Why ‘Deregulatory Reform’ Should Not Be A Euphemism for Destruction
Following the ALP winning the March 1983 federal election under Bob Hawke the term ‘deregulation’ has assumed an almost mystical status as a term in Australian public policy. Calls for ‘deregulation’ are almost inevitably associated with reform that will supposedly make Australia economically competitive and by implication, prosperous. It is therefore ironic that the federal leader and deputy leader of the Liberal Party Tony Abbott and Julie Bishop have called for caution with regard to the recent proposal that legislation be passed in the October session of the Commonwealth Parliament that the wheat industry be ‘deregulated’.
This caution on the part of the federal Liberal Party leadership is ironic because it goes against the coalition tendency that was manifest throughout most of the Hawke-Keating era (1983 to 1996) to support ‘economic rationalist’ policies with negative criticism normally taking the form of condemning then ALP governments for not going far enough in implementing purportedly ‘deregulatory’ reform. In the current context the Gillard government might consider being cautious with regard to ‘deregulating’ the wheat industry because such a ‘reform’ might be very detrimental, if not fatal, to wheat farmers in the eastern states.
There may be so-called political ‘hard heads’ in the ALP who think that passing ‘wheat deregulation’ legislation will be politically shrewd because coalition MPs will split over this issue to ensure the passage of this ‘reform’. However, the probable terrible ramifications for east coast farmers of such a ‘reform’ will very possibly ultimately rebound on the federal ALP. Even though such legislation will probably pass as a result of support of Western Australian federal Western Australian MPs voting with the ALP, the coalition will ultimately not suffer electorally due to Abbott and Bishop’s publicly voiced caution for this ‘reform’.
How Purported Deregulation Can Really Be Self-Serving Re-Regulation
In theory ‘deregulation’ is a positive concept because it conveys a freeing up of an economic system so that a private free market can efficiently allocate resources at a fair price based on supply and demand. The reality more often than not of ‘deregulation’ in Australia has been that smaller economic actors are squeezed out due to the economies of scale of more powerful forces. This was the case in the late 1980s and 1990s with regard union amalgamation as smaller craft based union were dispensed with in favour of larger industry based unions.
The ramifications of ‘industrial deregulation’ concerning union amalgamation were de-unionisation helping facilitate a shift to casual employment as manufacturing industries declined. The onset of decreased lower standards and protections was reflected by increased precarious employment and lower wages as ramifications of the weakened bargaining position of employees resulted from union amalgamation.
Lower living standards during the Hawke-Keating era were obscured, and possibly even mitigated, by the Hawke and Keating governments successfully maintaining an incomes accord (The Accord) with the Australian Council of Trade Unions (ACTU). The consequent wage restraint helped ensure low inflation but this positive dividend was counteracted by exorbitantly high interest rates in the 1990s (as high as 20%) as a result of financial deregulation and a servicing a rapidly increasing public foreign debt.
The high interest rate regime, combined with a floating Australian dollar made it very difficult for many farmers in the 1980s and 1990s to service, let alone, repay their loans. A frustrating aspect of the so-called ‘economic rationalism’ of the Hawke-Keating era was that it essentially had bi-partisan support due to endorsement of the federal coalition. John Howard eventually had the political nous to tap into public disillusionment with the ALP’s own neo-liberal policy direction to win a landslide election victory in March 1996.
Howard’s 1996 federal campaign slogan ‘For All of Us’ implied that his government would be one that took into account the impact of government policies on people’s everyday lives. Even though Howard continued with so-called ‘economic rationalist’ policies lingering hostility of many lower income Australians toward the ALP led to the emergence of Pauline Hanson’s One Nation Party. This party siphoned sufficient votes from the ALP to allow the federal coalition to win the October 1998 federal election.
Due to the Howard government’s effective application of a Lasch strategy by fostering fear regarding asylum seekers coming to Australia the coalition was able to garner sufficient former One Nation voters to win the 2001 federal election. The ALP’s failure to win the 2001 federal election put pay to the widespread sentiment within Labor that the coalition’s return to power was an aberration. Ensuing post-2001 turmoil within the ALP, public unease amongst the public toward Mark Latham as Labor leader and growing prosperity enabled the coalition to win the 2004 federal election.
