AFR should shut itself to boost the reform it craves

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From its editorial today:

On one measure, real per capita incomes have fallen more than 6 per cent since peaking five years ago to even be below the levels just before the 2008 global financial crisis. At yesterday’s Melbourne Economic Forum, economic modeller Janine Dixon suggested that a slightly different measure of per capita income would not return to its mining boom peak until 2018 at the earliest.

By any measure, Australia is in the middle of a decade or so of stagnant to falling incomes. After our China boom shielded us from the GFC, this is now drawing Australia into the global wave of political populism so spectacularly embodied in the US by Donald Trump but also by Bernie Sanders. The end of Australia’s resource development boom and the commodity price boom has exposed the economy’s poor productivity performance: the ultimate driver of material prosperity. There has been no genuine or lasting productivity-enhancing policy reform since John Howard’s GST-based tax reform in 2008. Yet the political class showed little appetite during the election campaign for policy measures to sharpen the incentives to work, save and invest and hence start growing the economic pie again. To the the contrary, Labor and Bill Shorten used the campaign to assure Australians that they could keep spending more taxpayer money because they wouldn’t adopt the Coalition’s modest growth-enhancing company tax cut.

The truth is that serious economic reform – budget repair, tax reform, workplace reform and so on – will be required to revive the income growth return needed to fund health, education and disability services. Without this, the policy vacuum increasingly is being filled by populist and protectionist snake-oil that will itself inevitably fail to do the job.

It’s true. The nation needs reform. A lot of it. The Great Australian Income Depression is unprecedented:

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Before it is over, The Great Australia Income Depression will very likely perform worse than the US Great Depression.

Back to the AFR and its righteous reform agenda, what prevents the kinds of policy change that could accelerate our way through the shakeout is that reform produces losers, nearly always rent-seeking losers, so they fight it tooth and nail. They do this through various means, the two most important of which are direct lobbying of policy-makers and through controlling the national discussion by manipulating obtuse, corrupt or ideologically sympathetic journalists. This kills reform in its infancy because there is no independent political forum (nor mindset eventually) in which the necessary changes can take root, so even well-meaning politicians are swept along the policy paths of least resistance of offending the least number of interests possible.

As you can see in the above editorial, although the problem is nicely described, the blame ascribed for the failure to find the solution is very obviously partisan. Not only is there no mention of the fact that the Turnbull corporate tax cut was condemned by the vast majority of reform-minded economists that surveyed it, and that the Howard GST reform has mysteriously shifted forward in time to 2008 from 2001 to make it appear more fresh, there is pointedly no mention of the Labor policy to scrap negative gearing, which was the single largest productivity-boosting reform mooted in this country in thirty years.

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I’m not going to argue that the ALP was proposing the kind of reform agenda that Australia needed more broadly but if you’re going to simplify stuff then Labor’s marquis productivity reform policy was far superior to than of the Coalition.

I wish I could say that some nut job is clearly writing the AFR editorial these days and soon enough he’ll be discovered and put to rest. But I can’t. The editorial represents the paper’s point of view on all things and its partisanship, as well as support for big end town rent-seekers is very consistent, thus rendering the paper one of the largest roadblocks in the nation to the very reform that it purports to champion.

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.