Tony Abbott’s mining tax moment

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Can you sense it? Chaos is again engulfing Australia’s political economy. It’s moving fast, faster than politicians can contain it.

It’s a mixture of dying media interests desperate to carve out a partisan niche, a confused and spoiled polity that has been systematically lied to, a political class that is equal portions political bastardry and policy haplessness, and an economy that is on a descending glide path that could get out of control.

It’s a toxic brew that is provoking increasingly irrational responses across the spectrum.

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Tony Abbott has been accused by all and sundry and committing a “Gillard moment” because he’s lied about important policies. But the current environment reminds me more of another, earlier and more tumultuous episode in the recent history of Australian political economy: Kevin Rudd’s mining tax debacle and the outcomes may be similar.

I’m not arguing Tony Abbott is about to lose his job but consider his fate if consumer confidence does not bounce back enough? The other similarities are stark. A newly elected government is setting about imposing serious reform to shore up future budget balances. But in its rush (or political naivete) it has filled the space rightly identified as in need of reform with ill-considered policy.

Affected interests are on the march, mobilising protests and drawing heavy-hitting support from sectional media interests that are inflaming the anger. Opposition parties are moving to blanket block legislation rather than negotiate better outcomes. Arguments on both sides are becoming polarised and irrational in the pursuit of agenda’s other than the national interest. Outlandish claims and the violent yoking of heterogeneous facts is now de rigueur.

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At the bottom of it all, the real soil of economic reform remains not only un-tilled but, as the furor grows louder, it is being salted, guaranteeing that no future politician will return to grow the new policy that we desperately need to prevent worse future outcomes.

That’s the final parallel. The Australian people are again being prodded, cajoled and bullied towards the embrace agenda’s deeply counter to their own long term interests.

Our political economy is broken, perhaps even more so than that of the United States, and S&P is very wise to be warning us and others against it.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.