Would you like wedges with that?

Three toed Sloth.gif

Here’s this week’s effort. Another lamentation on our national loss of vigor in economic reform. I argue that recently its been displaced by the much abhorred ‘wedge politics’. I try to downplay the idea that ‘wedge politics’ is anything special or limited to the Howard Government. Splitting off your opponents supporters and providing them with dilemmas has to be one of the oldest tricks in the political book, and must surely be in any politicians stock in trade.

Still, though I try to convey that, I also suggest that it is possible to rule without focusing on division. I’m a fan of those who try to rule by appealing to unity, (providing this is an appeal to the political centre and not an authoritarian play. I also think that appealing to unity in this way is a more successful strategy for staying in power and getting things done. Then again, we’ll never really know. The sample size isn’t large enough and there’s so much luck in the game.

For the record I think Bob Hawke has been the only PM in my lifetime who didn’t rule by division. Going back before then perhaps Gorton was similar, but it’s a bit before my time.

The contrast that I draw with competition policy at the end of the piece (which occured to me as I wrote it) seems to me to be a very telling one. We are simply drifting round without much idea of where our real economic priorities are. It was one of the features of the Hawke period that there was a really fierce focus on a few economic variables that really mattered at the time.

There is also several mentions of a three toed sloth.

Anyway, here’s the piece.

‘Wedge politics’ didn’t begin with John Howard. It’s the stock in trade of politics itself. The Romans even had a saying for it when applied to military matters divide and conquer. But some politicians have a stronger instinct for it than others.

Unlike Bob Hawke for instance, Paul Keating, was a divisive politician and a master of the wedge. His initiation of the republican debate was an act of vision and political courage, but he and his party could hardly contain their glee once its success had been demonstrated. It enabled them to wedge their opponents between the traditionalist monarchists and the progressive republicans.

While taking credit for the economic miracle produced by a generation of economic reform, this Government’s own commitment to the difficult process of reform seems to have run pretty much into the sand, no longer assisted by wedge politics but somehow supplanted by it.

The Government’s economic achievements can be counted on one hand of a three toed sloth:

  • restoring the budget to surplus;
  • tax reform; and
  • busting up a corrupt union’s stranglehold on the waterfront and increasing labour market flexibility.
  • But guess what? All these reforms were first announced during the very first Howard Government. And tax reform was implemented half a decade ago. No-one would accuse the Government of making tough decisions to shore up its revenue base these days.

    Recently, to fill the awkward silence on economic reform, our Treasurer has developed a special new faux reformism. I was astonished to hear recently that the States were welshing on a deal they’d made to abolish five state taxes.

    These taxes were well worth abolishing, but the idea that the States were ‘welshing on a deal? Well, to put it bluntly I’d call it a big lie. To put it politely I’d call it . . . well a small lie. The states had done nothing more than help undertake to review these taxes in words that assisted the Federal Government save face and get its revised GST deal through the Senate.

    This was also economic reform by wedge. The exercise meets these three objectives (I guess our friendly three toed sloth now has his hands full and is plummeting earthward even as we speak!).

  • while the Federal Government takes credit for driving reform and abolishing the taxes;
  • the states bear the cost; and
  • the States are also constrained from spending their own revenue windfall from Australia’s ‘economic miracle’ on things with higher political pay-off for themselves.
  • All the while the Commonwealth barely lifted a finger to use its own revenue bonanza from the past economic miracle to invest in the next one. It was too busy disgorging cash.

    This technique of reform by buck-passing is replicated deep inside Budget Paper One. Whether its inspired by the Government or just a bit of innocent Treasury Department sermonising, there’s a lecture on reform that calls for “sound cost-benefit analysis” in planning government delivered infrastructure. Well, for State infrastructure anyway. The Federal pork-barelling of the Alice to Darwin Railway is politely ignored cost-benefit analysis predicted it to be the white elephant it has become.

    The document then praises “congestion pricing for infrastructure services”. This would have you paying more to drive through Brisbane or commute to the Sunshine or Gold coasts, especially at peak hour. And if commonsense and overseas experience is anything to go by, congestion would be cut, saving your precious time and temper in traffic jams and generating revenue from which could be funded reduced imposts on car registration or better infrastructure.

    I’ve been advocating this for decades so it’s music to my ears. As well as improving our environment, it would slash our infrastructure shortfall both by increasing its supply and reducing demands on it. After its successful trial in London, Tony Blair has just promised this for Britain’s roads helping Britain move into the position we once proudly occupied as one of the world’s preeminent economic reformers.

    However, though congestion charging is electorally popular, that’s only after it’s implemented. Beforehand people think of it about as favourably as a few unexplained kilos of luggage on their way through customs at Bali.

    So, through the Budget Papers, the Federal Government endorses a bold new approach to reform. But it’s floated, safe in the knowledge that other governments would have to implement it.

    The contrast with previous ‘infrastructure reform’ could hardly be starker. With National Competition Policy, the Federal Government took policy leadership, most of the political flak and added substantial bribes to get the States on board.

    Those bribes were summarily removed by the Howard Government to fund its water reform during the last election campaign. I think the technical term for that is ‘welshing on a deal’. More to the point, to reinvigorate reform throughout our wide brown, infrastructure, skill, and export starved land, we need national leadership not passing the buck.