The achievement of higher living standards was a result of the Howard government effectively applying an inflation-neutral Goods and Services Tax (GST) to substantially expand the government’s revenue base. Even though the lowering of tariff levels threatened Australia’s manufacturing sector the terrible economic-social consequences that might have ensued were off-set by the revenue bonanza of the GST being imposed on imports.
Expanded revenue was effectively utilized by the Howard-Costello government targeting spending and, most importantly, by paying off the high public foreign debt of the Hawke-Keating era. This achievement took pressure off interest rates and the instituting of banking prudential controls crucially bolstering the lending capacity of Australian banks which helped underwrite the expansion of a small business employment generating sector.
All might have been well for Australia under Howard and Costello had it not been for this federal government’s aversion to promoting full-time employment. A key carry-over from the Hawke-Keating era was consolidated by the Howard government was the maintenance of high levels of casual and part-time employment. It seemed to be outside the federal coalition government’s ambit of objectives to promote full (or more secure) employment.
This coalition mindset was probably reflective of the perspective that a labour ‘market’ should be weighted in favour of employers by undermining employee rights with regard to wage setting and work conditions. The consolidation of this perspective was consolidated and reflected by the passage of the ‘Work Choices’, sic (No Choices) legislation in late 2005 which placed impossible restrictions on what unions and/or employees could negotiate.
The Howard government’s industrial relations regime combined with the sabotage of rent-seeking Liberals ensured the coalition government’s demise in the 2007 federal election. The ALP’s return to power was apparently a lucky break because a point the coalition’s 2001 election victory possibly marked a point in which a new anti-ALP electoral majority was assembled as a consolidation of the so-called Howard Battlers within the Liberal camp.
Why ‘Wheat Deregulation’ Could Be The Harbinger of Australia’s Economic Direction
With the benefit of hindsight a common ramification of the ‘economic rationalist’ (sic) policies of the Hawke-Keating and Howard-Costello eras was the emasculation of the independent economic actors. This decline of independent actors has since set the scene for current inter-party collusion in pursuit of implementing a rent-seeking agenda.
The paradox of this collusion is that the Abbott Liberals are now allowing the contemporary ALP to undermine independent economic actors, such as Australian wheat growers. This is being done on the correct and cynical expectation that the adverse ramifications of wheat ‘deregulation’ will ultimately electorally rebound on Labor.
The issue of wheat ‘deregulation’ is one where there is a difference between Western Australian and eastern wheat farmers with regard to their independence as socio-economic actors. Following the Australian Wheat Board (AWB) scandal in the 1990s of paying bribes to the regime of Saddam Hussein sell wheat to Iraq, Wheat Exports Australia (WEA) was created as the new agency to assist in arranging the international trade of Australian wheat.
Wheat Exports Australia has fulfilled a vital role in arranging and maintaining supply chains for wheat farmers. As a government agency, WEA has operated within the fine Australian socio-economic and political tradition of statist institutions supporting the viability of smaller organisations for an overall national economic benefit. The most prominent example of this tradition was the role that arbitration fulfilled in endowing craft based unions with the capacity to secure just wages and working conditions for employees in their areas of industrial coverage as part of their effectively representing their members.
Wheat Reform: When Caution is Courageous
The abolition of WEA would be a terrible mistake because wheat farmers in the eastern states lack the capacity to effectively represent their interests as their Western Australian counterparts do. This is because Western Australian wheat farmers own and effectively control the Co-operative Wheat Bulk Handling (CBH). CBH has crucially ensured the continuing viability of supply lines for the purpose of trade/export that in Western Australia. Consequently the wheat sector in Western Australia is effectively self-regulating and the 22 cents per tonne that wheat growers pay a probably an unnecessary impost.
