Updating the Australian Settlement

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The Australian federation started with a set of generally (but not universally) accepted policy principles, which with a historical perspective Paul Kelly has called 'The Australian Settlement'.

While precise definitions of the Australian Settlement differ, Kelly has distilled five elements: White Australia, Industry Protection, Wage Arbitration, State Paternalism and Imperial Benevolence.

A century on, we can look at these principles with the clarity and moral righteousness that is conferred by the vantage point of hindsight. But the underlying values they expressed were enduring. Those values were fairness, decency and respect – values which (unsurprisingly) dominate the discussion in this policy forum.

These were more than pious or idealistic notions. There was a clear vision of an Australia that would become something richer than a plantation or extraction economy. It was to be built into a fully-developed nation. All jobs were to be dignified jobs, paying decent wages. The White Australia Policy had its racist supporters of course, but it was also supported by liberals who did not want to see an underclass of poorly paid rural and domestic servant workers – a rejection of Ricardo's 'iron law' of minimum wages.

While few held to the romantic notion of a classless society, there was the practical aspiration of freedom from class struggle. There was a strongly democratic sentiment in the Australian vision, involving equality of opportunity (particularly through 'universal, secular and free' education), and equality of respect. Don Aitkin picks up on this last theme in his contribution on the meanings of equality. In the less formal language of the time, Lawson hailed those who 'call no biped lord or sir'.

Australians might live in bigger or smaller houses, but the tradesman would come to the front door, the business executive would ride in the front of the cab, the worker and the capitalist would share the same collective services. There would be inequality, but it would not be degrading or permanent.

Social mobility, which Fred Argy warns is now under threat, was an integral part of the vision. Entrenched privilege was not to be tolerated; Australians were repulsed by the Old World images of a wealthy indolent rentier class and an entrapped underclass. Indeed, Australia's very history had demonstrated that the poor and rejected, given an opportunity could build a decent and civilised society.

There were costs in adopting the Australian Settlement. Although Australia was enjoying strong growth it could have enjoyed even stronger growth, for a time at least, had it adopted a more laissez faire approach – free trade, unregulated wages and open immigration to provide cheap rural labour. In the 1977 Eliot Janeway Lectures on Historical Economics at Princeton University, the Nobel Prize winning economist W Arthur Lewis pointed out that at the turn of the twentieth century the world's two leading prosperous countries at the time, Australia and Argentina, chose different paths to development. Argentina chose the laissez faire approach involving specialisation in agricultural products in line with its comparative and natural advantages; Australia opted for a broadly based economy which would spread the benefits of economic growth.

History shows we made the right choice. While the underlying values remained intact, the Australian Settlement developed and changed. Imperial benevolence became irrelevant in 1942. The 1945 White Paper on Full Employment articulated old principles in new ways. In time White Australia was to give way to multiculturalism and tariff protection was seen to have served its purpose but to no longer be an effective policy.

Perhaps the main virtue of the Australian Settlement is that it did not attempt to separate out the 'social' and 'economic' spheres of life. There was no notion of any trade-off; the test of economic policy was whether it contributed to or detracted from accepted social values. It was not anti-growth, but it did accept that growth had to have an ultimate social purpose.

Now, however, there is not even an updated Australian Settlement. Tony Abbott put it plainly when, foreshadowing the Government's changes to industrial relations, he proudly stated that he was kicking away the last pillar of the Australian Settlement.

Into this policy void has come a set of disjointed, unconnected ideas – which I have heard one prominent public figure describe as 'faith-based policy'. Des Griffin refers to 'beliefs dressed up as facts'. Argument and evidence count for nought; rather we are told we must accept the tide of fashion and inevitability: citizens are out, customers are in; public investment is out, private provision is in; governments are out, markets are in. (Eva Cox's contributions list these and many more fashionable beliefs.) This form of political persuasion is not new of course; communists and fascists alike have used the notion of historical inevitability as justifications for their foul practices and the suppression of dissent.

Those who dare appeal to our traditional values are dismissed as being out of touch with the new realities. 'Move on' is the command to those who seek to restore the values of fairness, decency and respect into the political debate.

This is why the way we articulate values and principles is so important; the language of the message must be contemporary. The Howard Government is adept at using language which resonates with Australians' values, while adopting practices quite contrary to those values.

To take the example of welfare, Fred Argy correctly points out that Australians are unenthusiastic about 'passive redistribution'. The present government uses terms like 'self-reliance' and 'individualism' in an appeal to this sentiment. The reality, however, is that over the last twenty years Australia has developed a massive welfare system to compensate for the economy's inability to provide well-paid jobs, largely a consequence of decades of inadequate public investment in education and infrastructure. And this is not to mention the new forms of corporate welfare applying to the financial sector, health insurers and infrastructure owners, that are coming to dwarf the more measured assistance that was given out in the days of tariff assistance; or the forms of welfare for the idle rich, such as generous capital-gains concessions for speculative profits.

What we read from contributors to this policy forum is not a demand for an even larger welfare state; rather it is for a nation which invests in its physical, human, institutional and social capital so as to reduce the need for welfare dependence. That's an enduring value of the Australian Settlement, as valid now as it was in 1900.

For those seeking to update and restore the Australian Settlement I commend the work of Macgregor Duncan, Andrew Leigh, David Madden and Peter Tynan Imagining Australia: ideas for our future (Allen and Unwin 2004). Like the contributors to this forum, they too are calling for a new Australian Settlement, but one which draws on traditional values:

We believe strongly that the Australian ideals of egalitarianism, mateship and the fair go should not now be discarded as the quaint characteristics of a distant era. Our nation must not be allowed to become a society that accepts entrenched disadvantage and that tolerates diminished communities. Instead, we should aspire to become an inclusive, multicultural nation in which a high standard of living and quality of life is shared by all, and where none of our fellow citizens is left behind.

Those who read this work will find it brimming with well-reasoned ideas; no reader could possibly be expected to accept (or reject) them all. To paraphrase the authors it's about how we can rework and update our old values and traditions into something relevant for our times – for a "generous and modern Australia" to quote John Menadue – a fitting task for CPD contributors.

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