Article – Pulled every which way

The Australian Financial Review
29 June 2013
Capital idea Brian Toohey
Ideas count a lot more in today’s multi-faceted Coalition parties than in Labor. Which is why Tony Abbott will be pulled a dozen different directions, even if he achieves a comfortable election victory. Although a clear win should help him put his own stamp on the party as a new Coalition prime minister, it will also encourage many parliamentary colleagues to push him to pursue their own passionately held views.
Despite important exceptions, the Gillard government and Rudd’s first one relied heavily on outside advice rather than what remains of the party’s own internal policy processes. After Gillard met US General David Petraeus, his hawkish views on Afghanistan influenced her more than President Obama’s determination to get out. No one in Labor got a hearing. Before her belated embrace of the Gonski report, Gillard said she was “inspired” by meeting Joel Klein, the former head of New York’s mediocre school system. Rudd took his own counsel on issues such as foreign affairs, defence posture, population policy, hospital reform, censorship and so on.
Abbott hopes to run a relatively cautious government in which he listens to public service advice and the electorate’s wishes, as well as his own interpretation of the Coalition’s philosophical framework. But he won’t be able to entirely ignore the wide spectrum of strongly held opinions among his colleagues.
One backbencher recently called for a much faster troop withdrawal from Afghanistan than Abbott wants. Other more senior politicians rejected his support for the referendum to recognise local government in the constitution. Many colleagues continue to oppose his generous parental leave policy and gradualist approach to IR reform.
The Coalition’s philosophical themes of favouring free markets, small government and individual freedom provide little guidance to how it will govern. A passionate social conservatism curbs some members’ commitment to individual freedom. Abbott’s exparliamentary secretary Cory Bernardi combines free-market fervour with warnings that same-sex marriage will lead to demands to endorse polygamy and bestiality.
Unlike Abbott, other Coalition members share the Institute of Public Affairs commentator Chris Berg’s libertarian stand on Edward Snowden’s leaks to journalists about a massive US surveillance program. On Tuesday, Berg accused the US government of wrongly thinking that the former intelligence contractor’s leaks are the moral and legal equivalent of spying for foreign governments or terrorists.
Some Coalition members worry about the interventionist tone of Abbott’s recent proposals to develop northern Australia. The proposals include nominating population growth targets for particular cities and taxpayer support for new dams, apparently with only limited application of the user-pays principle.
The Coalition is also divided over Abbott’s protectionist support for paying billions of dollars extra to design and build warships instead of importing them. There is widespread philosophical opposition within the Coalition to compulsory superannuation, despite its reluctant acceptance of the government’s mandatory lift in contributions to 12 per cent of salaries. A strong view remains that letting people decide how to allocate their income produces better economic and personal outcomes.
Another concern is that compulsory super has artificially inflated the funds management industry to the fourth biggest in the world by restricting the market’s allocation of resources to other sectors.
Shadow treasurer Joe Hockey’s recent statement that a Coalition government may give the economy added stimulus, if needed, to avoid a future recession, discomforted some of his colleagues more accustomed to denouncing government debt.
One shadow minister likes the stimulatory option of converting compulsory contributions to a normal part of after-tax salaries, leaving employees to choose how much they put into super. Apart from being stimulatory, the lower the cost of the tax concessions on super would reduce the budget deficit.
Small government is a particularly vexed issue for Abbott. Eliminating waste will help, but budget support for those who can afford to look after themselves offers the biggest scope for economically harmless cuts. Some Coalition members want scrap Family Tax Benefits Part B, for single-income families, costing $5 billion a year. Others fiercely reject the idea, although many recipients don’t need safety net assistance.
There is ample scope to revise Peter Costello’s expensive decision while Treasurer to remove all tax on retirees’ superannuation income, despite stressing in his Intergenerational Reports that an ageing population will increase the burden on a workforce whose relative size will shrink sharply. Some Coalition members want to expand the tax base to these retirees to fund cuts to marginal rates that act as a work disincentive. Others fear losing “grey” votes.
Labor has left a lot of room to break the entitlement mentality. It even refused to touch the rort that lets retirees with a tax free income of $500,000, or more, get subsidised drugs for one-sixth of the price for minimum wage earners.
Abbott will come under strong internal party and business pressure to fund favoured tax cuts by expanding the GST to health, education and food, and increasing the rate. After overcompensating the losers, the proposed cuts include personal, corporate and state taxes. Cashstrapped premiers also want to use part of the extra revenue to meet voter demands to spend on services. Abbott, having built a reputation for rejecting a “great big tax increase on everything”, would much prefer to leave the GST alone until long after the 2016 election.