Ultimately, a new reform agenda is required to help the economy rebound, fire up entrepreneurial energy and drive investment for tomorrow’s prosperity. A growth agenda that is provided not by politicians throwing money at favoured sectors, but by the private sector being freed to invest by being taxed and regulated less.
Newspapers (such as this one) and think tanks (such as the one I head) have long advocated such mantras with mixed success. However, a crisis can force the political system to respond with a big-bang policy reform agenda to get business and the free market moving.
In other words, as Rahm Emanuel put it during a different crisis, here is an opportunity for our leaders to do the “big things we had postponed for too long, that were long-term, [that] are now immediate and must be dealt with”.
Beyond addressing short-term hardship and calming the panic, what should government do?
Simply put, boost business and public confidence with a wide-ranging structural reform agenda to improve the investment climate and liberate risk-taking.
Lower taxes, slash excessive regulatory red tape, reduce adversarial workplace regulation, loosen infrastructure bottlenecks, teach children basic skills essential for higher learning, fix the state-based payroll tax duties and stamp duties on property and, for a trial period, end our compulsory retirement saving system.
Paul Keating warned that Australia risked becoming a “banana republic” unless it transformed itself.
Voluntary super would give individuals far more choice, independence and the option of spending their upfront wages, which would boost economic growth.
Former Labor treasurer Paul Keating. AP
Such reforms would meet stiff political and public resistance. But they would improve the incentives to work, lift productivity, spur a revival in business confidence and competitiveness and strengthen long-term growth and living standards.
History shows a crisis is a good opportunity to implement such an agenda. Every so often, Australia suffers an economic convulsion and everything is thrown into confusion. In due course, a new landscape can be dimly discerned and a new reform plan is prosecuted.
Go back to the mid-1980s. In response to a balance of payments and currency crisis, Paul Keating warned that Australia risked becoming a “banana republic” unless it transformed its highly protected and overly subsidised economy. That gave Bob Hawke’s Labor government an opportunity to implement a radical agenda of tariff cuts, deregulation and privatisation, which laid the foundations for our long boom.
A decade later, John Howard and Peter Costello came to power with the shock of the early 1990s recession still imprinted on the national psyche. That gave the Coalition government the authority to repair the budget and implement a goods and services tax.
In both cases, Labor and the Coalition took the politically brave step of pushing a reform agenda onto a sceptical electorate. The result: Australia moved to an era of sounder policy and more durable prosperity.
However, in the Rudd-Swan era, Australia just rested on the windfall of our China boom. Ever since the political class has essentially settled into the complacency of prosperity.
Now the chickens are coming home to roost. Ultra-low interest rates have just overpriced sharemarkets. And unlike in 2008, we don’t have a budget surplus to help cushion the economy.
All the more reason for our leaders to prosecute overdue reforms that will ensure Australia emerges from the coronavirus contagion in a stronger position. After all, a crisis is a terrible thing to waste.