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    2024 years ago

    Not a bad piece Nicholas, but this is crap:

    “busting up a corrupt union’s stranglehold on the waterfront and increasing labour market flexibility.”

    There is no evidence of corruption in the MUA. On the contrary, it is classically regarded as the union you get when you have classic unionism. Moreover, the union still has virtually 100 per cent coverage, as classic unions do. The idea that this punitive government adventure was linked to consequent labour market “flexibility” is preposterous. This was a severe defeat for the government (thank god) in the totem i/r Howardian contest, and if the conspiracy case had ever been heard, it may possibly a defeat for the government itself for breaking its own laws. You are out of orbit on this point, imho.

    MUA, here to stay.

    Ken Parish
    Ken Parish
    2024 years ago


    Your gibe about the “white elephant” of the Darwin-Alice Springs railway is an invitation to engage in outrageous NT boosterism that I don’t intend passing up. It’s too late now, but an early morning post is percolating in these troppified, essay-marking-addled braincells. You have been suitably warned.

    John Morhall
    John Morhall
    2024 years ago

    Blair governs over a population and infrastructure intensive, physically small island where the incremental infrastructure needs are nowhere near on the scale required in Oz, nor necessarily of the same type so I think that the comparison with Oz is unfair. It has also enjoyed the benefit of some 2000 odd years of prior infrastructure development. Incidental road requirements within WA for example to assist in the economic development of the State’s North West require thousands of kilometres of of hard top. In the UK, a hundred kilometre new road is an unlikely requirement.

    Whereas I have no problem with a user pays basis for intensive infrastructure use in population intensive corridors for Sydney and Brisbane or wherever else, we need better ports, and better access to them over longer distances. The Feds must stump up some of the cash IMO. Infrastructure development has to be a joint responsibility between the Feds and the States. The Darwin Railway was always going to be a hard ask in terms of cost benefit analysis. Does all infrastructure development have to show an immediate economic return? If dedicated to a commercial enterprise perhaps, but if that was the only driving force for infrastructure development, in today’s world of electronic commerce maybe transport and movement of people in many cases are passe (accent omitted as I don’t know how) in any event.

    Dave Ricardo
    Dave Ricardo
    2024 years ago

    Ken, you’re not seriously arguing the Alice Springs to Darwin railway isn’t a white elephant, are you?

    It’s virtually a ghost train. Hardly anybody oer anything rides on it, certainly not enough to justify its existence.

    And this isn’t a bash at little Johnny. Fat Kim supported building it too, on – get this – national security grounds.

    2024 years ago

    ‘The Government’s economic achievements can be counted on one hand of a three toed sloth’.

    I am fairly sure Three Toed Sloth http://www.cscs.umich.edu/~crshalizi/weblog/ can count better than that.

    derrida derider
    derrida derider
    2024 years ago

    “Fat Kim supported building it [the railway] too, on – get this – national security grounds”

    That’s true – and all the more ironic because the traditonal military advice was that an NT railway helps any invader more than the defence. The Brisbane line was actually not bad strategy.

    Joel Parsons
    2024 years ago

    Real taxation reform would involve witholding GST revenues (an expected $38 billion in 2005-2006) from the States, using those revenues to remove the 42 and 47 % tax brackets from the tax system entirely and also allow income splitting among family units.

    Jacques Chester
    Jacques Chester
    2024 years ago


    Freight hauling is up, and the Ghan have added two new services this year to cope with demand.

    It’s a white elephant, but not as big or pale as everyone (including I) expected.

    Nicholas Gruen
    2024 years ago

    What would be good about that Joel?

    Why should removing these two tiers of income taxation come at the head of the queue in tax reform?

    Joel Parsons
    2024 years ago

    I actually think removing the situation where the States depend on Canberra for funding is the most important part of my plan. Removing the upper two tax brackets is good economic policy, but is just one way to return all the excess money collected by the Commonwealth to the people who actually earned it.

    Removing the tax transfer link between Commonwealth and State governments would allow the States to be totally responsible for their own revenue, if need be by raising their own state income taxes, and reduce the ability of Commonwealth governments to use money to play funny buggers with the States.

    It will also mean that heavy spending State governments (many of whose residents never feel the brunt of direct State government taxation) would have to be accountable for their spending, rather than complaining about bureacratic formulas used in Canberra to divvy up the bootie among the States.

    Removing those two teirs of income taxation would increase incentives for Australians to be involved in the thing which feeds us all, the production of goods and services, and would make Australia more competitive internationally as a place for high income professionals to live and work.

    2024 years ago

    My view on the problem of maintaining momentum for reform is that too many people, including the ALP reformers in the 1980s, rubbished the necessary reforms advocated by the so-called New Right. Consequently the people at large were confused about the need for reform and it has been difficult to get widespread understand and support for more of it.
    The support for the wharfies in some quarters illustrated the remarkable capacity of lefties to support people who were effectively screwing other workers, and the economy at large. That is what the strike threat system is all about.

    2024 years ago

    You’re wrong on your last point Rafe, but i’ll count the ways another day.