John Quiggin | Gillard’s Labor Has Lost Its Heritage


Wayne Swan’s Budget speech opened with a commendation of ‘this Labor budget’ and closed with an invocation of the past Labor governments which ‘managed the transition from a closed economy to an open economy competing in the world.’ But does anything distinctively Labor remain in the Gillard government?

It’s difficult, from a social democratic perspective, to find much to criticise in the 2011-12 Budget. The much-touted cuts turned out to be far milder than predicted (some successful expectations management on the part of the government’s spin doctors!). Most of the savings measures were reasonable enough in themselves, focusing on welfare measures that favored the well-off and on absurd anachronisms like the dependent spouse tax offset.

Unfortunately, it’s equally difficult to find anything much to praise, let alone anything that could be regarded as distinctively associated with the values of the labour movement. The provision of substantial assistance to improve mental health is long overdue, but Tony Abbott took the lead on this issue as far back as the last election.

There are also some useful initiatives to help long-term unemployed people find work. However, as under the Howard government, all such measures come wreathed in clouds of punitive rhetoric. Such rhetoric doubtless works well in the focus groups where it has been tested, but it undercuts any attempt to present the Budget in terms of Labor’s traditional concerns.

The biggest problems, though, are inherent in the government’s overall fiscal strategy of holding growth in public expenditure to 1 or 2 per cent, implying a reduction in real expenditure per person and in the share of public expenditure in national income. In effect, the commitment is to restore the fiscal settings inherited from the Howard government (to be fair, these were little changed from the time when Howard himself took office).

While Rudd was PM, there was a tension between these commitments, and the desire to make substantial changes for the better, exemplified by the ‘Education Revolution’. The tension became even sharper as a result of the Global Financial Crisis, which showed up the limitations of neoliberalism (or in my preferred terminology, market liberalism), and undermined the case for constraining the public sector based on neoliberal ideology. Rudd’s advocacy of a social democratic response to the crisis implied a much more active role for government, and a rejection of the growing inequality associated with an economy dominated by the financial sector.

These commitments were eroded over the final year of Rudd’s leadership and have disappeared entirely under Gillard. Having championed the Education Revolution before her ascension to power, Gillard was quick to drop it as PM. An embarrassing illustration was a Cabinet reshuffle in which the very word ‘education’ disappeared as the department was split into several parts. The nomenclature was hastily modified, but not Gillard’s lack of interest in her former portfolio. As with her role model, John Howard, Gillard is much more comfortable with ‘training’ than with education.

The Budget is, in some sense, marking time. The only real reform likely under this government is the introduction of a carbon tax. But while Labor can reasonably claim a strong record on the environment over the years, Gillard cannot, having forced Rudd to abandon the emissions trading scheme, and herself promised not to introduce a price on carbon. If we get a carbon tax, it will be entirely due to the Greens.

Despite its absence from the list of budget measures, the proposed carbon tax stood, like Banquo’s ghost at the banqueting table, behind a number of the measures announced on Tuesday night. The abolition of the Green Car scheme along with earlier announcements ending the subsidy for rooftop solar photovoltaic systems make some sense on the basis of the government’s argument that these are inefficient substitutes for a carbon price.

But if the government now backs away, or fails to get the legislation through Parliament, it will be left, in effect, with nothing.

The critical importance of the carbon tax was doubtless one of the factors behind the heavy emphasis on regional Australia, also present in more coded form in giveaways targeted at small business ‘ute owners’. The government needs the support of the regional independents, not only on votes of confidence but for the passage of this complex and controversial legislation.

If they can manage this (and Gillard has been remarkably successful in steering legislation through Parliament so far), the prospects for re-election will improve dramatically. The tax will have none of the disastrous effects claimed by its opponents. Its effects will be hard to detect against the background noise of a volatile economy.

Coming back to the Budget speech, it is notable that the reference to past Labor governments went back only to the role of the Hawke and Keating governments in opening up the Australian economy. While Hawke and Keating broadly accepted the neoliberal agenda dominant in the 1980s, they sought to combine it with the commitment to equality and public sector activism that had formed the basis of the Labor tradition represented by previous Labor governments. Hawke regularly invoked Curtin as a personal role model and sought to identify his government with the tradition represented by Curtin and Chifley. By contrast, for Gillard these men, and the socialist or social democratic ideas they stood for, belong to the dead past.

Bizarrely, it’s now Tony Abbott who is invoking ‘the ghost of Ben Chifley’. It’s safe to say that Chifley would not have recognised his ‘light on the hill’ in the Abbott’s opportunistic pandering. But Labor’s all too obvious abandonment of its own traditions and values has allowed Abbott to get away with it.

Perhaps, when the longed-for surplus is finally regained, the Gillard government will finally reveal its true social democratic culture. But it seems far more likely that any post-surplus largesse will take the form of income tax cuts, populist bribes and payouts to favored business interests.

John Quiggin is a CPD fellow and an ARC Federation Fellow in Economics and Political Science at the University of Queensland. He is the author of Zombie Economics: How Dead Ideas Still Walk among Us.