{"id":9547,"date":"2014-09-05T13:01:26","date_gmt":"2014-09-05T03:01:26","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/BTOpinion\/?p=9547"},"modified":"2014-09-05T13:01:26","modified_gmt":"2014-09-05T03:01:26","slug":"abbotts-first-anniversary","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2014\/09\/abbotts-first-anniversary\/","title":{"rendered":"Abbott’s first anniversary: open for business, closed to real reform"},"content":{"rendered":"

Richard Holden<\/strong><\/p>\n

In his victory speech on election night last September, Prime Minister Tony Abbott declared Australia was \u201cunder new management and \u2026 once more open for business\u201d.<\/p>\n

There were, of course, specific promises such as repealing the carbon and mining taxes, balancing the budget, and building lots of new roads. But the \u201copen for business\u201d line foreshadowed a broad increase in confidence in the economy.<\/p>\n

In terms of confidence since then, there has been little good news about the economy \u2013 and some bad, especially regarding unemployment. The Westpac-Melbourne Institute consumer sentiment index is 10.8% below its post-election peak.<\/p>\n

Treasurer Joe Hockey has told us there is an imminent debt crisis, but can\u2019t persuade parliament to pass all of his budget. Minister for Trade and Investment Andrew Robb has said budget blocking puts Australia\u2019s credit rating in jeopardy.<\/p>\n

The confidence of those receiving family tax and other benefits has been shattered, as has the confidence of those of us who are happy to see our tax dollars spent to make real the promise of opportunity for those less fortunate \u2013 a promise that has always been at the core of Australia\u2019s social compact.<\/p>\n

I get it: the first step to recovery is recognising that you have a problem. But so far the government seems to have scared global financial markets a fair bit, but not scared the Australian public and their representatives enough to do anything about it.<\/p>\n

And that\u2019s largely because we don\u2019t have an imminent debt crisis. We have a long-term structural budget problem caused by an ageing population \u2014 a problem shared by most OECD countries.<\/p>\n

Yet, despite the dramatic rhetoric, nothing has been done to address the structural problems. To say the least, this is not great \u201cexpectation management\u201d.<\/p>\n

A major election promise was to repeal the carbon tax \u2013 legislation that was passed last month. It remains to be seen whether the so-called \u201cdirect action\u201d policy on climate change will be implemented, but this is one area where business is certainly happy.<\/p>\n

And why not? Under a carbon tax or emissions trading scheme businesses pay if they pollute. Under direct action they get bribed not to pollute. It is, however, clearly bad policy for the economy as a whole \u2014 a fact that everyone except hardcore climate change deniers acknowledge.<\/p>\n

Abbott aspires to be known as \u201cthe infrastructure PM\u201d. But investments of the type Abbott promised take a long time \u2013 even to start \u2013 so it\u2019s too early to tell whether he will be remembered as he wishes to be in this respect.<\/p>\n

If we can glean anything, it comes from the yet-to-be-passed federal budget with nearly A$60 billion in infrastructure projects. Abbott has pledged that these and other projects will be subject to \u201crigorous cost-benefit analysis\u201d.<\/p>\n

If so, that\u2019s exactly why some of them might not happen. As an economist I can hardly be against weighing up costs versus benefits. But costs are usually pretty easy to quantify (how much will it cost to build \u201cX\u201d); benefits, not so much.<\/p>\n

Projecting how much traffic flow there will be on a road is not so hard, though tell that to AMP which is suing its consultants over forecasts of Lane Cove Tunnel traffic flows. Projecting the benefits of genuinely new types of infrastructure is much harder.<\/p>\n

What\u2019s the economic benefit of really fast internet access? It\u2019s tough for even the most seasoned consultant to know what to put in the line in the spreadsheet that reads \u201cstuff we never even knew it could be used for\u201d.<\/p>\n

So, paradoxically, Abbott\u2019s legacy as \u201cthe infrastructure PM\u201d may actually involve not being so wedded to standard cost-benefit analysis, but being prepared to take an educated guess about what a country such as Australia will need to face the economic challenges of the coming years.<\/p>\n

On the mining tax, unlike many economists, I give the government some credit. Although there are intelligent arguments that those who benefit from digging up Australia\u2019s natural resources should pay a good chunk for it, the mining tax was designed as a \u201csuper profits tax\u201d.<\/p>\n

If that sounds like the last refuge of banana republics that\u2019s because it basically is. \u201cYou foreigners are stealing our future.\u201d That is, at best, a cheap caricature of the Australian mining sector.<\/p>\n

I\u2019m still yet to hear a coherent definition of what a \u201csuper\u201d profit is and how exactly it differs from an \u201cacceptable\u201d profit. Oh, and the mining tax didn\u2019t raise any money, either. It was a bad idea, poorly executed. It\u2019s good to see the back of it.<\/p>\n

The Abbott economy at year one doesn\u2019t look terrible. But it doesn\u2019t look great, either. Unemployment is up, growth is flat, and confidence is down.<\/p>\n

For Australia to really be \u201copen for business\u201d at year two will require a year ahead with: less scaremongering about non-existent debt crises; fewer ad hoc taxes such as the so-called debt levy and the 1.5% tax on the top 3000 companies; and no more draconian cuts to lower-income families struggling to raise kids and get ahead.<\/p>\n

Richard Holden is a professor of economics at UNSW Australia Business School. A version of this post appeared on The Conversation.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Richard Holden In his victory speech on election night last September, Prime Minister Tony Abbott declared Australia was \u201cunder new management and \u2026 once more open for business\u201d. There were, of course, specific promises such as repealing the carbon and mining taxes, balancing the budget, and building lots of new roads. But the \u201copen for […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12809,12696],"tags":[],"class_list":["post-9547","post","type-post","status-publish","format-standard","hentry","category-economics-2","category-public-policy"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/9547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=9547"}],"version-history":[{"count":2,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/9547\/revisions"}],"predecessor-version":[{"id":9549,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/9547\/revisions\/9549"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=9547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=9547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=9547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}