Can Labor’s social fairness offset its economic unfairness?

You can see where the coming Shorten Government is going to go today in Victoria, via the ABC:

Victoria’s re-elected Premier Daniel Andrews has unveiled his new front bench, with half of ministry positions going to women.

The Andrews Government has become the totemic social progressive regime in Australia. Andrews has done this while the state’s economic model is the complete opposite, absolutely unfair to everyone but the very few:

Victorian living standards are falling at the fastest pace in the country, faster even than WA. It has been happening uninterrupted for nearly a decade and getting worse. It is not all its own fault. But it’s the truth nonetheless. The terms of trade adjustment and the mass immigration model response to it has handed Victoria the weakest wage outcomes in the country over the stretch. Add the extraordinary crush-loading of Melbourne which is killing service delivery across the city and you get the picture.

Yet the Andrews Government just won a thumping new majority. Sure, this was heavily aided by federal Coalition implosion and Gormless Guy. But that does not fully explain it. We must conclude that in the political calculus of Victoria, rising social fairness has been enough to compensate the polity for rising economic unfairness.

Will it work for other governments?

In NSW it isn’t working so well. Partly this is because it is a Liberal Government. Also, the crush-loading of Sydney is more obviously worse with a larger infrastructure deficit to begin with. As well, Sydneysiders are a lot less precious than Melbourne snowflakes, preferring to see the money more than the frills.

For the incoming Shorten Government this question is pressing. It is a big problem given a large schism between its policy agenda versus its rhetoric.

The Shorten Opposition has based its pitch around “fairness” as a way of corralling national disaffection with falling living standards. Its policy platform delivers on this, largely via reform to corrupt tax concessions for property and shares.

But, given the credit crunch underway, these are going to make the ongoing property correction worse and very likely threaten Australia with recession shortly after taking power in May 2019. The obvious response for the Shorten Government will be offsetting stimulus for FHBs and keeping mass immigration strong with RBA rate cuts thrown in. It is doubtful how much this will achieve but even if the adjustment is successfully slowed, what these policy responses will also deliver is intensified downwards pressure on wages and living standards as the economy stalls and the great crush-loading continues.

We must add the very high likelihood that the ongoing terms of trade adjustment will return as China slows and changes as well, making it highly probable that the income recession afflicting the nation’s households will get much worse during Labor’s tenure, though the precise timing is difficult to predict.

None of this need be a fundamental problem for the Shorten Government. It’s reform platform is a structural adjustment that we are dying for and MB supports it wholeheartedly.  If it is explained as a national project of economic repair and competitiveness then the polity will give Labor slack to deliver it, even through gritted teeth. The problem is that the obvious solution to preventing the adjustment from accelerating unacceptably will be manifestly unfair.

Which is where we come back to the Andrews Government approach. The Shorten Government could likewise oversee a rapid escalation of social policy fairness initiatives to offset its crushing economic unfairness. Climate change, gender, sexuality and issues of ethnicity and a republic might all rise to a crescendo to cover over crashing living standards.

This would be a mistake, I think. No other state is as progressive as Victoria, not even South Australia. Moreover, the expectations for the federal government are different and much more economic in focus.

Rather, what Labor needs to do quickly is to drop the fairness narrative and switch to one of mutual sacrifice for economic repair and competitiveness. This could be done by Chris Bowen alone while Bill Shorten takes the fairness high road. Such a rhetorical tension could be constructive and so long as the public is told the truth from some quarter, that we need to deflate and repair the real exchange rate, then the Government has a pressure release valve for the management of its reform program.

If it is not done then Labor will be blamed as living standards deteriorate and what is a thumping majority in May could turn sour very quickly, revitalising a Coalition opposition on its death bed.

Comments

  1. So. Adjusted for inflation the average Victorian personal income is probably close to being back in 90s? Also, I imagine the average per capita disposable income figure adjusted for inflation would be even worse. It doesn’t mean life is worse on every front because technology means some forms of entertainment and other things in daily life might be cheaper. But the essentials of housing and energy, combined with this decline in income, accords with homelessness statistics etc.

