Howard to Step Warily in Pushing Reforms

Worth A Look, Role of Government, Frontier Centre

It is eight months since John Howard’s centre-right Australian coalition was re-elected for a fourth term but it is only today when it assumes control of the Senate that it will reap the full fruits of its unexpectedly decisive victory.

As the first prime minister since 1981 to hold a majority in both houses of parliament, Mr Howard has been given a historic opportunity to push forward with reform.

In the nine years since the coalition’s first victory, the small centre-left parties and independents that have until now held the balance in the upper house have compromised its reforms with multiple amendments, as they did with the sales tax introduced in 2000, or teamed up with Labor to block them. The Senate has rejected proposed changes to unfair dismissal laws, for example, more than 40 times.

Those unfair dismissal laws are now set to be enacted within months. The planned shake-up of industrial relations regulations, if fully implemented, will transform Australia into one of the most deregulated workplaces in the industrialised world. Two decades ago its workplace was arguably the most tightly controlled. The other reform the prime minister has consistently foreshadowed is the full privatisation of Telstra, the telecommunications group, something else the old Senate would not have countenanced. While the enabling legislation seems sure to pass in some form, it could yet prove a battle for Mr Howard’s Liberals because the junior coalition partner, the rural-based National party, is deeply ambivalent about the sale.

With the privatisation of the state’s remaining 51.8 per cent sale set to deliver an A$30bn (£12.7bn, US$23bn, €19bn) windfall, the party, soon to be led by Mark Vaile, a more pugnacious politician than John Anderson, the party’s outgoing leader, will try to extract concessions. Otherwise, the prime minister has been relatively reticent about his plans. The coalition has a long-planned second-tier of reforms such as liberalisation of media laws, including the easing of restrictions on foreign ownership. The lack of a broad agenda is partly because Mr Howard is determined not to be seen to be abusing his new powers or to appear as if he is taking as a given coalition control of the Senate. The chamber’s members are traditionally more independent than those in the lower house and his government had a majority of just one.

“There has been an extraordinary amount of hype generated about what is going to happen on July 1. I’ve read about how democracy as we know it is going to collapse and unbridled, unprecedented power is going to fall into the hands of a power-drunk autocrat,” Mr Howard said last month. “I am not going to allow this unexpected majority to go to my head. That would be disrespectful to the public, and it would disrespect the robust nature of the Senate, even with a coalition majority.”

But the modest plans, says Glenn Withers, professor of public policy at the Australian National University, also reflect the 65-year-old prime minister’s focus on completing his old Thatcherite agenda, centred on deregulating the economy.

Like several other leading economists, he says the government should be putting much greater effort into developing a “capability agenda” to improve infrastructure and education, ease skill shortages and reform the health system, the biggest source of future budgetary pressure.

“We need the government to steer in these crucial areas of investment for the future,” Prof Withers says. “But the coalition is focused on second order issues, tidying up the prime minister’s old agenda.”

This is a matter of concern, say economists, at a time when it is becoming increasingly clear that Australia can no longer rely on the benefits of the deregulation reforms of the previous two decades to sustain growth, uninterrupted for the past 14 years. The economy is slowing, productivity gains have slackened and the country’s share of global exports is falling despite the commodities boom.

Peter Hendy, chief executive of the Australian Chamber of Commerce and Industry, a lobby group, says the priorities should include a reduction in the top rate of personal income tax from 47 per cent, changes to capital gains arrangements, and the abolition of payroll levies that business consider a tax on employment.

This article originally appeared in the Financial Times, July 1, 2005.