Has Julia Gillard's Time in Power Ruined Australia's Economy?

Prime Minister Julia Gillard’s Labour Party (ALP)-dominated coalition Government of Australia has clung to power without an express public mandate since the August 21, 2010, House of Representatives elections. This has been largely because its parliamentary majority has been guaranteed by four independent parliamentarians and one member of the Greens party, all of whom recognize that they would be unlikely ever again to gain a position of power and vote with the ALP to preserve their privilege for as long as possible.

Thus, Ms Gillard has been able to avoid being voted from office. Even her colleagues privately agree that when (not if) she falls, the Australian Labour Party has been so damaged by its extreme ideological politics that it was felt unlikely that the party would see office again for another decade.
Ms Gillard has, however, sought to achieve two things: firstly, a new budget designed to give her a fighting chance at the next elections (scheduled for 2013 unless the Government collapses earlier); and secondly, to make some changes “on the ground” which would reinforce government control over the economy and political expression, by being able to, essentially, eliminate freedom of speech. The new budget has been called a juggling act, and, even though it promises to deliver a surplus, Australian economists have pointed out that it is unlikely to do so, and relies heavily, as well, on earnings from a new carbon tax and a super-tax on mining companies to deliver revenues.

There has been little attempt to rein in government spending; on the contrary, the role of the State continues to expand. But in the short-term, there would be cuts in defense spending, and this may well hit at the progress of Australian plans to acquire the US-UK F-35 Lightning II fighter for the Royal Australian Air Force (RAAF). Certainly, the rosy days of considering a buy of 12 new submarines are fading from memory, even if the Royal Australian Navy (RAN) could find sufficient manpower for the fleet.

Defence spending has been cut, under the new budget, to below 1.6 percent of GDP, a depressed level not seen since the 1930s. Only the significant level of growth in Australian mineral exports — which Ms Gillard has attempted to harness with additional taxes, despite the prospect of a decline in the near term in the PRC’s import requirements from Australia — has kept some of the major defense programs, such as the F-35, in contention. Dr Mark Thomson, from the Australian Strategic Policy Institute, claimed that, under the ALP, defense spending for 2013-14 would be at 1.5 percent of GDP and in 2015-16 would be 1.6 percent of GDP. The UK for example, spends 2.57 percent of GDP on defense. But the out-year projections on defense spending even assume that the economy — and therefore the Government’s ability to raise funds — would grow at the levels projected. This is highly unlikely, given present trends. The Government has now called for a new Defence White Paper to look at the question of Australian security, but all such Australian White Papers since the 1986 Defence White Paper — the last truly strategic appreciation of Australia’s strategic position and goals — have been highly politicized and their real substance cut and shaped to ensure that the white papers merely reflected a bland and unstartling view of the global threat.

“The Government takes great pains to solicit the best advice from the broader strategic community in Australia, and then manages to pigeonhole and ignore it,” one analyst — who was asked to provide testimony for the new White Paper — noted.

Meanwhile, the new budget was not well received, neither by the mainstream Australian electorate, nor by economists. Even though the Government portrayed the budget as one which slashes spending, this is not really the case. Former Australian Treasury official Des More noted: “Unsurprisingly, the level of spending is projected to increase again in 2013-14 to 23.7 percent of GDP. Note that the rate of growth in real spending since 2007-08 is over three percent per annum, above the Government’s promise to keep it, on average, at two percent per annum.” Analyst Terry McCrann, writing in the Herald-Sun newspaper on May 8, 2012, noted that Treasurer Wayne Swan’s plan was “an unbelievable budget. Literally.” He noted that the budget included new spending of A$22-billion (approximately the same in US$) over the coming five years, including the current fiscal year. Overall, he said, “Spending goes up $25-billion this current year; falls $7-billion next year; and then leaps by $23-billion.”

Meanwhile, the Gillard Government has been moving ahead with plans to introduce controls on what could and could not be said in the media. By “media”, it meant all forms of public dissemination of information, including internet, blogging, and twittering, as well as the conventional print and electronic media. The Gillard Government has phrased its approaches to creating restraints — and a monitoring watchdog — under the guise of ensuring “fairness”, but the reality is intended to be one of the most sweeping reversals on freedom of expression seen in a Western society since World War II’s security censorship laws.

It is usually assumed that, with the fall of the Gillard Government, an incoming coalition of the Liberal and National parties would reverse the carbon taxes, the mining super-tax, and the curtailment of free expression, but that cannot be guaranteed. What is likely to occur, given Australian political history — which is not dissimilar to that of other Western states — is that an incoming government would be reluctant to abandon the additional revenue sources created by an earlier government, even though the taxes were challenged ideologically when the new Administration had been in opposition. Equally, the attempts to curtail free speech would likely also be seen as favouring the government of the day, regardless of party, and could well be retained.

In the meantime, the Gillard Government has made no moves to position Australia as a high-growth, major economic player in the global community. The Prime Minister — and Australian officials generally — have disdained comparison with the so-called “BRICS” states (Brazil, Russia, India, China, and South Africa), even though Australia, on a per capita basis (with 23-million population) is more than competitive with the BRICS. Australia’s 2010 GDP was $924.843-billion. Brazil’s 2010 GDP stood at $2.087-trillion, with some 185-million population; Russia’s at $1.47- trillion, with 143.4-million people; India’s at $1.727-trillion, with some 1.2-billion people; the PRC’s at $5.92-trillion, with some 1.3-billion people; and South Africa at $363.7-billion, with some 49-million population.

Despite the fact that the Gillard Government entered office with a major budget surplus and in an ideal global position — despite worldwide recessionary trends — it has used the period in office to substantially increase non-productive entitlement spending (essentially vote-buying), and an enlargement of the unproductive State sector of the economy, while actively “de-stimulating” the investment position of the Australian economy. The Australian and Indian GDPs were only narrowly different a decade ago, but, by 2012, and despite a dysfunctional and corruption- prone Indian governance framework, India — like some of the other BRICS — was looking at economic growth rates dramatically higher than Australia’s.

By. GIS/Defense & Foreign Affairs Canberra Office.