Budget week reveals an appetite for government but not to govern

The federal budget confirms a voracious appetite for government in Australia, but a tepid will to govern. The government wants everyone to “have a go”, but seems reticent to do so itself. It’s like the cricket captain sending in the nightwatchman without facing up to the challenge himself.

Dressed up as a reboot, the budget presents as a capitulation. Once you wrap your mind around the cornucopia of policy reversals, inconsistencies and outright hypocrisies, not to mention the above-trend forecasts, the overarching impression is the government has decided the task of governing is too complex and that campaigning is a better fit.

The result is a hollow and contradictory approach to fiscal management and a slap-dash approach to supporting the structural economic transition Australia needs. This comes two months after Treasurer Joe Hockey told us deficits forecast in the Intergenerational Report would make us fall off our chairs. Now he risks being labelled the boy who cried wolf, backflipping on the Coalition’s raison d’etre for government and its life source in opposition. The “urgency” of fiscal consolidation is stalled at best and abandoned at worst. Treasurer Joe Hockey’s second budget speech stalled his first budget’s ‘urgent’ fiscal consolidation.

All this comes in the wake of a poll indicating 94% of respondents believe Australia “needs a better plan for its long-term future”.

One thing should be obvious: you cannot “have a go” at building the future unless you can describe what it should look like. Let me advance two elements.

We need to enhance public sector capacities

First, Australia’s future requires creative and integrated long-term thinking, within which a strong, active and effective public sector will be critical. Yet the budget confirms the “smaller and more rational government” agenda continues.

The budget trumpets A$450 million in savings from “functional reviews” of the departments of Health and Education and from “efficiencies” in Attorney-Generals and Immigration and Border Security. It has confirmed reviews of another eight departments and agencies including the Department of Foreign Affairs and Trade (DFAT), Treasury, Environment, the Australian Tax Office (ATO) and the Australian Bureau of Statistics (ABS). Having wrung all the “false economies” out of the blunt approach, the government has swapped the sledgehammer for a scalpel.

After years of indiscriminate cuts, a more surgical approach might allow focus on allocative and dynamic efficiency. But surely these qualities cannot prosper in a public sector cut to the bone – not to mention the A$80 billion of cuts to health and education that remain.

There is no consideration to boosting public sector innovation to enhance workforce capacity. There is no awareness of new evidence suggesting 21st-century challenges require a larger, better-resourced and innovative public sector.

The government’s approach ensures a diluted advisory ability within an impotent public service. That a toxic environment for tackling long-term issues like social mobility and climate change.

We need to invest in an ideas boom

Second, Australia’s future does not rest on mining. The next boom will not be a mining boom. It must be an ideas boom.

Yet we aren’t investing in winning ideas. The net result for innovation in the budget was poor: cutting $263 million from the Sustainable Research Excellence program salvaged the Research Infrastructure Fund. Building our creative infrastructure will require catalytic investment by governments and business, a culture of collaboration and a preparedness to fail.

Teaching our kids to code will be essential too. The government’s improvements to the taxation of employee share schemes, along with Opposition Leader Bill Shorten’s call in the budget reply for coding literacy and a $500 million Smart Investment Fund are all steps in the right direction. Opposition Leader Bill Shorten’s budget reply offered a couple of steps in the right direction.

An ideas boom would transition our economy to penetrate global value chains and accelerate the move towards a clean economy. Investment in renewable energy fell 35% in Australia last year (it fell 88% in investment in large-scale renewable energy) despite rising 17% globally. Bizarrely, the only double-dissolution election trigger the government has is its bill to abolish the Clean Energy Finance Corporation, which is forecast to return money to the budget at double the five-year government bond rate.

This is not a “dull” and do-nothing budget. By continued acts or deliberate omissions the budget undermines long-term policy development and credibility. Our contributions in foreign aid are cut again by $3.7 billion over the next three years, diminishing our influence in the region and making us more vulnerable to the butterfly effect of poor development.

Bulging ‘too hard’ basket is jeopardising our future

Make no mistake: the largest deficit Australia has is between the conversation we need to have about the future and the one we’re having.

Small-target politics is a far cry from what Australians want: effective long-term policy solutions infused with values as well. Most of us understand tough decisions must be made about our economy, democracy and society. Our luck hasn’t run out. It might if we can’t separate real issues from imagined ones.

The knowledge-action gap is as tragic as it is mesmerising.

Australians have much to be proud of but certain facts should concern us. We don’t take climate change seriously. We rank last in the OECD for collaboration. We punt more than twice as much each year on the Melbourne Cup as we do on technology start-ups.

Indigenous Australians comprise over 25% of our adult prison population but just 3% of our total population. Nearly nine in ten Australians live in cities, yet we have no national cities policy. Wage growth is the lowest on record. Unemployment is predicted to climb.

And, yes, Australia does have a structural budget deficit. But there are pathways to correct it, including by rebalancing taxes and concessions on wealth, capital, labour, land, emissions and consumption. An informed debate about debt financing might help too.

This budget confirms fiscal consolidation has joined other policy challenges in the “too hard” basket. That leaves us with a grab bag of politicised and capricious policy initiatives that pick around the edges, often ineffectually.

The budget attempts to fix childcare without focusing on the child. It tries to foster “fairness” in paid parental leave by discounting hard-won gains of mothers from employers. And it persists with poorly targeted and extremely costly superannuation concessions.

Former Labor frontbencher Bob Carr used to say the US was “one budget deal away from banishing talk of American decline”. Australia is too if she can deal boldly with the issues above. Clear goals and incremental reforms to outlast political cycles would allow us to make the future we want and renew Australia to thrive in the 21st century.

Australia must do more than survive until stumps. It’s time to call back the nightwatchman and set ourselves up for the long term.

Travers McLeod is CEO of the Centre for Policy Development, an independent, non-profit and non-partisan policy institute.