How will we measure the 'Abbott miracle'?

The new government has a lot to live up to. Living standards maintenance, foreign policy and investment, and infrastructure will be the key areas to watch.

The Abbott government is certainly doing its bit for confidence, talking up some grand plans and plotting a course to growth in defiance of the ending of the mining construction boom. 

But what will be the measure of this government’s success? How will we know if they’ve pulled off one of the great turnarounds in Australia’s history?

Firstly, maintaining living standards at their current level will be a success – the main thing will be avoiding a decline in real incomes and personal wealth as the dollar falls and long dormant industries struggle to regain growth. 

Income distributions and poverty will also be watched closely by charities, unions and the Australian Council of Social Services. Movement and fluctuation is okay, social collapse is not.

As a nation we are in a precarious position, with very high levels of private debt that must be serviced by jobs growth in industries that are, at present, uncompetitive.

A new report from Deloitte has identified six industries that it thinks will grow around the world in the years ahead, with Australia potentially seeing strong growth in five of them – agriculture, gas, tourism, education exports and wealth management (the other sector, healthcare, won’t be an export industry).

These are not too far from the Coalition’s ‘five pillars’ vision for the economy, which is based on manufacturing, agriculture, services, education and research, and mining.

The big mismatch between the two lists is manufacturing. At present the Coalition thinks car manufacturing will likely wither, but leave in its wake a highly successful components manufacturing industry that will take its place in other nations’ supply chains. 

There are other manufacturing opportunities. The steady and miserable erosion of food processing may be reversed as the dollar falls further. Deloitte expects the Australian dollar to trade at around 80 US cents in the long term, which in turn could see a lot more value added on-shore for the growth sector of ‘agriculture’, rather than simply exporting bulk commodities. 

And this brings us, in a way, to a second yard-stick of success: will Australia maintain something like the diplomatic clout and self-determination of a ‘middle power’ in our region? 

Tony Abbott’s announcement that he will conclude a free trade agreement with China is welcome, but putting a 12 month time limit on that process is foolish. It’s a bit like haggling to sell a second hand car and saying “I won’t take that low price, but it will be sold by the end of the day”. Smart buyers, in that situation, withdraw their previous offer and make a lower one. 

Abbott is facing silent, but seething dissent from Nationals senators who worry that he will allow more large agricultural properties to be sold to Chinese interests without proper scrutiny. Raising the dollar value of transactions of the Foreign Investment Review Board would help clinch the free trade deal, but could cut Australian farmers out of the export boom to China. 

So when added to the ‘boats’ issue that Abbott made one of his core promises to the Australian people over the past three years, ‘sovereignty’ more generally will be a measure of his government’s success. Australia needs foreign investment to prosper, but throwing away middle-power status to achieve it – effectively saying ‘it’s all yours!' – would be a measure of failure. 

The third measure of success will be in nation-building infrastructure (Gear up, Hockey – it's time to get on the roads, October 1). Today’s papers are full of stories on two main issues in this regard: the potential for asset privatisations at both federal and state levels to fund further publicly built infrastructure, and the potential to use the government’s AAA credit rating to assist private investment in much-needed infrastructure. 

The Howard government had a poor track record in this regard, but Abbott has come to power promising to be remembered as an “infrastructure prime minister”. To do that he must shake off Anthony Albanese’s largely correct assessment that the Coalition: “talks infrastructure, but doesn’t do infrastructure”.

Three years hence, a country with virtually the same standard of living; with resurgent industries to replace mining; a greater, not lesser sense of its standing in the world as a middle-power and productivity gains from real nation-building projects (however funded) would be a great success. A miracle almost. 

But that’s what the early days of the Abbott government are promising. For now, let’s just hope there is real substance behind those promises.