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.
