The real significance of the deficit blowout is that, for the foreseeable future, the federal government will not have the money to drive the economy forward. The good news is that the Coalition in opposition realised this, and Andrew Robb as shadow finance minister developed a detailed plan which was pigeon holed when the Coalition came to power. It was the most detailed plan any opposition had ever prepared, so as to avoid what has now happened and lock in continued prosperity.
We need to underline that poor government, first by Gillard-Rudd-Swan and now by Abbott-Hockey, has contributed to the latest deficit blowout and the deep problems of the Australian economy. And the effect of four years of mistakes in Canberra has now been multiplied by the dramatic change in Australia’s terms of trade, which is what Joe Hockey now focuses on. But he also needs to look back at what happened when the Coalition took office.
Robb was ‘sidelined’ to trade and investment -- where he has done a remarkable job -- and that allowed Hockey and Treasury to defer the Robb plan.
In fairness, Robb never anticipated such a big fall in the oil, iron ore and coal prices, but it is still possible to restore Australia to health by going back to the Robb plan.
And because it is so sensible, the Senate will approve most of it. Senate hostility was inflamed because Abbott and Hockey (aided by Pyne in education and Dutton in health) broke their word to the electorate on taxes before the commodity price fall. It’s time to get back to the basics in the Robb plan.
Andrew Robb realised that if Australia was to continue its prosperity it would need two basic elements: a plan to take advantage of the emergence of the Asian middle class and a plan to stimulate the people who will employ future Australians, small enterprises and independent contractors. And government had to be made much more efficient, so there was no need for tax rises (at least prior to the commodity slump). Much of the plan was abhorrent to Treasury, and Joe Hockey went along for the Treasury ride -- it was a disaster. So here are nine points in the Robb plan that ministers should work on over Christmas so they can be introduced as soon as Parliament resumes. If they are too lazy to do the work they should be prepared for Bill Shorten to be the next prime minister.
So here we go.
1. Stop the duplication between federal government and the states in education and health. There is $10bn to $20bn in savings sitting on the table being stopped by Canberra public servants sending it off to committees. Do it.
2. The Murray report set the scene for banks to lend more to smaller enterprises. And the enterprises actually need the investment so their systems and marketing catches up with the cloud, mobile phones, supply chain efficiencies and other technology developments.
I was yarning to NAB’s Andrew Thorburn last week and he is ready to go on the small business front in advance of Murray. NAB does not want to lose any more business lending market share, although he wants to maintain lending standards. I know the CBA’s Ian Narev has the same view, and I am sure the other big banks are also ready. But an essential part of the Robb plan was an end to unfair contracts by large organisations (government and corporate) with smaller enterprises. That change has been put in the too-hard basket because too many Coalition supporters hate the idea, but it will trigger huge investment and employment because it makes loans to smaller enterprises safe for lender and borrower.
3. The taxation commissioner is still disobeying the law in respect to independent contractors because Joe Hockey dithers. Stop it, Joe. The Howard independent contracting rules are good and need to be obeyed. This will lift employment, efficiency and entrepreneurship. Given that big changes in industrial relations are in the too-hard basket, independent contracting becomes vital to our prosperity.
4. We need the university system to be aligned to its future as a supplier to the Asian middle class. Education Minister Pyne was on the right track, but he took money away from the universities at the same time and damaged the Robb vision. I think Pyne knows what to do, but it may require someone else to reinstate the vision.
5. We now have free trade agreements with Japan, South Korea and China. Let’s show some vision and get the investment flowing -- not just in dwellings. You have to sell it.
6. Under the Robb plan the motor vehicle industry was to be given a chance to use robots and supply chain technology to become efficient given the likely fall in the dollar in the wake of the end of the mining investment boom. Joe Hockey’s decision to close the sector at the end of the mining investment boom was bad timing. It’s a very long shot, but Tony Abbott should call the President of Toyota, Akio Toyoda, in Japan and ask if there is any chance of a rethink.
7. Direct action on the environment is a brilliant program and was an essential part of the Robb plan, albeit designed by Greg Hunt. New technology means we can invest to be much more energy efficient in our buildings and in many other areas. The government outlays on individual projects will be small but will kick-start a wide range of short payback projects to make enterprises more efficient in energy.
8. We need investment in infrastructure, but we must involve the states more. Northern development and water infrastructure is vital for our long-term vision.
9. Robb did not foresee the looming gas shortage. It needs to be attacked with vigour.
There is more, but that’s a good start and will help get the economy moving again.