The author during his recent visit to Australia with Tony Abbott.
by Owen Paterson
I have just returned from a week in Australia talking to a wide range of people, and found that recent criticism of Tony Abbott by some right-wing British commentators to be wide of the mark.
Abbott came to power 16 months ago at a critical juncture. After more than 20 years of uninterrupted growth, the lucky country’s run of good luck was ending.
As in the UK, the Labor government had managed to go on a credit-fuelled spending spree. In Australia this was during the nation’s biggest ever mining boom, when exports were enjoying the highest prices relative to imports in the nation’s history.
When Labor came to power in late 2007, the federal government had no net debt and $50 billion in funds. After six years, Labor had run up a debt of $240 billion, the fastest fiscal deterioration of the 29 advanced economies studied by the IMF. Government debt – state and federal – trebled, rising from just shy of 10 per cent of GDP in 2008 to almost 30 per cent in 2014. In addition, Labor locked in new unfunded spending, with future deficits totaling $123 billion over the forward estimates.
As a result, Australia is borrowing more than a $1 billion a month or $100 million dollars a day. Worse, the boom is now going bust. Prices for Australia’s single largest export – iron ore – have fallen by more than 50 per cent and the price of wheat has fallen 20 per cent, resulting in falling tax receipts.
Abbott campaigned on a platform of ending Labor’s waste, and despite the fact that he never enjoyed high personal approval ratings was elected to government with one of the largest majorities in recent history.
Far from a fickle public flinching at his tough border protection policies, his stance on illegal immigration still enjoys high levels of support. Similarly, his policies on climate change have not changed and have not caused him grief in the polls.
Rather, his fall from grace with the electorate has come about because of the tough stance he has taken to put the government’s finances in order.
To get back to surplus, the government needs to cut some $65 billion a year for the next decade. Yet expenditure on health, education, welfare and old age pensions are all increasing much more rapidly than the inflation.
It is very easy to be popular when you are handing out other people’s money, as Kevin Rudd, Abbott’s Labour predecessor as Prime Minister, did. It is much harder to try, as Abbott has, to cut, or just cut back the growth in government spending.
On top of this, Abbott’s ruling Liberal National Party Coalition has been held hostage in the Upper House to a motley collection of right and left wing populists. So it is no surprise that Abbott is unpopular. His party has been languishing in the polls ever since he brought down his first painful budget.
Yes, he has made mistakes. For example, Abbott unilaterally committed his party, several years ago, to one of the most generous paid parental leave schemes in the world. While this was never popular with his base, it became a major liability once his Treasurer had promised to cut back existing benefits and end the age of entitlement. Abbott was too slow both to craft a more modest policy and to axe the scheme entirely.
The introduction of a modest fee to see the doctor was also deeply unpopular on the Left, while earmarking the revenue raised to put into a major medical research fund infuriated right-wingers who wanted it to pay down debt.
Hence the paradox of Abbott’s budget: while parts were tough and not always well thought out, or well defended, other parts cut across that message, allowing it to be caricatured as both mean-spirited and extravagant.
Yet, in only 16 months, the Abbott government has also had some notable achievements. It has signed free trade agreements with three of its major markets – China, Japan and South Korea.
There have also been signs that the economy is picking up, with jobs growing at triple the rate they did in 2013 and GDP growing at 2.7 per cent up from 1.9 per cent a year earlier.
Abbott has survived the spill motion that threatened his leadership, and his team is now working hard to deliver a budget that will put the country on a credible path to surplus without causing households too much pain. It is an almost impossible task.
But even if Abbott can craft a Goldilocks budget that is tough, but not too tough, he will need to get it through the Senate. Given the Labor party is in denial both about its fiscal profligacy and the need to cut expenditure – and securing support from the cross benches is like herding cats – they have a tough job ahead of them.
Far from being a dangerous right-wing populist, Abbott is polling poorly largely because he has refused the populist path of simply kicking the debt and deficit can down the road. Confronting the same daunting task of getting public finances in order that governments face throughout the industrialized world, he has been a little too courageous, in the Yes Minister sense of the word.
It is easy for right wing commentators to sneer from London. But what Tony Abbott and the Liberals are attempting to do – recovering from a massive deficit built by a Labor government in boom years – is hugely in the interests of Conservatives back here. It is a daunting task, but I was struck by the determination in Abbott’s team to get this done, to learn from mistakes, and the significant backing they enjoy should not be underestimated here. They deserve the strongest support from Conservatives in the UK.
Owen Paterson is a former Environment Secretary and is MP for Shropshire North.