Australian Financial Review
16 December 2016
Scott Morrison has given three speeches over the past couple of months setting out of the government’s economic agenda entitled: “Staying the course”.
Critics are wondering: what course?
Fourteen months after he replaced a widely criticised Joe Hockey as Treasurer, Morrison has disappointed some of the people who should be his strongest supporters, including businesspeople, economists and free-market advocates.
Styling himself as a tough, cut-through, sound bite-wielding pragmatist who would drive pro-growth policies, Morrison has failed to formally propose any politically ambitious policies, unlike several of his Liberal and Labor predecessors.
“He has done very little,” says former Liberal leader John Hewson.
“He needs to do more,” says Robert Carling, a former Treasury official who is a senior fellow at the Centre for Independent Studies, a right-wing think tank.
“He has spent far too much time advocating for higher taxes,” says John Roskam, the chief executive of the Institute of Public Affairs, another right-wing think tank.
Morrison’s best shot at making Australians wealthier – and heading off a Trump-style populist backlash – is to reduce government interference in the economy and make taxation more efficient, orthodox economists believe.
Even though Hockey was criticised as an amiable but ill-disciplined government salesman – his quip that poor people don’t have cars or actually drive very far killed a modest petrol tax hike.
And he pushed several politically unpopular changes regarded by experts as good public policy. One was even implemented: an end to billions in long-term subsidies for General Motors, Toyota, the Ford Motor Co. and their suppliers.
Supporters of deregulation hoped the removal of Tony Abbott – who many in his own party perceived as sceptical of orthodox economics – would lead the new government to propose bolder policy change. And as the principal economic minister, the weight of expectations fell on Morrison.
Morrison’s major political achievement is securing parliamentary support for about $6 billion in spending cuts and tax increases, and an agreement to reduce tax breaks on the superannuation savings of the wealthy.
While those policies are an important component of his medium-term goal of balancing the budget – which would deliver the government huge economic and political legitimacy – they don’t please Coalition supporters seeking smaller government and lower taxes.
“It’s arguable whether he’ll ever recover politically from breaking the Coalition’s promise not to increase taxes on superannuation,” Roskam says.
“Many of Morrison’s inclinations are in the right direction. But unfortunately those inclinations haven’t so far been translated into policy. And he’s increased red tape – not cut it. And he’s done very little to reduce the size of government and bring down the deficit.”
Morrison’s office points to a long list of achievements under his name. They include a tax cut for businesses with revenue of less than $10 million, toughening the rules on foreign investment and taxing big foreign companies more, banning high credit-card charges, making the rules easier for financial-technology businesses, toughening the corporate-competition rules and responding to the financial system inquiry led by David Murray, which led the banks to set aside more capital, reducing profits.
These were done “all within the constraints of the previous and current parliaments,” his office says, a reference to Senate opposition. (Morrison declined to be interviewed for this story.
Morrison has one of the toughest jobs in the country. He inherited a huge budget deficit and a Parliament eager to spend and reluctant to save. The fragmentation of the Senate has made negotiating hard.
“The degree of difficulty for a deepening of much-needed economic reform is higher than it has been for some time,” says James Pearson, chief executive of the Australian Chamber of Commerce and Industry.
“The notion of reform fatigue where you are trying to find budget savings is understandable,” says Hans Kunnen, an economist at St George Bank, a unit of Westpac Banking Corp.
Without the support of his boss, Turnbull, Morrison isn’t going be able to take big change very far. Hockey’s abandoned plan to charge a modest fee for seeing a doctor, which was designed to make people value the service more, was recently cited by Prime Minister Malcolm Turnbull as the kind of political mistake he wants to avoid.
With unemployment low and growth high there doesn’t appear to be much community support for change. Following Donald Trump’s election as US president, the Labor opposition in Australia is hinting it will move to the left on economic policy. That could make convincing voters to support change even harder.
Advocates for a more-efficient economy argue that Morrison needs to use his advocacy skills, honed by a career in politics, to lead the public debate. They argue that the economy is more fragile than most Australians appreciate. Most of the new jobs are part time. Low iron ore and coal prices, stagnant wages and weak profits kept growth in national real income low for several years, until the three months ended June 30 this year.
“If Morrison developed a strong economic reform agenda – which included industrial relations reform – and then advocated for it – he could yet go down in history as one of Australia’s more significant treasurers,” Roskam says.
“Too often we see him making the right noises but the actions don’t match what he has been saying,” says Carling.
Costello, Keating comparison
Any substantial changes to economic policy could be years off. In September Morrison said he would ask the Productivity Commission, the government’s independent think tank, to come up with ideas every five years to make the economy more productive.
Other high-level reviews haven’t achieved much, including a review of the taxation system under Kevin Rudd and a commission of audit of the government under Tony Abbott.
Morrison is pushing for solutions to one of Australia’s thorniest challenges: high property prices. Recently he urged state governments to relax rules that restrict the supply of land in cities, a step he argued would make housing more affordable. Another of his priorities is to help Australian companies develop technology for the finance industry.
Observers compare Morrison’s advocacy unfavourably to Paul Keating and Peter Costello, two predecessors. In speeches and in Parliament, Morrison hasn’t developed a compelling narrative about his plans or compelling one-liners that grab the public’s attention, they say.
“His greatest weakness is he doesn’t deal with the facts and he still tries to spin,” says Hewson, who lost the 1993 election proposing bold tax changes.
“‘Everything is rosy and going swingingly,’ he says. The problem in economic terms is that it doesn’t take too long for the data to embarrass you. And I don’t think the uncertainty has ever been greater than today.”
In his second “Staying the course” speech, on September 16 in Melbourne, Morrison laboriously described the current economic and budget environment and listed the government’s spending plans, including $89 billion to build naval ships and submarines, much of it in marginal seats.
“This is the type of the economy that can coax private capital out of its cave,” he concluded.
Today, is it easy to forget how highly Morrison was regarded as an immigration minister in the Abbott government.
Morrison ruthlessly and efficiently staunched the flow of refugees from Indonesia and elsewhere, delivering one of the Abbott’s few big political successes. He was unafraid to offend media outlets, especially the ABC, although he solicited the support of right-wing commentators and broadcasters.
Before the change in party leader, helped by Morrison switching allegiance to Turnbull, it was accepted among pro-Abbott Liberal MPs that he was Abbott’s most likely successor, according to a source with direct knowledge of events.
Today, if Turnbull resigned Morrison would not appear to be the leading leadership contender.
Right now Morrison is concentrating on next week’s mid-year fiscal and economic review, a budget update.
He still has his supporters, in part because there is no obvious other candidate for treasurer among Liberal MPs.
“When you look around the country I still think Scott’s the best man for the job,” says Graham Morris, a lobbyist and former chief of staff to prime minister John Howard. “He is still a family man with his feet planted on the ground, not some airy-fairy economist.”