      • OK. Missed the fo’ Real in the titles.

        As many others have pointed out. The most obvious issue to add is that housing inflation is not truly captured in the Real figures so on average people are likely far worse off than this depicts – which is bad enough.

  2. The danger is that, with a big win, they overplay their fairness hand because they think they’ve been voted in rather than the other mob being voted out. ie we could see a “fairness” version of the 2014 “lifters” budget.

    They are already heading that way a little with wanting to increase tax rates at the higher end while also increasing the dole. If you chuck in falling house prices and reduced retirement incomes, large cohorts in the electorate will not be happy.

    • Agreed. They and supporters seem to already be interpreting the win to mean people have no concerns about immigration because they have rejected the ‘politics of fear and division’ etc.

      The saddest thing in life is slowly seeing almost NOTHING ever debated thoughtfully or with any nuance and instead just two metaphorical dunces on a see-saw formulating the most trite three word emotion baiting slogans to throw at each other.

  3. DefinitelyNotTheHorribleScottMorrisonPM

    The great thing about fairness is that I get to make it up and then enforce it at gunpoint. This is the only reason anyone gets into politics. It’s an all-round thrill, way better than any lame relations party.

  4. Labour’s social fairness: A house for you , and you, and you, but the rest of you bastards get to live in substandard rental accommodation for the rest of your miserable lives. yep that sounds fair as long as landlords maintain the right to toss you and your family on the street with a months notice for No Reason.
    If the NSW Labour party / movement gave a rat’s about Social Fairness it would have gotten fully behind the recent Tenancy reform process and put an end to No Reason terminations of longer term tenancy agreements.

  5. Social fairness?

    Andrews won because he built more schools, more hospitals and removed level crossings. He went on to promise free dental, and three year old kinder.

    Daniel Andrews addressed economic unfairness not because he addressed social unfairness.

    • Andrews just promised everything for everybody and nobody gives a RA about debt.
      (This is not a defence of Vic Libs – just a fact)
      Debt doesn’t matter at all!!! We’re lucky like that.

  6. The first graph is beautiful. It clearly shows that wages have been shrinking for the past 10 years.

    Atlassian says that is not enough shrinkage and we must have more shrinkage – even though he is a billionaire!

    And Domainfax reveals why a “job guarantee” can not happen:

    ‘Tsunami’ of rail projects to create chronic skills shortage

    https://www.theage.com.au/politics/victoria/tsunami-of-rail-projects-to-create-chronic-skills-shortage-20181127-p50ikw.html

    The same is true of the NBN. Instead of funding “degrees” in basket weaving, the fake left should have trained Aussies to splice fibre optic cables. So the fake left imported 3rd world passport holders to install the NBN – while simultaneously saying (lying) that they want to put Aussies in jobs. Just give out free food at school to reduce poverty and reduce obesity.

  7. Works in Singapore. Poorest class have no hope to elevate themselves, but at least they rotate the election candidates based on race. This is fine!

  8. Meh, the politically powerful left despises the working class poor, as do the Greek gardening greens.

  9. Can’t stand either of the big parties, but not let’s pretend for a second that Labor genuinely care much about social fairness beyond the increased likelihood that such rhetoric increases their chances of being elected. As for their so-called reform platform, I’ll concede it is better than nothing, but is still half-arsed and poorly thought through in many respects. Even a superficial examination should suggest it is not worthy of MBs wholehearted support. It is strongly tainted by political priorities, and we could do so much better.
    In the taxation area in particular, we really need to get the pollies hands off it and subject the whole lot to some independent intellectual rigour instead of the ongoing piecemeal adjustments that incrementally increase the already insane complexity and inequity of tax law in this country.

    As for the prospect of any intelligent debate on the merits of reducing current high immigration levels, Mr Shorten has made clear that he considers that the domain of “political extremists”.