Voting in an economic vacuum

The first winter election in more than 20 years appears to have become an excuse for our political leaders to go into hibernation on the policy front.

Through to the last days of this campaign, there has been little or no serious appetite for genuine economic reform evident on either side of politics, just when we need it most.

This is an abdication of leadership.

At the Committee for Economic Development of Australia, we began warning as far back as February of a disappointing drift in policy directions.

It was as if, having escaped the worst of the global financial crisis, Australians began indulging themselves in the belief the job was done. The shallow, risk-averse nature of this election campaign has confirmed these fears.

Yet if Australia is to deliver a strong and prosperous economy into the future, we need to be laying the policy foundations today. In an uncertain global economic environment, it is vital that Australians very quickly return their focus to the important policy challenges ahead.

While the initial shock waves of the global financial crisis have passed, governments, in the US and Europe in particular, must now deal with the consequences of having taken their budgets much deeper into debt to fund stimulus packages.

Recovery in the north-Atlantic economies has been tentative at best. Unemployment remains high, financial sectors fragile, and budgets in chronic deficit. Capital markets fear the risk of debt default.

These structural weaknesses are constraining global aggregate demand. This is now beginning to have a discernible impact on east Asia's prodigious export sectors.

Australia, as a key supplier, will not be immune from the consequences if the global economy takes another turn for the worse.

Australia went into the crisis with our economy as robust as any in the world, the federal budget comfortably in surplus, the best terms of trade in a decade, and a well-regulated banking sector. Continuing strong demand for resources and commodities in our key Asian markets cushioned the blow to national income and government revenues.

Yet, in a volatile global economy, we cannot bank on our good fortune extending indefinitely into the future.

We need to ask how it was that Australia had built the capacity to ride out the crisis. We need to understand how this strength and success was founded in large part on critical economic reforms of the previous two decades. More importantly still, we need to acknowledge that more work remains to be done to ensure Australia can sustain that prosperity. We can ill afford to be lazy and complacent.

Hence, our disillusionment with the paucity of the policy debate in this campaign. 'What about me?' sectional interests share the responsibility for the torpor that prevails.

In our February Economic and Political Overview 2010, we highlighted the great gains from economic reform through the last quarter of the 20th century – from dismantling tariff barriers, to greater flexibility in capital and labour markets, to opening up competition in the aviation and telecommunications sectors, to the broadening of the tax base.

Importantly, most of these milestone reforms were achieved by governments and regulators adopting sound principles of accountability and efficiency associated with what we call "liberal economic orthodoxy.” The key for government is to establish a reliable, predictable and competitive framework within which people can make their own economic choices in line with their own needs, interests and priorities.

The result has been greatly improved flexibility and dynamism, rising living standards and job opportunities, and an Australia better prepared to compete in the global economy.

In February, we spoke of the critical importance of these same rigorous principles of economic governance now being extended into reform of the key sectors of our national infrastructure, hard and soft – whether broadband or water supply, higher education, public transport or hospitals, the pricing of carbon emissions, or across the many policy issues relating to the changing demographics of our nation and cities.

Last month, CEDA launched a two-year water research project, in partnership with Harvard, Melbourne and Monash universities, to inform the national debate on how Australia can better structure its water supply markets to deliver long-term security of this precious resource.

We will also draw on CEDA's expertise as an independent, non-aligned policy think tank to bring together the best ideas on addressing the challenges of a growing and ageing population. We intend this project to be an antidote to the apparent loss of confidence by Australians in our country's ability to handle growth.

These are not arcane policy debates. They go directly to the heart of how and whether Australian can position itself to remain a strong and successful economy, and society, in the decades to come.

But we need leaders prepared to build the case for ongoing economic reform. We need leaders prepared to argue for the pro-market policies required to exploit Australia's new growth opportunities. And we need leaders with the conviction to see genuine reform through.

David Byers is the chief executive of the Committee for Economic Development of Australia