By contrast in the eastern states, wheat farmers are still reliant on WEA to ensure the viability of supply chains, to set and maintain quality standards and generally protect their interests of eastern wheat growers. For this reason these eastern wheat farmers are mostly supportive of the WEA and still prepared to pay the 22 cents a tonne levy. Should the WEA be abolished then eastern based grain handling companies such as GrainCorp and Vitera could well gain a monopoly that destroys the independence of eastern wheat growers.
Cynical rent-seekers within the two major parties (and even some Nationals) may not be adverse to such an outcome on the basis that Western Australian wheat farmers will ensure the continued viability of Australian wheat exports. This is because Western Australian wheat farmers grow and export more than their eastern counterparts. The sabotaging of the capacity of eastern wheat growers will help promote a rentier state by fostering an over-reliance on the mining sector.
It is therefore to be hoped that the Gillard government will follow the lead of Tony Abbott (who is probably insincere as a rent-seeker) in cautiously approaching wheat ‘deregulation’. Julia Gillard could protect the interests of Australian wheat growers as she previously did as Minister for Employment and Workplace Relations when she courageously restored the bargaining rights of Australian employees/unions so that they could be independent actors under the framework of the 2009 Fair Work Act (FWA).
As prime minister, Julia Gillard has since commendably rolled back the onset of a rent-seeking agenda by adopting a Minerals Resources Rent Tax *(MRRT) in place of a proposed a so-called Resources Super Profits Rent (RSPT) and limiting the damage of the carbon price by reducing the companies that have to pay this economically unproductive impost from one thousand to five hundred and not applying this tax to petrol. The scope for Prime Minister Gillard to continue to help the country overcome foisted rent-seeking policies would be enhanced by protecting Australia’s agricultural sector.
(*The MRRT is still a terrible tax because it threatens Australian economic interests by providing an unfair economic advantage to those five iron and ore exporting mining companies that have links to a mercantile Leninist People’s Republic of China, PRC).
The Nexus Between Destructive ‘Reform’ and Rent-Seeking
The need to protect Australia’s agricultural sector is enhanced by the fact that the mining boom has effectively ended. This development is not so much due to the decline in commodity prices but by the Rudd government previously squandering the reserves acquired by the Howard-Costello government during the mining boom. Had these reserves not been forfeited by the unnecessary stimulus packages reputedly applied in 2008 and after as a response to the Global Financial Crisis (GFC) then Australia could have more than adequately withstood the current decline in commodity prices.
The question therefore arises as to why Australia’s financial reserves were really squandered by the Rudd government? The reason was to create the high public foreign debt regime that Australia is now afflicted with so that there would be an over-reliance on a mining sector dominated by the PRC as a result of the infliction of a dud super-profits tax regime. To help facilitate the power of rent-seeking traitors Sovereign Wealth Funds (SWFs) will be created as the economic capacity of the manufacturing and service sectors of the economy are undermined by the infliction of a carbon tax.
Australia is therefore relatively fortunate that the nation is presently immune from a world-wide drought that will (or already is causing) cause steep increases in food prices. The nation has nearly always had an impressive comparative trade advantage due to the high quality of its food be exports be they fruit, meat and vegetables and the superb effectiveness of Australian farmers as food producers. It is therefore imperative that the present opportunity for an agricultural boom to become the new equivalent of a minerals boom is taken.
Unfortunately, where there is the opportunity for economic advancement there will also be a strong prospect for sabotage by rent-seekers within the two major parties. The proposed ‘deregulation’ of the wheat industry is a manifestation of domestic economic sabotage that has always being there since the Hawke-Keating era. The substantial difference is that is the predominant element within the federal opposition that is trying to manipulate a government that has an independent minded leader into pursuing a rent-seeking agenda.
‘Win-Win’: Two Tier Wheat Reform
Another major difference between the Hawke-Keating era and now is that rent-seeking elements within the coalition are now prepared to reap the political benefits of terrible ALP socio-economic policy. But the major antidote to being manipulated by an external force is to maintain one’s independence no matter how challenging the situation. The Gillard government could do this by applying a two-tier approach to wheat ‘deregulation’.
