Crippled by its crutches

Bookmark and Share Governance & Service Provision | John Roskam
The Australian Financial Review 2nd December, 2011

According to Ralph Norris, overseas investors are worried about the Gillard government. No matter how worried overseas investors are, they should be reassured by one thing. They're not the only ones worried. So are quite a few Australians.

Norris finished up yesterday as the boss of the Commonwealth Bank of Australia. His comment is important, but it would have been more important had he made it while still in the job.

The trouble is that if Norris or any other chief executive of a large public company were to speak their mind, they wouldn't be thanked by their shareholders.

Bank chiefs are especially vulnerable. For as long as banks rely on funding guarantees from government and confront an ever-growing array of regulation, it's not wise for a bank boss to give an honest opinion in public.

And it's especially unwise for bank bosses on multimillion-dollar salaries to give honest opinions.

Just a month ago, fresh from his wins on the mining tax, the carbon tax, and banning the live cattle trade to Indonesia, the leader of the Greens, Bob Brown, was on the ABC resurrecting his campaign for a super profits tax for banks.

"You've only got to look at the way the big banks give their CEOs - Kevin Rudd described them 'obscene' salary packages between $8 million and $16 million a year - to see that they're not short of a shekel" (Why Brown used "shekel" instead of a word like "dollar" or "quid" can only be speculated.)

If foreign investors are looking for reasons to be worried, they can contemplate what happened in federal Parliament last week.

The speaker of the House of Representatives who was widely regarded as doing a good job, was replaced by someone who at best can be classed as unpredictable. What foreign investors would make of what's happened is anyone's guess.

Julia Gillard and Wayne Swan like to compare Australia's economic performance with the rest of the world. It's true that Australia has done relatively well - but comparing us to Europe or the United States is not much of a consolation. At least our Prime Minister has been elected - which can't be said of Italy or Greece.

In the UK this week, 2 million people went on strike to complain about budget cuts. The budget cuts that Wayne Swan boasts of to deliver his surplus are so tiny they won't even be noticed.

And of course, the Treasurer's cuts are not "cuts" in the sense that spending is reduced in absolute terms. The "cuts" simply mean that spending won't increase by as much as the government had initially wanted.

A quick review of how much the federal government has spent annually over the past few years as set out in the government's Mid-Year Economic and Fiscal Outlook released this week reveals that any discussion of "cuts" is ridiculous.

In the year following the election of the Labor government, spending increased by 12.7 per cent in real terms.

Spending in this financial year is projected to increase by 3.7 per cent, then expected to fall by 3.0 per cent before rising by 3.3 per cent.

With cuts and increases swinging around so much it is hardly a picture of an administration in suffering.

According to Norris, what overseas investors fear is Australia's problem is a minority federal government. On this, he's half right. Minority government itself is not the problem. There have been lots of minority governments at the state level and some of those administrations have proved competent.

New Zealand had a minority government before last weekend's national election and they're going to have one again. They don't seem to have had anything like the troubles that the Gillard government has invented for itself.

In Australia at the moment, Julia Gillard is depending on a motley ragbag of Green and independent MPs. What unites that motley ragbag is their temperament, which is anti-corporate, and their willingness to see more regulation as the solution to any problem.

Other than the mining tax, which Kevin Rudd made up all by himself, it's difficult to think of a single policy initiative pursued by Julia Gillard since she became Prime Minister that has not been the result of demands from either the Greens or the independent MPs.

The issue is not minority government. The issue is who a minority government has to rely on to stay in power, then what a minority government has to do to keep happy those MPs who support it.

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