Six Impossible Things

(Cross-posted on the ALP blog, which is the place to leave comments.)

In Lewis Carroll’s Through the Looking Glass, the White Queen tells Alice: ‘Why, sometimes I’ve believed as many as six impossible things before breakfast.’

I was recalling this line the other day when thinking about the task faced by Tony Abbott. Here are the six impossible things that the Opposition Leader has to believe before breakfast every day.

Impossibility 1: That a price on carbon pollution won’t change behaviour. Once upon a time, Liberals used to believe in the power of prices. Now, they take a selective approach. When it comes to the effect of the exchange rate on import prices and the impact of income taxation on the price of work, they contend that prices matter. But when it comes to carbon, the Opposition must believe the impossible: that companies won’t reduce their pollution when we put a price on it.

Impossibility 2: That mining companies pay too much tax. In August, BHP posted a $23 billion profit – the largest in Australian history. As the Henry Tax Review acknowledges, Australia’s royalty tax regime is both inequitable and inefficient. That’s why Labor is moving towards a profit-based tax on the minerals that are the birthright of every Australian. It’s only Mr Abbott and his naysaying Liberal-National team who think that mining companies are paying enough tax.

Impossibility 3: That WorkChoices will raise productivity. The current decline in productivity growth began about a decade ago, about midway through the Howard Government’s time in office. In the WorkChoices era, the productivity growth rate continued to fall. As the Grattan Institute’s Saul Eslake pointed out at a conference run by the Reserve Bank of Australia: ‘the workplace relations reforms introduced by the Howard Government under the title “WorkChoices” in its last term in office were not, primarily, “productivity-enhancing”.’ Mr Abbott likes to claim that WorkChoices is ‘dead, buried and cremated’. But it’s increasingly looking like he may pickled his favourite bits before burying the rest.

Impossibility 4: That Australia could’ve gotten through the GFC without taking on debt. When an economic downturn hits, it has two impacts on the budget. First, revenues fall as governments get lower company tax receipts, less income tax, and less GST. Second, smart governments engage in fiscal stimulus – stepping in to keep people in jobs and businesses afloat. In the 2008-09 downturn, two-thirds of the cost to the budget came from lower revenues, while one-third came from fiscal stimulus. In total, we took on debt less than a tenth of national income – a small fraction of the debt loads in most developed countries. When you hear Liberal and National Party members arguing that Australia shouldn’t have gone into debt, they’re not only saying that we shouldn’t have had fiscal stimulus. They’re also contending that when a downturn hits, the government should start cutting back. That’s either an economic recipe for disaster, or just another impossible claim.

Impossibility 5: That Australians are saving enough for retirement. When the Keating Government introduced universal superannuation in the early-1990s, some Liberals denounced it as an unwarranted impost on businesses. Two decades later, universal superannuation has become part of Australia’s social fabric. But in a ‘Groundhog Day’ moment, the Opposition are currently opposing an increase in the minimum superannuation contribution from 9% to 12%. What’s particularly ironic about this is that every member of parliament elected since 2004 are covered by an agreement that sees us receive 15% superannuation contributions. Impossibly, Liberal-National Party members of parliament believe that 15% is good enough for them, but 9% is sufficient for their constituents.

Impossibility 6: That parliament isn’t working. Since the last election, the Gillard Government has passed more than 200 Bills through the House of Representatives and nearly 150 through the Parliament. That’s more than the Howard Government in the same amount of time. At the same time, the Opposition are bereft of policy ideas, and staring at a $70 billion hole in their costings. As the White Queen said to Alice: ‘The rule is, jam tomorrow and jam yesterday – but never jam today.’ Perhaps that will be the basis on which Mr Abbott draws up his next election costings.

Australia can’t afford to be caught in Tony Abbott’s ‘wonderland’ where truth yields to nonsense. It’s time for the Opposition Leader to give up his six impossibilities, and join the conversation about how to build a better future for Australia.

Read more at Andrew Leigh