My article in today’s Fin is over the fold
If there is one word that will be tied inexorably to the Howard government in historical memory, that word is â€˜non-coreâ€™. Indeed the word is so closely associated with Howard, that itâ€™s surprising to recall that he never uttered it. Rather, having ditched a large number of inconvenient promises after the 1996 election, Howard proudly announced that he had implemented all his â€˜coreâ€™ promises. The implication that the broken promises were â€˜non-coreâ€™ was left to the electors.
The process by which Howard came to this point is instructive. In 1975, the Whitlam government had come to grief by sticking rigidly to its platform commitments even when economic shocks rendered a change of course vital. Subsequent governments, starting with that of Malcolm Fraser, learned the lesson too well, becoming increasingly willing to promise whatever was required to win an election, then renege when the election was over.
Howard himself was an early exemplar of the process, when, newly appointed as Treasurer after the 1977 election, he ditched the â€œFistful of Dollarsâ€? tax cuts that had been the centrepiece of Fraserâ€™s successful campaign. Bob Hawke followed suit in 1983, after the convenient discovery that the budget position was much worse than expected. The Hawke-Keating government continued on this path through its four terms in office, on issues ranging from privatisation to the L-A-W tax cuts.
By the time Howard was running for office in 1996, voters had woken up to many of the standard tricks. Howard was asked explicitly what he would do if, as with Hawke, the budget position turned out worse than expected. Howard made the commitment that he would stick to his promises anyway. Once the election was out of the way, however, this commitment was adjusted to apply only to â€œcoreâ€? promises. A couple of years later it was the turn of the GST, which Howard had promised would â€˜never everâ€™ be introduced.
The great majority of the economic commentariat cheered the repudiation of promises they regarded as obstructing the process of economic reform. Many of them simultaneously deplored the deterioration of the policy process in the later years of the Howard government. However, most failed to make the link between the two.
By the end of the Howard years, it was impossible to take any long-run policy commitment seriously. So the only credible promises Howard could make were those that involved lump-sum handouts (like the baby bonus) or immediate interventions to subvert long-term policy (like the Mersey hospital takeover).
The process is continuing with debates over the tax cuts promised by Labor before the 2007 election, and over proposals to privatise the NSW electricity industry, a violation of long-standing Labor policy.
Most economic commentators would prefer a larger budget surplus to tax cuts, and a privatised electricity industry to a continuation of public ownership. But they failed, before the election, to persuade the parties or the voters to adopt their preferred position. In seeking to retrospectively invalidate the outcome of the election, they are willing to subvert democratic processes to achieve their preferred outcomes.
As with the Whitlam government in the early 1970s, changing circumstances may make it necessary to abandon or modify electoral commitments. But that excuse does not apply here.
Itâ€™s true that the economic outlook is worse than when the cuts were promised six months ago. But the risks of higher inflation were evident even then, and were pointed out by critics at the time. And some of the adverse changes, such as the increased risk of a US recession, strengthen the case for tax cuts.
As regards electricity privatisation, the debate has been going on for years, and the advocates of privatisation have conspicuously failed to the carry the public with them. They can scarcely claim that current circumstances, with financial markets in turmoil and proposals for emissions trading in flux, are more favorable to privatisation than they were when the Iemma government was re-elected in 2007.
The Rudd government has rightly sought to reverse the damage to public confidence in political processes inherited from its predecessors, of both political colours. Keeping inconvenient promises, such as the commitment to tax cuts, is an essential part of that task.
The loss of public confidence is even worse at the state level, and particularly in New South Wales. The state Labor government should emulate its federal counterpart and follow the policies on which it was elected.
Who knows? If governments were made to keep their promises, perhaps politicians would be more careful about what they promised.
John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.