmental degradation; and worsening housing affordability.
Henry then goes on to recite a list of challenges which he believes the public wants tackled, but are being ignored by the political class.
Economic historians will tell you that the most compelling reform narrative describes a “burning platform”. That was the narrative that motivated Australia’s economic reform program in the last 15 years or so of the 20th century.
The difficulty with the challenges identified this century is that they are seen as distant. Our political leaders, from their vantage point, appear confident that the platform is not on fire. But it is, and most Australians know it.
Here are a few things most Australians know. They know that the budget is unsustainable and that a government that refuses to address the quality of the tax system is not going to fix the problem.
They know our population is growing at a rate that exceeds the capacity of traditional models of planning, building and pricing access to the nation’s infrastructure and housing. They know that productivity growth will not be boosted significantly without a substantial contribution from economic infrastructure and without further investments in education.
They know that climate change is real and that Australia risks committing itself to a national balance sheet of stranded assets because of its incapacity to sustain rational policy responses.
The full column is here.