If Western Australian wheat growers really desire ‘deregulation’ then they should be exempted from paying the 22 cents levy and from the jurisdiction of WEA. By contrast, WEA should continue to operate in the eastern states because this government agency is still a crucial support to eastern wheat growers. As Abbott and Bishop have already stated, if there is a need for ‘deregulation’ of the wheat industry and that this should be undertaken with the support and involvement of eastern wheat growers.
The scope for the Gillard minority government to be genuinely consultative exists due to the holding of community cabinet meetings in regional centres in which locals have asked ministers questions. This laudable practice also had the practical benefit in helping the government potentially be ‘grounded’ so that detrimental policies are not applied.
Indeed, as prime minister, (1949-1966) Sir Robert Menzies appreciated the vital importance of his always having independent communication to a broader society that went beyond government parliamentarians and senior public servants. In this context, Liberal Party branches around the nation were vital sources of independent information in which strong and honest key contacts could communicate to the prime minister their perspective as to what the actual situation was.
The then prime minister also utilized his doctor, cleaning and secretarial staff in his department and social acquaintances at the Melbourne Cricket Club (MCC) and the Carlton Football Club to gain a broader perspective as to the actual effectiveness, or otherwise, of his government. Furthermore, the First Lady Dame Pattie always kept her ‘ear to the ground’ so that she could pass messages onto her husband from people who were intimidated by mistakenly thinking that Sir Robert Menzies persona was arrogant.
Why it is Often Necessary To Be Grounded To Achieve A Political Ascendancy
Had Hawke, Keating and Howard maintained contact with people on the ground then they might have retired at the time of their choosing due to their consequent political ascendancy. Being a successful Australian prime minister however is more than just retiring at a time of one’s own *choosing but this is often reflective of a successful tenure. In the current context prime ministerial success or otherwise will ultimately be determined by honestly assessing the impact of government policies by people who are honest and have a valid understanding of what is really happening.
(*When it is all said and done Sir Robert Menzies stands out not only as Australia’s longest serving prime minister but also as the only one who essentially retired at the time of his own choosing. Incredibly these two phenomenal achievements of Sir Robert Menzies were inter-related).
Because the nation is on course to an economic disaster due to the infliction of the carbon tax it is imperative that the Gillard government be ‘grounded’. An important reason why the ALP governments of Hawke and Keating were essentially failures was that they were too narrowly ensconced in the milieu of the senior echelons of the Commonwealth public service. Howard for a time was more successful than his two ALP predecessors because of the political nous of his senior personal staff.
Furthermore, Howard did had a positive personal policy agenda, which he shared with his Treasurer Peter Costello, of paying off Australia’s then massive public foreign debt (which has since been re-accumulated) which gave him a degree of independence from a powerful federal bureaucracy. That is not to say that Howard did not effectively utilize the public service to achieve positive policy as he did in regard to the formulation and implementation of a non-inflationary *GST.
(*There is now pressure from the Business Council of Australia, BCA to increase the rate of GST. This advocacy is part of an agenda of having the Gillard government fulfil the role of being a transitional one that does the groundwork for a rent seeking Abbott regime).
This prime minister also brought his own passions, albeit negative, with regard to destroying states and Australia’s arbitral system of industrial relations, which made him an independent political actor. Nevertheless, Howard lacked the scope (as Sir Robert Menzies did after he returned to the prime ministership in 1949) to have a political base that extended beyond the nation’s political elite to have been as politically successful as Sir Robert Menzies was.
Due to the dynamics of Abbott being the federal Leader of the Opposition Australia’s political elite is now creating a rentier state that will ultimately destroy the nation. If the *carbon tax cannot be rescinded then the Gillard government will hopefully establish close links with people involved in the rural sector to save the Australian economy. Seeking advice and policy input from all Australian wheat growers will be a vital step in the correct direction by the Gillard government serving the nation’s genuine national interest.
Dr. David Paul Bennett is the Director of Social Action Australia Pty Ltd.